<< <<Capital Gains kick in if the property was not a primary or secondary residence. If it is a primary or secondary residence and if the house was lived in at least 3 of the last 5 years, then any capital gain is non-taxable.>>
That is only true if the money is re-invested in a house of equal or greater value of the sales price within 18(?) months. Otherwise it is considered capital gains.
You are right about the death tax, I got that mixed up. >>
Actually we are both off a bit. The new tax law stipulates (from IRS website):
<< If you meet the ownership and use tests, you will generally only need to report the sale of your home if your gain is more than $250,000 ($500,000 if married filing a joint return). This means that during the 5-year period ending on the date of the sale, you must have:
? Owned the home for at least 2 years (the ownership test), and
? Lived in the home as your main home for at least 2 years (the use test).
If you owned and lived in the property as your main home for less than 2 years, you may still be able to claim an exclusion in some cases. The maximum amount you can exclude will be reduced. If you are required to report a gain, it is reported on Form 1040, SCHEDULE D, Capital Gains and Losses.
For additional information on selling your home, refer to Publication 523, Selling Your Home. >>
If the amount exceeds that allowed, a 1041 exchange can remedy the tax exposure.