you would be deemed to own both houses for 2 out of 5 years provided your meet the following qualification
Service, Intelligence, and Peace Corps personnel.
If you or your spouse are a member of the Uniformed Services or the Foreign Service, or an employee of the intelligence community in the United States, you may choose to suspend the 5-year test period for ownership and residence when you’re on qualified official extended duty. This means you may be able to meet the 2-year residence test even if, because of your service, you didn’t actually live in your home for at least the 2 years during the 5-year period ending on the date of sale. Qualified extended duty. You are on qualified extended duty if:
• You are called or ordered to active duty for an indefinite period, or for a definite period of more than 90
days.
• You are serving at a duty station at least 50 miles from your main home, or you are living in government quarters under government orders.
• You are one of the following:
1. A member of the armed forces (Army, Navy, Air Force, Marine Corps, Coast Guard);
2. A member of the commissioned corps of the National Oceanic and Atmospheric Administration
(NOAA) or the Public Health Service;
3. A Foreign Service chief of mission, ambassador-at-large, or officer;
4. A member of the Senior Foreign Service or the Foreign Service personnel;
5. An employee, enrolled volunteer, or enrolled volunteer leader of the Peace Corps serving outside
the United States; or
6. An employee of the intelligence community, meaning:
a. The Office of the Director of National Intelligence, the Central Intelligence Agency, the
National Security Agency, the Defense Intelligence Agency, the National Geospatial-Intelligence Agency, or the National Reconnaissance Office;
b. Any other office within the Department of Defense for the collection of specialized national
intelligence through reconnaissance programs;
c. Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard;
d. The Bureau of Intelligence and Research of
the Department of State; or
e. Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information.
Period of suspension.
The period of suspension can’t last more than 10 years. Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. You can’t suspend the 5-year period for more than one property at a time. You can revoke your choice to suspend the 5-year period at any time.
so say the former home meets the tests so you are deemed to have owned and occupied it for 2 out of 5 years before the sale. however, there are other rules. first, you can only exclude 1 home sale every 2 years. there is a reduced exclusion for the second sale.
I'm assuming your single. this is the computation for the reduced exclusion. if you use days for 2a you must use days throughout otherwise you must use months throughout
1) max exclusion $250,000
2a) number of days or months used as main home
2b) number of days or months owned
2c) smaller of 2a or 2b
3) number of days or months since sale of first home for which you used exclusion
4) smaller of 2c or 3
5) divide the amount on line 4 by 730 days or 24 months - enter result as decimal to at least 3 places
6) multiply 1 by line 5
line 6 is the home sale exclusion for the second sale
in addition, you'll have to recapture the depreciation taken when your previous home was rented
the law and proper computations can be complicated. you may want to use a pro to optimize the benefits. it may be better to sell the previous residence first.
