Capital Gains - Investment > Primary

[Navdeep Raj]

I'm in the process of purchasing an investment property in Austin, TX. Without lot of research I assumed if I lived in the property for 2yrs in the last 5yrs of the sale, I could be eligible for the exemption so I don't pay any capital gains up to 500k (I'm married). 

Based on another thread, looks like its not the case :( Other than the "qualified use" time in the property, looks like the rest of it is all taxed? I'm wondering if there are other options to avoid capital gains (other than the 1031 exchange).

First question is what defines if a property is investment or primary? The loan type? 

Let's say I rented the property for 3yrs, moved in and re-financed as a primary and lived in it for 2yrs. Will I still pay capital gains for the first 3yrs? What if it was an investment for 5yrs, then I re-fi as primary and lived in it for 3yrs?

Right now the property is just in my name. Is it a stupid idea to "sell" the property to my wife as a primary right after I purchase, then live in it for 2yrs and then rent it out for 3yrs?

Why do people who buy as primary, live for 2yrs then rent for 3yrs get all 5yrs tax exempt! vs starting out as an investment and then deciding to make it a primary so expensive?

Thx for any inputs :)