If you are asking for an exclusion on both your first and second homes, I don’t believe that can be granted under any circumstance. To use the exclusion, you have to meet the two year residence rule out of the last five years, the two-year ownership rule, and you can’t have used the exclusion on a different home in the past two years, or 731 days. The regulations allow certain exceptions to claim a partial exclusion if you don’t meet all the tests, But if you look at part B of worksheet one in publication 523, there is no way you could qualify for a partial exclusion for home #2. The exclusion is based on the shortest of three periods: the length of time you used the home as your main home, the length of time you owned the home, and the length of time since the most recent time you used the exclusion.
You haven’t lived in home #2 as your main home, so that period would be zero. And since you are selling #2 before #1, that period is a negative number. Even if you qualified for a partial exclusion, the amount would be 0/731ths of the gain.
You aren’t really asking for permission to use the partial exclusion rule, you’re asking to completely waive the capital gains tax on your second home and I don’t think that is possible under the law, regardless of how sad the individual circumstances are.
