Capital Gains taxation question

[Kevin Joy]

Here is my situation. I bought house in 2007 and lived in it from 2007 to 2012.

In 2012, I bought a new construction and moved into it in August of 2012. I kept my other home and converted it to a rental.

I was thinking that in two years, I could sell my new construction home for a profit and move back into my rental home, keeping the gains from the new construction sale. I would then convert my rental back to my primary residence, obviously, and use some of the proceeds from the new construction sale to renovate my rental property.

Would I be subject to capital gains in this situation since the new construction home was never seasonal, a rental, or anything else? It was always just my primary residence.

[Jon Holdman]

As long as you live in that new house for at least two of the five years before you sell you can exclude $250K of gains ($500K if married filing joint.)

Of course that's assuming you have gains. After considering the costs associated with both the purchase and sale, its tough to actually have any gains after only two years.