So the initial 1031 deferred gain will not be taxed until she sales the property as a personal residence.  Then she will have to pay tax on the recaptured depreciation and exclude the capital gains as a personal residence except for the portion of rented years to total years owned.  If she owned the property for 15 years and lived in it for 5 years, she would have to exclude 66% of the $250,000 plus be taxed on recaptured depreciation?