New client, so I'm missing some history.
Taxpayer built home in 1995ish and resided in that home as their primary residence till 2005. Sold home in 2005 to a relative (if that matters) with owner financing, ie: monthly payments to the taxpayer. Relative "defaults" on payments and taxpayer takes back the home and sells it in 2011. Taxpayer did not live in the house since 2005, ie: does not meet the 2 of 5 year rule for the 2011 sale.
I know that you adjust the basis down for the payments received, and that adds to the gain on the house sale in 2011.
The home sale in 2005 was a qualifying sale for the gain exclusion. No problem.
I'm seeing the resale as a taxable event, unless someone knows something that would extend the gain exclusion to the second sale of that home.
Any help on this is appreciated.