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Nowhere was the air-quoted "selling" mentioned or implied.

The OP's original post said:

I don't think there is a way to use the "living in the house at least 2 of the last 5 years" tax deduction here, since we didn't do a formal change of ownership.

Then, the OP asked:

Do you actually have to sell it, or does a change of ownership such as to a different family member or from "husband and wife" to "wife" (or "husband" to "wife") do it? What about moving it into a trust?

and then followed up with:

It must be sold. Transfers between spouses don't count.

If you gift it or sell at lower than market value to a relative, then you will need to deal with related party sales issues.

What about moving it to a family trust?

If you sold it at roughly fair market value, would there be a related party sales issue?

I saw the air quotes because the OP continued to refer to both 'moving it to a family trust' and 'selling' in the same set of questions.

'Moving' a property into a family trust just requires re-titling the property. It's a different action than 'selling' to a family trust. Because mortgage lenders generally will not lend directly to a family trust, it's unclear how the family trust would have the money to buy the property at full market value, unless the OP's family trust has other assets that it would exchange for the property. Maybe there are other assets, but then I don't know why the OP continued to ask about 'moving' the property into a family trust.

Lenders do allow property to be re-titled ('moved') into a family trust after the mortgage is funded, if the original borrower(s) will sign documents stating that they remain personally responsible for the mortgage, even though it's the family trust that owns the property.

-cynical today
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