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Investors & landlords
Yes, you can use the $500,000 Principal Residence exclusion and then defer the rest of the gain using a 1031 exchange. Here it the IRS guidance about that:
https://www.irs.gov/irb/2005-07_IRB/ar10.html#d0e1794
I don't think there is anything definitive about how how it needs to be a rental property before the 1031 exchange, but if it is a rental for more than a year, you are probably okay (if it was two years, you would definitely be safe).
‎June 4, 2019
10:03 PM