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You generally can exclude up to $250,000 of gain ($500,000 if married filing a joint return) realized on the sale or exchange of a main home in 2002. The exclusion is allowed each time you sell or exchange a main home, but generally not more than once every two years. To be eligible, during the 5year period ending on the date of the sale, you must have owned the home for at least 2 years, and lived in the home as your main home for at least 2 years.

Note. The maximum amount of gain that you can exclude will be reduced if you do not meet the ownership and use tests due to a move to a new permanent duty station.

For married individuals filing jointly who do not qualify for the $500,000 exclusion for gain on a sale of a home because they do not satisfy the ownership and use tests, the limit on the amount of excludable gain should be calculated separately for each spouse. In that case, the maximum exclusion for the couple is equal to the sum of the exclusions to which the spouses would otherwise be entitled if they had not been married.

Property used for rental or business. You may be able to exclude your gain from the sale of a home that you have used as a rental property or for business. However, you must meet the ownership and use tests discussed in Publication 523.

For more information on the laws affecting the sale of a home in 2002, see Publication 523.

Loss. You cannot deduct a loss from the sale of your main home.

Above Information Extracted from IRS Publication #3, Armed Forces Tax Guide