All Forum Posts by: C. J.

Wayne and Dave,

Thank you very much for your replies. I think I understand now.  Have a great 4th of July weekend!

CJ

I should also add that properties in the $200K range are few and not very desirable in the area I'm looking at.  There are many more options in the $350-$400k range.

Appreciate you taking the time to respond to my post.

My goal is to have no mortgage on the new property.  I have about $200K cash as well, which may be an important missing detail.

If I don't payoff the mortgage before the sale, I could apply the $200K from the sale and $200K cash for a new property.  However, I would have to pay taxes on the $160K mortgage that disappeared, I'm assuming.  It seems like if I pay the mortgage off prior to the sale, then I no longer have to pay taxes on the $160K mortgage - that it's a totally tax free event.

Does that seem like a good way to do this, or is there a better way?

If a mortgage is paid off right before selling the home, can we exchange all the proceeds of the sale with no tax consequences? 

For example, suppose a home is worth $400,000 with a mortgage of $160,000. If the mortgage is completely paid off, then the next day the home sells, can all the $360,00 in proceeds ($400,000 - $40,000 in costs) be used to 1031 exchange with no tax consequences (assuming the next home is worth $360,000 or more)? I'm just wondering if there are any issues (mortgage boot, for example) with paying off a mortgage right before selling and doing a 1031 exchange.