I recently moved into a 2 year old house. My electric clothes dryer was only getting partial heat and we traced the problem to the 240volt electrical outlet. We tested the wires at the panel and both breakers gave a reading of 122 volts. After we could not get the right reading on the actual outlet, we removed it and tested the wiring alone. We get no reading from the white wire. There happened to be a third (red) wire capped in the outlet box, that when we tested it, was good for 120volts. We used this red wire to connect the outlet with. My question is: Is is safe for me to leave that white wire capped in the outlet, or should I have an electrician come and try to pull it out since we did get a live reading for that wire in the panel.
I don't want to burn down my new house.

What type of cord do you have on the dryer? 3-wire or 4-wire. If you have a 4-wire cord, you will require a 4-wire receptacle and will have a connection place for the white wire. If you have a 3-wire cord and the receptacle is for 3-wire (which I suspect) you are fine capping the white wire.

To add to strouds' input. If it is 3 wires, you need to have 240 volts between the 2 hots,
Then connect the ground to center of receptacle.

NO, you are NOT fine capping the white wire. Also, you do NOT install the receptacle to match the cord, your install a cord to match the receptacle.

I am not sure how it was connected before, but if one of the INSULATED wires was capped off it was wrong.

You MUST use three INSULATED wires to connect to the receptacle if NM cable was used (which is the case since you say there is b, w & r).

If you have a 3-prong receptacle (which I suspect) you use the black, red and white wires to it. The black and red are your two hots and the white is the NEUTRAL.

If the existing receptacle is a 4-prong then you must also use the ground.

An electric dryer is a 120/240v appliance. NOT a 240v appliance. They also follow the same rules as 120/240v household kitchen cooking appliances.

Please see this thread for plenty of information on this topic:
https://www.askmehelpdesk.com/electrical-lighting/okay-use-bare-wire-neutral-okay-share-ground-185686.html

Just noted 2 year old house, New construction and remodel require 4 wire, it should have had 4 wire receptacle and a 4 wire cord installed on dryer. Looks like someone had a 3 wire dryer and felt it easier to change receptacle than cord.

Just noted 2 year old house, New construction and remodel require 4 wire, it should of had 4 wire recepticle and a 4 wire cord installed on dryer. Looks like someone had a 3 wire dryer and felt it easier to change recepticle than cord.

I agree that someone installed the wrong plug and therefore didn't need all the wires.
To fix the problem, should I intall a 4 wire plug? If so, will it still work knowing there is no voltage reading on the white neutral wire?
At the panel, the black and red wires are going to the breakers. The white wire is going to a neutral. We did not get any reading on our voltage meter when we touched the white wire. I DO have a 3 wire plug in, to which we hooked up 2 hots, (red and black) and the ground in the middle. I have the white capped.

Yes, you ABSOLUTELY should replace the receptacle AND cord with 4-wire units.

The hook ups are the same only you are using both the white and ground.
You should get not a voltage reading from white to ground.
You should get a voltage reading from hot to white.

When You install the Receptacle, Hots to the outside, Ground will have strap connecting to receptacle metal body, and green to ground.
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When you install the cord, Hots to the outside on dryer, The center is a little tricky. Remove the strap that connects the center of the 3 terminal studs(On dryer). This is now Your Ground and Neutral Separated. The White goes to center terminal, and the Green goes where the strap was(The metal body of the Dryer). Don't use strap. Turn Power off.
Like stanforty says, no voltage on Neutral as they are both connected together at your electrical Service.
The difference is the Neutral carries current, and the ground carries current when a fault occurs.
A drill may use a black(hot and neutral)white for power, and the case of the drill grounded. If you drilled into a Live wire it will touch ground, trip breaker, and not become Live?Dangerous).
When you have a 3 wire(Range or Dryer)the 3rd wire(Ground is carrying current)Ground is NOT to Carry current.
This would have current flowing through. A potential for voltage.
It probably took 100 Years for someone to make it happen, I thought about it myself, and was an NFPA member, and accepted it. I never Back wire recepticles even though code allowed years ago.
Take Care

This picture is for dryer -- 3 prong and 4 prong diagram

Appliantology Archive: Dryer Cords (http://fixitnow.com/appliantology/dryercords.htm)

Red wire and black wire are hot they are LINE on the diagram ( L1 & L2 )

The WHITE wire is the Neutral wire -- Marked ( N ) same on 3 or 4 prong plug

The GREEN is the GROUND on a 4 Prong Plug -- connects to the case or chassis

In the breaker panel a 220 volt breaker is required -- RED & Black Wire lug in

The WHITE wire Lugs where all the other WHITE wires lug

Green lands on GROUND -- and should run from panel to ground stake