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Capital Gains on Multi Family used as Primary Residence

I have owned a two-family property for 3 years. We have used one unit as our primary residence but have always rented the second unit (50% of property.) If we were to sell the building in order to buy a single family home as our new primary residence, my understanding is that I would owe capital gains taxes on the proceeds of the sale as they are not "like properties" and the current property has not been used 100% as our primary residence for two years to qualify for a primary residence exception. Is that correct?

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Level 15

Capital Gains on Multi Family used as Primary Residence

Ok ... to make it simple ... you technically are selling 2 properties ... the personal residence and the rental. 


The personal portion can be excluded ( this includes the sale of the land ) if you qualify but the rental portion cannot.   So you will prorate the selling price and the costs of sale to each part and remember the land belongs to only the personal residence ... none of it belongs to the rental.