Note that you can only claim the exclusion of gain on a primary home once in any two-year period. There is no way to exclude the gain on two homes that you sell at approximately the same time, even if you meet the two-out-of-five-years requirement for both homes. There would have to be at least a 2-year gap between the two sales in order to exclude the gain on both of them. See "Eligibility Step 4—Look-Back" at the first link in tagteam's reply above.
Regarding the possibility of a like-kind exchange, note the following.
- A like-kind exchange defers the gain. It does not eliminate or exclude the gain.
- A like-kind exchange is only for property that you use for investment or business (including using it as a rental). You cannot use the property for personal use, such as using it as your home.
- When you sell a property that you acquired through a like-kind exchange, you cannot exclude the gain if you sell it less than 5 years after the exchange.
- The rules for like-kind exchanges are very complex and the IRS watches them closely. The exchange has to be done through a qualified intermediary, and you need advice from a tax professional who has experience with like-kind exchanges.
