DEAR BENNY: My question is about the two-year residence requirement for tax exemption when selling your main residence. We owned the bare land for years and built a home on it in 2006. We actually moved out of our rental and into the home on Nov. 6, 2006, and by Dec. 31 the home was 99 percent complete. However, the final approval wasn’t signed off until March 2007 when the required pool cover was installed. When I read the law, it states “primary residence date,” but would that be the date we actually moved in or from date of final sign off by the building department? –Carol

DEAR CAROL: Yours is an interesting question that will have lawyers and probably the IRS issuing dozens of opinions, many of which will be contradictory.

I don’t know the answer. The law says that you have to have owned and lived in the house for two out of the five years before the property is sold. I would argue that the target date would be when you actually moved into the house, namely November 2006. But if you can hold off until March 2009 — which will be two years after you received the final clear-off from the county — that would be the safest course to take.

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Filed under: Legal Advice in Common Scenarios, Tax Issues