My parents are considering buying a 2nd home, but right now would be renting it out full time. However, eventually they may be interested in moving in, maybe for a long time but maybe just for the 2 years required to not have the capital gains taxed.

In doing some sleuthing around the web, I came across a Minneapolis Star-Tribune article about a change to the taxation of profits on the sale of 2nd homes - http://www.startribune.com/homes/buy/26414929.html?elr=KArksLckDiUvckDiU_1OKUiD3aPc:_Yyc:aULPQL7PQLanchO7DiU

Basically it sounds like they are doing away with the 2 years deal. It's all % based now - if you live in the house 2 out of 10 years, 20% of your gain would not be taxed, as opposed to 100% being exempt before (if you lived in it the last 2 years).

I think I read that right...

Can somebody clarify something for me?



So does that mean if you buy before January 1st, 2009, you can live in your 2nd house for years 9 and 10 (continuing from my example above) and renting it years 1-8, and have all gains tax exempt (up to the $250/$500k limits)?

Or does it just mean that if you bought on, say, January 1st, 2008, that when you sell after year 10, you will only be taxed on the gains for years 2-8?

Thanks for any help.

Call a 1031 exchange company and they will be able to help with your specific situation.

There are many bills proposed and amendments to tax code but many do not make it through the hwole process to actually take effect. Sometimes bills die altogether or mutate to something else.

I think you are in the wrong forum, we are not SPA to give tax advises. Everything you hear in this forum is just guess, I would suggest you to ask SPA who specialize in Real estate.