This is a good discussion! I have similar question, but different than the situation in the example. What if I bought the house, rented it for 2 years, and live there for 5 years, sold it. Is the capital gain (assume 140K) exemption calculated proportionally, only 5/7 * 140 = 100K exempted? Reading the section B, the non-qualified use did not happen in the past 5 years before sell, should the whole 140K get exempted?
