House Hacking, Section 121 Exclusion, & 1031 Exchange

[Spencer Fuller]

Hello,

I would like to understand how the section 121 exclusion and 1031 exchange could be applied to a 3 bedroom condo that I own. I lived in the condo as a primary residence for two and a half years, so therefore qualify for the section 121 exclusion until January 2023. Currently, all three bedrooms are being rented out, so the entire unit is now a rental property. However, while I was living there, I was also renting out two of the bedrooms. Based on what I've read online (see https://www.biggerpockets.com/blog/2016-02-21-tax-implications-house-hacking), I can treat the percentage of the unit that I am living in as my personal residence, and the percentage of the unit I am renting out as the rental portion. How exactly is this calculated if there are common spaces such as kitchens, dining rooms, and family rooms? The condo is 1200 sqft total. If my personal bed and bath are 10% of the total sqft of the unit, would I call my personal usage 10% + 10%*[sqft(kitchen,dining,family)/1200sqft], or would it be 10% + 33.3%*[sqft(kitchen,dining,family)/1200sqft] since there were three people living in the condo and I was using one third of the shared space?

How would the capital gains exclusion apply if I sell the condo before Jan 2023? I've read online (see https://www.biggerpockets.com/forums/51/topics/531067-capital-gains-exclusion-with-house-hack) that because this is a SFR, 100% of the gains (up to $250,000 of course) is tax free. However, I have a suspicion this is not actually true based on how taxes are filed with house hacked properties (having to split up the unit into a personal percentage and rental percentage). If the capital gains exclusion applies only to the percentage of the unit designated as personal, can I use the remaining gains from the rental portion for a 1031 exchange?