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"No. The gain from the rental portion will be taxable. See Publication 523."

Thanks Phil.

Okay, I looked at the publication. For "property used partly for business or rental" on page 18 I'm interpreting what it says as that you CAN exclude the whole gain, that it is NOT necessary to allocate gain between the rental portion. All you have to do is reduce the exclusion by any depreciation you have claimed on the business/rental tax return. So the taxable gain would only equal any depreciation claimed, if any.

Can anyone tell me if I'm interpreting that correctly?

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