a second home as-is is not investment property. so if you wanted to avoid tax on the gain you would have to convert it to investment property and then do a 1031 exchange. that usually means converting it to rental. many pros say that the rental would have to be in place for 6 months to a year since there is nothing specific in the code or regs. too short and the IRS could deny 1031 treatment making the entire transaction taxable when the proceeds are now tied up in the other real estate. after the lease expires do a 1031 exchange - see a lawyer you'll need one. the issue you could have with that is to avoid gain completely you can get no cash out on the 1031. Any cash out would be taxable boot. then too there could be taxable boot if the mortgage on the replacement property is less than that on your second residence. Also, you would now have investment property with your cash tied up and not available to use for the new residence.
