Exit strategy for 1031 exchange

[Dan Keem]

I hope this finds you well! I have a scenario I would like your input.

I have had a rental property for 10 years. I want to access cash by selling it except there’s a big capital gain on the investment property. So instead, I perform the 1031 exchange. For the first two years, I keep it as a rental property per regulation. Then, I move in for 3 years turning it into a primary residence. I have held the replacement property for a total of 5 years aiming for the long term capital gain exclusion of $250k/$500k. 

Here’s my question- when I decide to sell it, is my ratio of (qualified use) / (total property use) = 3/5 just counting the years in the replacement property? Or.. do I carry the 10 years of non-qualified period prior to the 1031 exchange making it = 3/15?

Thanks in advance!

[Wayne Brooks]

@Sherry Boone I have no idea what you are talking about. Loans, their pay off amounts, and cash received  have nothing to do with cap gain taxes. 

@Dan Keem You could use the 232 qualified use calculations when you sell the property but that would only apply to the gain from that property.....the deferred gain from the previous property would be fully taxable at that point.