DEAR BOB: We own rental property that is now paid off and fully depreciated, but giving us little tax write-off. We would like to take out about $150,000 equity to refinance a new mortgage. Will the IRS let us again write off the interest on such a new loan? Are there any limitations how the $150,000 can be spent, such as remodeling our current residence? – Mr. R.V. DEAR MR. R.V.: There are no restrictions on refinancing investment and business property, or on the use of the funds obtained from the refinancing. Yes, the mortgage interest will be tax deductible. Purchase Bob Bruss reports online. However, you could be creating a future tax problem. It is called "mortgage over basis." When you eventually sell that rental property, if you do, your mortgage balance will probably exceed its depreciated basis. At that time, your capital gain will be the difference between the depreciated basis and your adjusted (net) sales price. But you won't receive that full amount in cash beca...
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