@ebot wrote:
What if it's a triplex and active duty military servicemember lived in the "owner's unit" (or any of the units for that matter)? Wouldn't the 2-of-last-5 rule be 2-of-last-15 for active duty military apply to the owner's portion at least? I assume this would be determined by market rental income of the unit occupied relative to the market rental value of the entire triplex...1/3 for example (if all 3 units were considered equivalent)...or some minor alteration of that for relative market rent value of the occupied vs other units. No?
Don't confuse two sets of rules.
For selling a home that is a duplex or triplex (ignoring the military part) you can claim the exclusion on the portion that you occupied as your personal primary residence. You must have a reasonable basis to allocate the gain, usually on a square foot basis.
Separately, when you sell your personal home as a member of the military, you may be able to extend the deadlines for the exclusion, regardless of what kind of home it is, following the normal rules.
Putting them together, for example:
You buy a triplex for $100,000 and on a square foot basis, you assign a cost basis of $40,000 to unit A, and $30,000 to units B and C. You live in unit A as your main home for more than 2 years. You are then deployed overseas for 7 years. During the deployment, you rent out unit A. You now sell the triplex for $400,000. Using the same square foot basis, $160,000 is assigned to unit A. For the sale of units B and C, your capital gains are fully taxable. There is no military benefit or gains exclusion for rental property. Part of the gain is depreciation recapture and part of the gain is long term capital gains. For unit A, you can apply the gains exclusion to your $120,000 of capital gains. However, you must still pay depreciation recapture tax on the depreciation you claimed or could have claimed on unit A while it was a rental.
