Capital Gains Tax Question

[Dustin Miller]

Hey guys,

I have just got an offer on my first fix and flip! It was a full price offer that sold in Lexington, KY after throwing it up on Zillow as a FSBO. It was listed on Friday, and sold that following Monday for full, no closing costs requested! Needless to say, I'm pretty pumped. I chose to owner occupy this one and fix it up myself, as I only had about 3,000 to my name and have been finishing my Master's degree, while working full-time. Here is where my question develops:

I will have lived in the property for 19 months at closing. The reason my home was tossed on Zillow now is because I came across a property that was going under radar and was too great to pass up as my next owner occupancy (This will likely be my forever home and further invest with the equity I will be walking into). I needed to free up the capital to put the 20% down to make it happen (because my debt:income wasn't going to allow it to happen any other way in the timetable). I bought my initial property for 93,900 and put about 20,700 into improvements over time. This was all out of pocket as I lived there, so after receiving a signed offer for 169,900 and paying their 3% realtor fee, I will be looking at about 75,000 in my pocket after my mortgage payoff of 89,500. Counting my improvement costs, that'll leave me with a profit of about 55,000 on my first property. I'm right under the occupancy requirements of 2 out of the last 5 years to avoid full capital gains, but this other deal is too good to pass up. I know there are some partial exclusions I can work with, but I wanted to see where your all's feedback could guide me. Obviously, I'm wanting to hear that I can avoid taxes someway, somehow! Additionally, I am putting a down payment on this next property of 55,600; which will absorb my profit (my offer has been accepted and signed for the next property). 1031 comes to mind, but since I purchased as an owner occupant, I don't believe I can do that.

Thank you in advance for any feedback! I have reached out to many CPAs in my area, but you would be amazed at the variety of answers! It's baffles me! Any and all suggestions/insight welcomed.