Contemplating the sale of a home and wishing to minimize the resulting tax, my question centers on IRS behavior in a specific scenario. The home was used as a rental more than 5 years ago but after 2008. In the terminology of 121 cap gains exclusion, there was no non-qualified use in the 5 year look-back period. Pub. 523 in worksheet 3 instructs the taxpayer to bypass all calculation of a qualified use ratio when no period of non-qualified use exists in the 5 years prior to sale (section b, if you don’t know the verbiage then you aren’t likely the right subject matter expert for this question). So, getting to the question, what, in your experience, has been the IRS’ RESPONSE when homeowners rent out their condo and then convert it to primary residence for 5+ years then, upon the sale of the condo, follow the p523 Wks3 SectionB instructions to take the full exclusion? I want to sell but I cannot un-sell the home if the exclusion is denied in examination so I would like SOME idea of past/recent IRS behavior here in order to make a considered decision.
