1031 or Section 121 Exclusion?

[Jonathan Serna]

Hi BP fam,

First time poster long time lurker. I'm wondering if someone can advise on my situation. I tried reaching out to a CPA but they're either very busy because of tax season (understandably) or want to charge me $500/hr. I'm happy to pay but they won't see me for a few weeks and I need this resolved before the close of my apartment. The situation in question below:

1. Wife and I bought a 1 BR co-op in NYC as our primary residence for $232K in 2014

2. Rented out the co-op starting 1/1/2019-current day

3.  Our current tenants asked to buy the apartment ($400K). We're in contract and scheduled to close in late June/early July 2022. 

TO RECAP:

Primary Residence (2014-2019) Owned

Rented out (2019-present)

So it was our primary residence in 2017 & 2018 and we rented it out starting 1/1/2019, 2020, 2021, does that still fall under the 2-Out-of-5-Year Rule if our date of sale is 7/1/22?

My question is, am I still within the 2 out of 5 year rule? If so, do I still have to pay capital gains taxes? If so, what is the percentage that I will be responsible for? If I am not within the timeframe, what are my options besides a 1031? For context, we want to use a small portion of the profits to fix up our current primary residence in Richmond, VA. 

Thank you in advance!

[Wayne Brooks]

@Jonathan Serna No, you’ve missed your 121 exclusion period.  You would have had to sell by 01/01/22 to meet the 2 out of last 5 years (which means you can rent it out for Up To 3 years after you move out). You would have occupied it for exactly 1 1/2 years out of the last 5 (since it will have been a rental for the last   3 1/2 years).