You might qualify for a partial exclusion of gain on the sale of your home even if you don't meet the two-year rules, if the reason that you can't meet them is because you suffered a "change in place of employment, health, or unforeseen circumstances."
You can establish that you are selling your home due to a change of place of employment, health or unforeseen circumstances in one of two methods. First, if you qualify under a "safe harbor," you meet that test. But, even if you can't find a safe harbor, you can qualify if you establish sufficient "facts and circumstances" to satisfy the IRS that the sale was tied to your health, your employment location or unforeseen circumstances.
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Planning Tools
You can compute a partial exclusion by using this reduced exclusion worksheet. At this time, though, it is unclear whether the reduced exclusion will apply when a home acquired in a like-kind exchange does not meet the five-year ownership period due to one of the special circumstances.
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