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By now, every accountant knows that the Taxpayer Relief Act of 1997 (TRA '97) changed the rules with regard to sales of residences. IRC section 121 now allows a taxpayer to exclude up to $250,000 ($500,000 for couples filing jointly) of gain on the sale or exchange of a principal residence.
To qualify, IRC section 121(a) requires a taxpayer to have owned and used the residence as a principal residence for perF ods aggregating two years or more during the five-year period preceding the date of sale...