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Actually, the real issue is how long you keep the property as rental property before "converting" it to personal use. And there is NO guidance from the IRS in this area, which explains the differing answers. Some CPA's I've talked to say you should keep the property as a rental for at least one year, to show that you aren't attempting to evade income taxes. Even the most aggressive CPAs recommend that if you do convert the property to personal use soon after an exchange, you do it after two tax years (last three months of one, first three months of another MAY be enough). And keep very accurate records during the rental periods to show that you were legitimately renting the property.

My aunt and uncle asked me the same question last year. A number of retirees are converting and selling their rental properties consecutively, one every two years, to benefit from the gain exclusion. It just gets tricky when you've done the like-kind exchange.
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