@Julie J.Doing that will not exempt you from the full amount of gain since the property was first an investment property and then a personal residence.You have to calculate the gain/excluded gain by factoring in qualified use / non-qualified use.

In terms of your primary residence, if you have lived in it for 2 of the last 5 years, you can generally exclude $250k in profits from your gain if you are single or $500k in profits from your gain if you are married / filing jointly. 

The "core" CPI (which excludes food and energy) rose 0.2% in September, and up 1.7% from a year ago.

Most duplex down basements (excluding new construction) in Chicago were done without permits, it's up to you how comfortable you are with that. 

Payments that you make normally fall into one of 3 buckets100% of the payment can be factored in somewhere on the returnPartial payment can be factored somewhere on the return0% of the payment can be factored in somewhere on the returnHouse-hacking also has considerable tax implications in the event that you want to sell this property.You can potentially defer a portion or all of the gain on the investment property with 1031 exclusion.You can potentially exclude a portion or all of the gain on the personal residence with section 121 exclusion

The law specifically excludes rentals under 250 square feet.

Payments that you make normally fall into one of 3 buckets100% of the payment can be factored in somewhere on the returnPartial payment can be factored somewhere on the return0% of the payment can be factored in somewhere on the returnHouse-hacking also has considerable tax implications in the event that you want to sell this property.You can potentially defer a portion or all of the gain on the investment property with 1031 exclusion.You can potentially exclude a portion or all of the gain on the personal residence with section 121 exclusion

That’s excluding big ticket items like HVAC, etc.

We also have kids and as they get older I wonder if it would be more feasible and fair to divide the property as a real estate partnership that would exclude my brother and me but include my 2 sons and his 3 sons.

The law specifically excludes rentals under 250 square feet.