1031 Exchange - Multiple title holders, one uses as primary

[Dat Nguyen]

We are three siblings, all listed on title for a home.  One sibling (single) lives in the home as a primary residence for the past 10+ years; the house has never been rented out.  The other two siblings have primary residences elsewhere.  We are selling the home, and looking for ways to reduce/defer capital gain tax.  We are considering:

1. The sibling who lives in the home will take the Section 121 exclusion to shield $250K of the gains from tax.

2. The rest of the gains will be distributed to the other two siblings, and they'll do a 1031 exchange to defer the tax on these gains.

Is this a legit way to split up the proceeds from the sale of the home?  The home has never been rented out, but can it still be considered investment property for the non-residing siblings?  I've read elsewhere about having to first convert a primary into a rental to take advantage of 1031 exchange; but in this case, that's not necessary since the home is already considered investment property for the non-residing siblings.  Is that interpretation correct?