There is no limit to how many times a taxpayer can do this as long as the minimum use requirement is met. Homeowners have an option to trade up or trade down on a tax free basis.

Most homeowners don't take full advantage of all the adjustments in order to keep the gain as low as possible. If the truth were known, most people's records are so poor that when the time comes to recognize the gain, the calculations probably have to be based on estimates instead of actual numbers.

RULES FOR EXCLUSION

1) Effective date for sales of principal residence on or after May, 1997.

2) Ownership and use must have been the principal residence for two out of the five preceding years. There is a formula to provide partial exclusion for those who cannot satisfy the two year requirement.

3) Gain in excess of $500,000 or $250,000 amount is taxable at capital gains rate.

4) Exclusion does not apply to vacation or second home properties.

5) There is no requirement to rollover proceeds and reinvest them into another home.

For additional information, a taxpayer may refer to the IRS Publication or see their tax professional. Form 2119 must be filed with the taxpayer's regular income tax return in the year of the sale.

For more information, call Richard Morse, your real estate professional, at (800)946-3895.