because the home you owned was really a vacation home before it will become your principal residence the exclusion is figured as follows:
1) period not a principal residence during term of ownership
2) total ownership period
3) gain
4) non-excludable gain 3) times 1) divided by 2)
5) excludable gain 3) minus 4)
example
1) 13 years
2) 15 years
3) $750,000
4) $650,000
5) excludable gain only $100,000
now if it was your principal residence for 25 years
the non-excludable gain would be $750000 times 13 divided by 25 0r $390,000
leaving an excludable gain of $360,000
what this shows is the longer you live in it as your principal residence the larger the excludable portion up to a current maximum of $500,000
