Exclusion of Gain on Sale of Principal Residence Nonqualified use means any period after December 31, 2008 that the property is not used as a principal residence.
Although the basic rules remain the same as to the exclusion amount ($500,000 if married filing joint return) and the ownership and occupancy periods (owned and occupied 2 out of the 5 previous years), effective December 31,2008 there will be a disallowance for the gain allocated to periods of nonqualified use.
Nonqualified Use
How to Allocate Gain to the Nonqualified Period
The total gain is multiplied by a percentage which is determined by the nonqulalified period divided by the total ownership period.
Certain Uncertainy
In December 2010 the Tax Relief / Jobs Creation Act of 2010 (see page 1 of Tax Tips and Comments) extended many of tax provisions including the "Bush Era" tax cuts. So, in that regard many of the uncertain issues resolved at the end of 2010 are still in effect.
The big uncertainy is what hapens when the Congressional so called Super Committee votes. Depending on the report from the committee and spending cuts it will be interesting to see what tax legislation takes place in 2012.