move into your rental before Jan. 09

[Lynn Z]

If you plan to move into your rental property, live for two years and exclude capital gains tax under section 121 of the IRS code do so before Jan. 2009. Any rental or "unqualified use" after that time will be counted in a formula which reduces your exclusion when you sell significantly. See section on 1031 exchanges which keep you informed of the Housing Bill 8/08 which establishes that the House and the Senate want to penalize small investors. Rental years through Dec. 08 (check the date) will apparently not be counted as "unqualified" use but will count after that date. I consider this to not be generous for those with a long term lease of two years as they are stuck counting those years in the reduction formula.

This is major for 1031 exchanges because you must hold them for 5 years anyhow.