- assuming 500hrs each, we have spent enough time this year to get to that but wondering if thats a red flag for IRS with high chance of getting audited (we travelled 7 times over the past year to work on the unit and spend at least a week each time excluding the time we spent managing the guests)- Lastly, our understanding is that each can take 50% of the final offset to our W2 assuming we prove material participation eligibility. 

Hey Justin, Section 121 allows you to exclude 250k from gains as single and 500k from gains as married. 

Simply own and live in the home for 24 months of the past 5 years from the date of sale, and receive a tax benefit of up to 250k of excludable capital gains from tax or 500k if married and filing jointly. 

I was advised that the depreciation taken during the years it was rented is not excluded from the exemption. 

be mindful that those involved in the military are provided an 'extender' on their section 121 exclusion eligibility.Depending on the appreciation on the property(if there was), you may want to consider taking advantage of section 121 as the excluded gain may be higher than the potential cash-flow that you can get on a property.

You can deduct expenses like mortgage interest, property taxes, insurance, repairs, and maintenance costs from your rental income.The biggest advantage is depreciation—this allows you to deduct a portion of the property’s value (excluding land) over time, significantly reducing taxable rental income.

After the initial bidding period has ended, bids are opened daily excluding weekends and holidays.Homes are available to certain types of buyers for certain periods of time.

Your profile mentions doing a 'live-in-flip'.You would want to work with a CPA that is knowledgeable of real estate and also has a good understanding of section 121 which allows you to exclude some gain from the sale of a personal residence.

I have read that it may be possible to show records of the sale and the on-time payments in order to get some or all of the debt payment excluded. 

Bought 132 for 1x1 830 sq ft and went from 132 to 189 in 2 months but that's also priced with doing  a reno priced at 17 k for material excluding labour.