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Hey there,

We purchased our first home in October of 2002. Now we're looking at buying another house. It wasn't planned, it's just something that became available, we like, and is right next door to my fiance's mother. The family is very close, so it would work out well for all involved.

The house is also in a nicer area, and I suspect that it will do better in the long run than our current home. It's also more expensive.

We would have some gains ($30k or so) when we sell our current house. I understand that if we live there two years, we could completely exclude them. However, that wouldn't be the case. It used to be that you could roll your basis into your next home.... but from what I've read it seems like that went away.

Will we be forced to pay taxes on the $30k if we decide to move? And if so, will it be at our marginal tax rate? Is there any way, aside from turning it into a rental property, of avoiding paying taxes on that $30k? It really doesn't seem quite fair - as the $30k gain was surely offset by a similar gain in the price of the house which we are looking to buy.

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