Capital gains from sale of 2nd home

[NSNM]

A taxpayer's second home, located outside USA, was NOT used for renting or business anytime.

Taxpayer realized proceeds from sale of that second home and used in the purchase of replacement second home in 2012.

Is the capital gain subject to tax in the year of sale, or can that be deferred?

Are any exclusions available for the sale?

My review of the situation indicated gain is taxable and loss is NOT deductible.

Your opinion will help resolve a tax question.

Thanks for any response.

[Uncle Sam]

Your review is correct.
However, if the 2nd home is sold via a legitimate 1031 tax free exchange - then there's a
deferral of the gain until the replacement of the second home is sold.

[Burke]

Uncle Sam is correct. The difficulty lies in (1) following the appropriate procedures and the time frames for a 1031 exchange (it cannot be done retroactively after the sale and repurchase have taken place); and, (2) whether the TP can establish the investment purpose of such property (as opposed to personal use as a vacation home or second residence.) See IRS Ruling 2008-16 for safe harbors.