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Updated over 6 years ago on . Most recent reply

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Handie Kunen
  • Rental Property Investor
  • Bedminster, NJ
5
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42
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Refinance to LLC - is it considered a sale?

Handie Kunen
  • Rental Property Investor
  • Bedminster, NJ
Posted

We are rehabbing a property and will refinance afterwards to complete the BRRRR. The property is currently owned in my husband's and my personal name. We identified a local bank which is willing to refinance it into our LLC's name. The banker told us thought that this would be considered a sale, not refinance. Therefore, there may be consequences such as transfer tax etc. However, my additional concern is whether this would mean there is capital gain tax as well. I am willing to pay transfer tax and purchase title insurance. However, if there is also capital gain tax, what's the strategy to avoid paying / deferring it? 1031 exchange? FYI, the property is in Allentown, Pennsylvania.

Most Popular Reply

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Jason D.
  • Rental Property Investor
  • St. Petersburg, Fl
4,385
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Jason D.
  • Rental Property Investor
  • St. Petersburg, Fl
Replied
@Handie Kunen in Pa. you will have to pay a transfer tax, but it isnt considered a sale. There would be no capital gains tax owed until you sell the property. If you use a quitclaim deed, there is no need to purchase title insurance. The refinance is a separate transaction, and separate from the transfer.

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