Hi Diane,
Well, I actually took this situation to HR Block, and they said as long as you move from one primary residence to another, any profit made on the sale of the first primary residence, you do not have to pay capital gains tax. Which is great, because the profit was significant with the land subdivision. I think a couple caveats are 1) we had to sell the first residence as well, not just the land, which we did, and 2) you can only take advantage of this type of situation once every 5 years, which prevents people from doing it as a business of buying land, subdividing, and immediately moving.
Thanks goodness...they saved me a lot of money.
Thanks,
Gwen
