1031 & Delayed financing

[Connor S.]

Does anyone know if you are able to do delayed financing if you use a 1031exchange to buy a house? From what I understand if the government believes you are doing a 1031 and a cash out refinance directly after just to avoid paying taxes than they will not allow it. However if you are refinancing for a business purpose (aka to buy more houses) they will allow it? 

Any advice would be appreciated! 

[Dave Foster]

@Connor S., you never say never when it comes to the gummit.  But in general where you'll get heartburn from the IRS is if you refi immediately before a 1031 starts.  That's been consistently dis liked by the IRS.  Refi's after a 1031 are not the same.  In a  refi after a 1031 you are not accessing gain you are borrowing against equity in a property you are holding for productive use (the whole premise of the 1031).

Here's the disclaimer.  If the IRS thought you were a bad actor and wanted to get at you anyway, could they challenge a refi done immediately after a 1031?  Sure but those instances are hard to prove and very very rare.  Have your ducks and rationales in a row and wait till after the 1031 is complete.  Unless you're Al Capone you'll be fine.