Posted by Dave T on July 04, 2002 at 23:46:40:
I think Tom overlooked the part of your post that said you were buying a triplex. Because you are depreciating, I assume that you are living in one unit and operating the other two as rentals. Additionally, I assume that you allocated a fair share of your cost basis to each unit, and are only depreciating your rental units’ basis (less land value).
In this instance, when you sell the property, you will have to treat the sale for tax purposes as two transactions. The first will be the sale of the unit you occupied as your primary residence. The second will be the sale of the rental units.
On the sale of your primary residence unit, you may take full advantage of the capital gains exclusion for the portion of the profit on the sale allocated to your unit. Since you are not allowed to depreciate your primary residence, no depreciation recapture would apply.
The sale profit allocated to the other two units are subject to capital gains taxes and depreciation recapture.
Suggest you consult a professional tax advisor for specific details.