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My fiance and I each own a home, and we've each lived in our respective homes for over two years. Both homes have appreciated in value since we bought them, but by less than $250,000 each. We plan to marry in January 2001. AFTER we've married, my fiance plans to sell his house and move into my house (in early 2001). In early-to-mid 2002, we plan to sell my house and buy a larger house together (need room for the hoped-for family! :-) ).

My question is, will we be able to use the $250,000 exclusion from capital gains for the sale of his home in 2001 AND the $250,000 exclusion from capital gains for the sale of my home in 2002? Or, will we have to pay capital gains tax on the gains from the sale of one of those homes? [If we would have to pay capital gains tax under this scenario, is there any scenario under which we would not have to pay it - other than a) his selling his house before we marry or b) our waiting two years to sell my house?]

(I ask this because the IRS examples in their instructions for the home sales form refer to home sales BEFORE two individuals marry, not AFTER they marry, so I'm not clear on whether we'll be able to take both exclusions.)

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