Can I keep a home as rental and use primary residence exclusion

[Account Closed]

Hi everyone, 

I've personally lived in a house for 2 of the last 5 years. So I qualify for the home tax exclusion.

But I'd like to keep the house. It's a great SFR in an A/B area that cash flows.

Can I, as a person, sell this home (new financing, new deed) to a business entity I own (LLC, etc)? Therefore, on my personal tax return I don't pay taxes on the 250k gain. And I've essentially stepped up the basis 250k for the business entity.

Anyone have experience with this?

[Peter M.]

@Michael Sedillo No you can't do that. Publication 523 of IRS code calls that a remainder interest. Remainder interest. The sale of a remainder interest in

your home is eligible for the exclusion only if both of the

following conditions are met.

• The buyer isn’t a “related party.” A related party can

be a related person or a related corporation, trust,

partnership, or other entity that you control or in which

you have an interest.

You could rent it for 3 years before the 2 of 5 is up then you could exclude it minus the depreciation you claimed but if you go past the 3 year mark you'd be out of luck. In that case you could just do a 1031 exchange.