Capital Gains and IRS Publication 523

[Tim Hem]

Looking for some opinions on a recent home sale and possible capital gains exemptions. 

In short, I purchased my primary residence in 2017. I resided in the home until summer 2020 (total 2 yrs 9 months) and then deployed overseas for the next 4 years; selling the home in June 2024.  During the time deployed (last 4 yrs), I rented the home.  Under IRS Publication 523 for 2023 dated February 2024, I qualify as "Service, Intelligence and Peace Corp Personnel" and for "qualified extended duty" (page 4& 5 - https://www.irs.gov/pub/irs-pdf/p523.pdf). If I read this correctly, this essentially changes the 2 of 5 rule to 2 of last 10?  

Two questions: 

1. Does renting the home while deployed void the eligibility for exclusion of gain, even when the home was lived in/primary residence for 2 of the last 7?  

2. If yes, am I eligible for a 1031 exchange even though I claimed the home as my primary residence when it was rented? 


Appreciate any thoughts!

[Wayne Brooks]

Quote from @Tim Hem:

Thanks all!  So if I understand this correctly, by qualifying to extend the 5 year rule to 10 yrs, $250k if single or $500k if married of proceeds from this sale would be exempt from capital gains? 

Yes, you are all good.