Tax deferring question

[Grant Ancelet]

if I flip a house and make 50k.... then I reinvest that 50k in another flip... I understand I don't pay taxes on that 50k... but what if I reinvest to buy another property then mortgage the house right away and take out the 50k and it goes back to me... then do I pay taxes on that 50k?

[Natalie Kolodij]

Hi Grant, 

What you're thinking of is a 1031 exchange. And a flip won't qualify....it only works on rental properties. 

So if you owned a rental, sold if for $50k gain...and then boughta  new rental with greater debt/cost then you can defer the taxable gain. 

If you bought a new rental for cash (deferred the $50k gain) and then financed the house it would not create a taxable event.