You will not be able to exclude any gain on the business portion. If you convert your former vacation home, rental property, or business property to your principal residence, you may be able to avoid tax on most of the gain. You must pay tax on depreciation deductions taken after May 6, 1997. But the rest of the gain can be excluded, up to the allowable limits if you meet the use and ownership tests. So if you know you will be selling, it might be wise to give up that home office for a couple of years.
Divorce situations Special rules apply to divorced taxpayers.
As long as your divorce papers specify that your ex-spouse can continue to occupy the house, you may still be able to exclude the gain when the house is sold even though you fail the occupancy test. Transferring a home as part of a property settlement is not treated as a sale. There are many tax planning opportunities surrounding your residence, your vacation home, and your business property. Contact your tax accountant well in advance of an anticipated sale to discuss your options. Installment ban ended New law provides relief for small business owners Congress has repealed the ban on the installment sale method of accounting for accrual-basis taxpayers.