WHEN SHOULD I REFINANCE MY 1031 PROPERTY? A "NANOSECOND" AFTER CLOSING?

First and foremost, it is always advisable to err on the side of being conservative when dealing with IRS.   Having said that, you are taking a great risk if you refinance the 1031 relinquished  property you are about to exchange, just prior to closing the sale, because IRS has taken the position in numerous cases that taking those cash proceeds just prior to closing on the relinquished property sale constitutes receiving taxable boot. 

So what about refinancing the replacement property immediately after you close on its purchase?   There are some pundits that state you can refinance a "nanosecond" after closing on the replacement property.  I disagree with that position and would recommend waiting for at  least 3 or more months before refinancing the replacement property. Refinancing 3 or more months after closing/exchanging on the replacement property, makes it a lot harder for IRS to come back to the taxpayer and declare that they had planned the refinancing of the replacement property at the time of their purchase. 

For those bloggers that have been reading this blog for the past couple of years, you know I stress that 6 letter word "intent".  IRS will look or try to interpret the taxpayer's "intent".  In this case, refinancing later rather than sooner, after exchanging a piece of property, should be the mantra.