Is buying a second home a wise tax strategy?

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DEAR BOB: My wife and I bought a house in 1995 for $180,000. Since then, we have taken out home-improvement loans and now owe $320,000. Similar nearby houses sell for $600,000. In 2004, we bought our current home for $640,000 and rented out our former home. We have been told if we sell our first home within three years after buying our second home we won't owe any capital gains tax. Or should we try to sell it now although the local home sale market is a bit slow? --Manuel A. DEAR MANUEL: You received incorrect tax information. Buying a replacement home is irrelevant. Also, the mortgage balance on your old home doesn't matter. Purchase Bob Bruss reports online. To qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $250,000 for a single person (up to $500,000 for a qualified married couple filing a joint tax return), you must have owned and occupied the home at least 24 of the last 60 months before its sale. That means you have up to 36 months after m...