Principal Residence/Non-Qualified Use

[Burke]

Part of the 2008 Housing Act just signed by President Bush, this provision will eliminate the period of non-qualified use of a personal residence after 1/1/09 from the exclusion of gain rules. In other words, that fancy vacation home may become a personal residence if you move into it and stay for 2 years, but the period of time it was used for other than a personal residence will not be part of the excludable gain when it is sold. Interesting.

[David1980]

Can't say I'm too surprised. How many people can really claim they haven't been in a tax class/seminar where the story of the little old lady with 37 rental houses lives in each house 2 years before sale in order to avoid paying any capital gains. The change seems to be closing a loophole, though it will make our jobs a little harder (well, result in more off-season IRS letters anyway since clients never tell you the whole history of a house they sale...)

[jimmcg]

Can't say I'm too surprised. How many people can really claim they haven't been in a tax class/seminar where the story of the little old lady with 37 rental houses lives in each house 2 years before sale in order to avoid paying any capital gains. The change seems to be closing a loophole, though it will make our jobs a little harder (well, result in more off-season IRS letters anyway since clients never tell you the whole history of a house they sale...)

On a rental house they would still have depreciation recapture to contend with which may or may not exceed the realized gain on sale.