Capital Gains Strategy Question

[Bill Johnson]

I purchased my personal residence about 12.5 months ago with personal non-business funds.  I want to sell my house and use the proceeds to purchase a Duplex which I can use to House Hack.  Will I be subject to the long-term capital gains rules, or since I plan to live in 1/2 of the duplex with it qualify as a rollover of equity?  Any tax strategies suggestions are appreciated.

I am sure I'm not the first to do this, but couldn't find a doc talking about a person selling their home under the current tax laws to live in 1/2 a duplex and rent the other.

Thanks!

[Dave Foster]

@Bill Johnson, it is the use and disposition of the property you are selling that determine your gain and taxability.  The property you are selling is your primary residence.  So it does not qualify for a 1031 exchange.  And you have not lived in it for 2 years out of the 5 year period prior to sale.  So you do not qualify for that exemption.  There are a few prorated exceptions depending on job related or medical reasons that may apply.  But apart from that you will incur tax on the sale of your property.  It does not matter how you will be using the replacement property in this instance.  

Next time you're ready to sell you can do a 1031 exchange on the half you don't live in.  And if you've lived in the other half for two years you'll get that tax free up to the limits of sec 121.