Real Estate Taxes - Capital Gains Event in Exchange of Our Units

[Arthur C.]

Can someone with lots of familiarity in real estate taxes confirm whether or not it would trigger capital gains when my co-business partner and I exchanged our 50% interest in each of our respective unit of the new two-unit condo building we had the developer constructed for us. At end, I would own 100% of the upper unit and he will own 100% of the lower unit. I intend to live in my upper unit for at least two years to qualify Section 121 -- $250K capital gains exclusion.

However, I was told by my title company to confirm with a real estate CPA whether or not the exchange of 50% interest of each respective unit between two parties can be legally avoidable. The argument that we originally owned 50% of each of the two units and we wanted full ownership to one of our respective units hence we did the exchange. It doesn't make sense for me to incur capital gains into that exchange when I actually intended and planned to live in it for at least two years for capital gains exclusion.

Any of your help is greatly appreciated.

Thanks,

A