Capital gains and rentals

[Phill Young]

I'm asking this for a friend. They own a home and lived in it for two years and one month. They have moved and have been renting out the home now for the past three years. They are considering selling the home and when they started researching capital gains, realized that they would indeed paying them as the home has been a rental longer than it was a primary residence. She was initially under the impression that as long as the home was a primary residence for at least two years before becoming a rental this would not be the case. Apparently the laws on this changed in 2009? Does anyone know about this or have advice to offer?

[Joshua Wright]

I’m not a tax expert, but if they can get out of the property with zero tax...by all means do it. If they can’t, then I’d definitely consider a 1031 exchange to other investment property. If they don’t want to manage property, then they might look into some kind of managed property or check out a DST (depending on qualification). Good problems to have :)