Asset class conversion creates an opportunity for Massive value-add, creating enough value for a cashout refi, allowing for millions to be taken out without a sale, which means no Capital Gain, which means no taxes.

You will have to pay up the property taxes.

You can schedule a call with me here: https://calendar.app.google/32zXfK5pMihKJLZK9

Your resident state CA will tax all of your income, including out-of-state gain.

Those that respond “$0” or something ridiculous, you can request income documentation from them to justify.Don’t be afraid to share with them how much your property taxes & Insurance increased and that YOU cannot afford to absorb them.ALWAYS get an increase or something of value annually or tenants will start thinking they should never have an increase, making future increases that much more difficult to negotiate.

There is no inheritance tax given the value of the estate.

My question is do I need to use all of the equity towards the down payment of the property, to avoid capital gains tax? 

The property is scheduled for a foreclosure sale prior to your close date, is that correct?

There was an opportunity to help a fellow investor who had his family growing and needed to dispose of the property to get rid of problematic tenant issues, rising taxes, and invest in other opportunities closer to home.

Never let the tax tail wag the dog.