Question on personal residence capital gains tax

[Jean Bolger]

So, I was talking to a friend who is looking to help her father sell his house. He's owned it for many many years and it is in a nice area. The plan is that he will buy a smaller condo for himself and probably another rental out of the proceeds. 

He'll have more than $250k in profit from the sale (it will actually be closer to $400k) so there will be capital gains tax due.  My suggestion was that they take out a loan against the house to buy either the new condo or the rental, which would then bring the proceeds of the house sale down below $250k and avoid the cap gains tax.  My friend thought I was being totally outrageous and suggesting something fraudulent! I'm pretty sure that's not the case (and it certainly wasn't my intention) but it did raise a specter of doubt in my mind... so, I am appealing to the CPAs and tax folk here. Is there anything wrong with the scenario I proposed? Thanks!