Most likely your conclusion is correct, but the only way to confirm it is by having a real estate accountant review your tax situation.Also, please read this introduction if you want to better understand the concept:https://www.biggerpockets.com/forums/51/topics/1075919-five-...

If I understand correctly your siblings goals are to sell their rental properties, use the funds to purchase a primary residence they'll eventually move into, and limit their tax liability correct?

I'm correcting the misinformation you are posting and trying to get further clarification on what you are posting.

Its more hands off than being a landlord or flipping homes but you have know how to do it correctly.   

This is correct. 

Yes Mike, that’s correct.

Not sure if hard money would be the correct route to go for this one or not

If I understood your reply correctly.

If convicted of bank fraud you may be facing large fines of up to $1,000,000 and/or imprisonment of up to thirty years.Posted without comment.Okay, so one comment:Just because someone in your community says it's okay to do, better clear it with the feds first, or you may be talking with them later..This reminds me of a Subto in California that went bad and wasn't handled correctly. 

Yes Mike, you are correct, it's all about taking action.