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The portion that you (and your brother) used as your principal residence will qualify for the home sale exclusion. EACH of you will be able to exclude up to $250k from your share of that portion of the gain.

The portion that has been rented out will not qualify for the exclusion and will be taxable. Since you've been reporting as a partnership, the sale of the rental portion of the property should probably be reported on your partnership return.

I trust that you've been splitting up the property expenses (mortgage interest, taxes, insurance, utilities, etc.) correctly in the past. Your personal share of these expenses goes on your individual returns to the extent these are deductible. The portion for the rental should have been reported on the partnership return.

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