@Ed golf
<<If I sell my home tomorrow for 850,000 that I bought originally for 175,000 8 years ago. I netted after commissions, property taxes etc something like a 580,000 gain>>
assuming you and spouse lived in the home for 2 of the last 5 years, then you would pay capital gains tax on $80,000 of the gain THIS YEAR. There is no rollover of the gain to the next house - that went 'out the window' many, many years ago. You are eligible for a $500,000 exclusion on the gain, which is why you'd only pay tax on $80,000 of long term gain in your example.
<<What’s preventing me from renting and sitting on this gain for a couple of yrs. Got to be sometime the IRS will come a knocking >>
At closing, the attorney is required to report the sale to the IRS if the sales price is over $500,000 (since it's a married couple selling) and send you a Form 1099-S at the end of the year. You are required to report that 1099-S on your tax return (as the IRS got a copy also, they are expecting it). So the IRS will "come a knocking' pretty quickly because the attorney reported the sale to them.
Again, the concept of 'rolling over the gain' is no longer part of the tax code, so if you want to rent the rest of your life, the IRS will have received anything from you because of the 1099-S that was reported to them in the year of sale.
