Re IRS rule on non-qualified use of principal residence, is this rule only applicable if you have lived in your principal residence 2 years of last 5 yrs ?

the look back period being five years,  and as you say you have had the property for rent for all of those five years -- therefore it will be classed as  income property --- no gains exclusion allowed.  Where it gets troublesome when you  convert a home ( main residence  )  to income property, you need to keep track of both the original basis ( acquision cost plus cost of improvements during qualified use) and the FMV at the time of comnversion.  Gain or loss is computed using both , further adjusted for  allowable depreciation , improvements etc.  But TurboTax will walk you through all of these issues.  If you need more   & specific help, please add your questions  as comment

Thanks for quick response. Just to clarify please. This means that I would take the diff between (market value of the property when it became an income property) - (purchase price + improvement costs) and CGT would be levied on this sum. There would be no possibility to apply any partial exclusion, even for the period we lived in the home and this formula - Total Period of Non Qualified Use / Total Ownership Period X Gain on Sale of Property - cannot be used. Even if we had to move out the property because of work. Is that correct ?

The period we lived in the home was over 5 years ago.