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I am selling a townhouse right now that I lived in for 2.5 years 3/97-8/99, and have rented out since (I own no other property and currently rent). I stand to make a pretty decent profit.

Assuming that you haven't excluded gain on the sale of a personal residence in the last couple of years, up to $250,000 of your gain is excluded from your income except for the amount of depreciation allowed or allowable during the rental period. This will hold true as long as you sell before 8/2002. The recapture of the depreciation will be taxed at a maximum rate of 25%, and you'll need to report the sale on Form 4797.

You'll find a lot more information in Publications 523 and 527.

Phil Marti
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