Hi everyone?this is a real scenario, with dollars and dates changed a bit for anonymity:

In 2001, Joe purchased a home on 12.3 acres for $349,000. Last year, he refinanced and subdivided the lot into 5 lots. One lot was just over 6 acres, which he kept and built his new home on, and the other lots were split off as follows: ~1.3 acres with the old (existing) house on it, and three vacant ~1.5 acre building lots. This year, (calendar year 2017) he sold all four of the new parcels (the house and the three vacant lots) for a total price of $700,000. He lived in the old house until his new home was built this spring. The new home was started and completed entirely within 2017 as well.

Is that taxed at a capital gains rate, using the purchase price minus 6 of the original acres for the basis? How do you do this calculation? Since it was owner occupied, some portion should be untaxable, but how much? Or is it all taxable since he exceeded the $500k limit for an owner occupied residence?

Can the fact that he built a new primary residence be taken into consideration?