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My father currently rents a house from me that I own and moved out of in January of 1998 after having lived there since 1985. I still run my business from the basement (about 50% of the house). We want to maintain this situation indefinitely, but would love to also benefit from the capital gain tax exclusion whenever I decide to sell the house. Since we are approaching the end of the 2 yr./5 yr. exclusion provision (Jan. of 2001), is there some way we can legally keep the exclusion in effect without having to get rid of the house, thereby evicting my father and my business? Or can I sell the house (or just the "residential half") to my father or some other friendly party who would allow us to maintain the status quo? What would be the legal and tax implications?"
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