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I have an investment property where I have a capital gain of approximately 700k with no mortgage.

I understand that you can move into an investment property, convert it to your primary residence and stay for multiple years before selling it to get a capital gains tax exception.

Can I 1031 exchange my current property into two properties, proportionally distributing the capital basis, then move into one of them for five years and sell it. And then move into the other one, stay for five years, and sell that too? Taking the tax exemption twice?

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I understand that you can move into an investment property, convert it to your primary residence and stay for multiple years before selling it to get a capital gains tax exception.

You understand wrong.

The Sec. 121 exclusion that you're referring to specifically addresses this situation. See the IRC Sec 121(b)(5).

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  • Can you help me see what you're seeing? It looks like if I convert it to my primary residence and move into it that I will eventually qualify for the exemption
    – Matthew
    Jun 28, 2023 at 3:34
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    @Matthew you will, but you'll need to first do the depreciation recapture, and then prorate the remaining gain for qualified and non-qualified periods, and only the qualified portion will be exempt, up to the limit.
    – littleadv
    Jun 28, 2023 at 3:47

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