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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 17919  
Subject: Re: Rental home Date: 10/12/2004 8:09 PM
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SecrtAgent: "I hope this is the right board to ask this question (if not, I'm sure someone will POLITELY direct me!)

I have a home we lived in as our primary residence for 5 years (purchased new). Recently we (my wife and I), purchased a new home, and hope to rent the other for up to 3 years, then sell, and retain the tax exemption due to it being our primary reesidence for 3 out of the last 5 years.

Has there been any important, significant changes in the tax code, that impact this approach?"


The Tax Board would be the best place to ask; the pro tax gurus hang at that board.

That said, there have been no recent changes, but you need to be aware of several things.

If you wait more than three years to sell, you will no longer qualify because that home will no longer have been primary residence for 2 of the last three years. IOW, you need to sell before three years have expired from the date you moved out of the "old" house.

The exemption does not work if you have recently (within last year or 2 used the exemption in connection with another property). This may affect your plans vis-a-vis the new house. For example, if you own and live in the new house for 2 years and then sell it and take the exemption, you will be time limited in how soon you can sell the "old" house and use the same exemption. Tax pros will know the time limit.

Last, depreciation on the "old" house that you take or should have taken
once it become rental property will be recaptured and taxable, regardless of the availability of the exemption. IOW, the exemption (even if there might be dollar room) does not shelter recaptured depreciation.

Good Luck. Regards, JAFO
(not a tax pro)
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