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My wife and I moved into rental property in June 1997 intending to live in it 2 years while we built a new home, and avoid capital gains on the rental when sold.

We will be moving to the new home by April 01, 2000. We have a contract on the rental, the new owners are pushing to close the sale next week (First week of February '00) in order to avoid chance of rate hike.

We had been led to believe that if we did not stay in the rental the full 2 years, that the capital gains taxes would be prorated. In this instance we expected approximately 20/24 th's avoidance. Now my accountant tells me it's "all (24) or none".

Sale,and proration, due to "unforeseen circumstances", evidently are allowed.

Can someone help me as to the reality of prorating or,what are "unforeseen circumstances" ? Perhaps some examples.

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