Rental Property to Primary Residence Tax Strategy

[Cole Melcher]

I have an idea that my tax professional says won't work. I have read through the complete IRS guide to rental properties and can't find anything that specifically prohibits this plan from working. Anyone know for a fact that the IRS won't allow this, and if so, where I can find that information.

Plan:

1.) Buy a SFR as a rental property

2.) Rent the property out over the course of five years using the cash flow to make improvements. (I'll also be putting personal funds for improvements and general maintenance into the property as well. Some will be deducted for that year and some will be capitalized)

3.) Depreciate the property over the course of these five years

4.) Move into the property as a primary residence after year five.

5.) After living there for two years, sale and take the capital gains allowance for a primary residence.