Selling My Fourplex That I Lived In (Taxes)

Anchorage, AK · Member since 2018 · 5 posts · 1 vote

So I lived in my fourplex for five years, moving between three of the units over that time, fixing them up as I went.

I purchased the property using an FHA loan, where I have to "intend" to live in the property for a year, which I obviously did. And with the "two out of the last five" rule, I assumed I wouldn't have to pay capital gains on 250k.

Am I mistaken? Will I have to pay taxes on 75% of the gains? Does it matter that I lived in at two of the units for at least two years?

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Justin BrickmanBusiness Member
Realtor · San Antonio, TX · Member since 2021 · 502 posts · 274 votes
2y
Hey Benjamin, that's correct. You don't have to be living there on the date of the sale to qualify for the 2 of the last five rule. So you should be good to go.
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
2y
@Benjamin Knisely Yes, your Primary Residence is 25% and 75% is a rental property. You can use 121 on your 25% and either pay cap gains or 1031 the 75%.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
2y
@Benjamin Knisely, You may want to put a pencil to the months you were back and forth in the building with different units. If you managed to clock 24 months in more than one of the units your accountant might let you take the 121 exemption of both units. Normally you can only do one primary residence exemption every two years. But this would be one sale. And you might get 50% of the gain tax free (up to the $250K you mentioned). Otherwise, @Wayne Brooks is absolutely correct. You can do a 1031 exchange on any part or that building that is being used as investment when you sell it.
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