Hi all. I am helping a family member who has been holding an investment property for many years in an s corp (bad, I know). Due to depreciation and the rise in market value, his basis is very low. He wants to get a commercial mortgage on the property but has been advised that if he pulls the loan proceeds out of the S Corps accounts he will have to pay capital gains on that amount. Is this true? Is there any solution? Seems absurd to have to pay tax on money that is simply borrowed from the bank, not profits.
