I own a five-plex apartment building that was fully depreciated by September 1996. I would like to sell it and not pay any taxes on the recapture depreciation and capital gains. I would like to know if I can move into one of the apartments, live in it for two years and then sell the whole building as my principal residence and therefore avoid paying any taxes under the principal residence exclusion provision of the IRS tax codes. Also, would I have to live in the whole building by myself or could I rent out the other units and still qualify for the entire exclusion? One of the units is an efficiency apartment while the other four units are two bedroom apartments. We could easily turn the building into a four-plex if that makes any difference. Also, would it make any difference if we turned the building into a Bed and Breakfast for the two years we lived in it? Thanks in advance for any thoughts on this subject.
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