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I bought my home in December 2014 and lived in it until October 2016. Due to my mother-in-law's illness, in October 2016 we converted our property to a rental property and moved to another city to take care of her. Now I would like to sell our home to purchase another home to be a primary residence.

Since the home was only my primary residence for 22 months (2 months shy of the 24 month requirement), will I still be eligible for a partial exclusion of the capital gains if I were to sell my home?

I'm reading IRS publication 523 (page 4) and it mentions sale of home due to unforeseen circumstances, but it doesn't mention anything about converting to a rental property.

If I don't qualify to exclude the gain, what if I moved back to the rental home for a couple months to complete the 24 month requirement. Would I then be eligible to exclude the capital gains?

  • If the exclusion doesn't apply, then you would just need 2 months to qualify, the 2 years of last 5 don't have to be contiguous. – Hart CO Aug 27 '17 at 19:30
  • Thanks, @HartCO. That could be an option. How would I determine if the exclusion applies? – user1359256 Aug 27 '17 at 20:24
  • That part is less clear, not sure if the delay between moving/selling negates the exception or not, hopefully someone with experience weighs in, otherwise you'll probably want to hit up the IRS tax support. – Hart CO Aug 27 '17 at 23:03

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