Unique capital gains question

[Marc Andrew]

I have an interesting question: I've been thinking about selling a duplex I've owned for 6 years or so. I have moved in/out of it several times, and depending on which unit had a lease, I'd move into the vacant side. The question is; If I sold the property would I have to pay capital gains on the "investment" half since over the course of the last 5 years I've spent 2 years living on each side of the duplex? 

[Dave Foster]

@Marc Andrew, I think the answer will be dependent on how your accountant has treated that property all along.

If they simply chose half and consistently reported that one half as the investment portion and depreciated it consistently and offset the expenses on that half then you'll have a tough time taking more than one side as your Primary residence exclusion.  

However, if you kept good records and depreciation was taken appropriately, and you actually resided in each half of the property for 2 out of the 5 years prior to sale you should be able to take it all in the one sale with the exclusion.

You would always have the option of 1031ing half and since your already contemplating a purchase it would be the conservative approach