More than 500K in equity in primary residence?

[Dori Arazi]

What can you do if you have more than $500K in equity when selling your primary residence? Can you "1031" the balance or any other restructure to not pay tax on the gains? 

[Dave Foster]

@Dori Arazi, You actually can combine a 1031 with a sec 121 primary residence sale.  However you have to be patient enough to move out of the house for a year or so and convert it into an investment property.  

Then when you sell you do a 1031 exchange but take $500K in boot.  That boot would normally be taxable but since you've lived in the house for 2 of the 5 years prior to sale that $500K becomes tax free and the rest is tax deferred in the 1031 exchange.