Actually, you may not need to qualify in the second year.

There are several articles that do an exceptional job of explaining who, what, where, why and how tax payers qualify for the ‘STR Loophole’ listed here:The Short Term Rental Tax Loop Hole: A Game Changer for W-2 Wage EarnersThe Short Term Tax Rental Loop Hole: What Investors need to know The implications on the Oregon and California Coastal STR market is a strengthening buyer pool for luxury rentals in the $750-1.5M+ range.

Under this rule, if you spend at least 100 hours on the property and no one else exceeds your time spent, you can qualify as materially participating.

Hi @Ben Lindquist, The 1031 Exchange Qualified Intermediary is a crucial part of any successful 1031 Exchange transaction.

This is due to bonus depreciation which allows taxpayers to deduct 40% of qualifying property costs in the first year, in addition to regular depreciation for new construction and improvement.

If you go that route, ensure to use a Qualified Intermediary to handle the sale/purchase otherwise there will be no 1031 exchange. 

Definitely get with a qualified tax professional on this.

., from crypto) by reinvesting the gains into a Qualified Opportunity Fund (QOF) within 180 days.

For the son to qualify for the $250k exclusion, I believe he would most likely need to meet the ownership and use test, meaning he needs to own and live in the home as his primary residence for at least two of the last five years before the sale.

I've received apps in the past where this was the exact situation only for the borrower to not qualify and be stuck.