Date to sell my Virginia house by in order to avoid capital gain taxes?

[nanu1002]

I lived in my Virginia house till Oct 2014 (bought in 2010) and the house was vacant till 5th January 2015. From January 5th 2015 till February 28th 2017, the property will be rented.

I am not sure how to calculate the date to sell by as the property was vacant and then rented from October 2014-January 5 2015. Trying to not cut it too close and I am thinking of hopefully selling by August 2017. 

[Carl]

If you lived in the house as your primary residence for 2 of the last 5 years, counting backwards from the closing date on the HUD-1 you will receive at the closing when you sell it, then up to $250K of gain is exempt from the capital gains tax. That's to say you lived in it as your primary residence for 730 of the last 1826 days you owned it.

[Opus 17]

The question is when was the house your primary residence.  The conservative answer is that the house was your residence until October 2014, which means you have to sell by October 2017 (minus 1 day) to use the exclusion.

A liberal risk-taking answer is that the house was your primary residence until Jan 4, 2015, which means you need to sell by Jan 3, 2018, to use the exclusion.

A realistic answer might be that the house was your primary residence until you "held it out for rental."  That is to say, if you began advertising it as a rental and it was ready to rent as of December 1, 2014, then November 30 is the last date you could reasonably claim to be living there.  

This issue is always what can you prove, if audited, because the burden on you is to prove your deductions and qualifications, the IRS does not have to prove anything.    If you really moved out and were gone by October XX, 2014 then that's the date you were gone.  If you were legitimately in a transition period for a few days or weeks you might get away with stretching the date.

[Carl]

Generally, there's two dates to consider here, and the IRS considers the date of conversion to to the transition date. For example, I moved out of my house on Jan 18, 2004. Jan 19, 2004 was the date I converted it to a rental, and began working on it to get it ready. Jan 24 was my "in service" date, because that's the earliest date a renter "could" have moved in. Therefore, the last day it was my primary residence was Jan 18, 2004. My new "primary residence" day count began with day 1 on Jan 19, in the house I moved in to.