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I have a long question with twists and turns. I'm trying to understand the $250k exclusion for selling your home. I won't use the exact numbers but here's the story:

1. I recently "exchanged" into a $250k 3-unit which has an adjusted basis of 100k.

2. I've been thinking about living there and want to know what kind of tax treatment would result when I eventually sell.

3. What if at some time in the near future (how soon can this be?) I move into the 3 unit and turn it into a single family home and then live there for at least 2 years before I sell. I might do this in degrees... first occupy one unit and then all of them but I know I'd have to live in the entire house for 2 years before selling.

4. The home I currently occupy will be sold and I will pay a small cap gain since I've only owned it for 1 yr at this time and I would like to move to the 3 unit soon.

5. Would the gain on the 3-unit turned primary residence be excluded up to $250k (I'm single) or do I have to pay cap gains on the depreciation claimed or anything else? If I don't rent it for long before moving in, there would be very little depreciation. But what about past depreciation on the previous property that was exchanged for the current one?

See what I mean about twists and turns?

The IRS doesn't seem to have complete answers or any examples that fit my potential situation. They recite something about using the basis (would this be the basis when it was purchased as rental property?) to calculate gain but also that I must pay the cap gains on any depreciation taken (from just this property and not one exchanged earlier?). Yet, the IRS example of owning a home and renting it for 3 years and living in it for 2 years before selling does not mention anything about depreciation.

Any information would be greatly appreciated!
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