Hi, Will really appreciate any advice on the following situation.
Owned a house for last 10 years and I have in access of 250K gains. I have been renting this house since Jan 2007 and before that it was my primary residence. If continue to rent the property till April 2009 and sell this house in April 2009, how will my 250K deduction on home sale gains will be impacted. Please share your wisdom thanks VJ-
The new rule should not change your situation at all. In a nutshell, if you meet the Section 121 gain exclusion rules from time of purchase up through the most recent two years, you can convert to a rental for up to three additional years beyond that and still use the full exclusion. What you can no longer do is rent out a property for a long time, then move into it for the last two years before sale and use the full exclusion based on those last two years.
I'm leaving out a lot of details, such as pre-2009 "grandfathered" use, the proration calculation, and so on.
Also, don't forget that gain due to depreciation allowed (or allowable) since you converted to a rental continues to be not excludable.
-Mark Bole
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