Capital Gains Question??
I know you do not pay capital gains on your house if you live in it 2 years and one day and them sell it. My question is... If you live in the house for 5 years and then turn it into rental property are you able to not pay capital gains when you do sell it later? Thank you. 
I'm pretty certain that its 2 of the previous 5 years. So if you live in it for 2 years then decide to rent, as long as you sell before the end of year 5 you pay no capital gains... it works the other way to; say you have a rental property for 10 years, it appreciates dramatically and its somewhere you would like to live, you can move in for 2 years and sell and pay no capital gains.
If you count back the previous five years and you have lived in the house for at least two years, you are eligible for the capital gains exclusion.
Definition of living in the home does not necessarily mean you are living there all the time. The code allows for temporary absenses. Temporary absenses is defined as anything less than 1 year. This would reasonably mean that you could move in for a few weeks, move out, move back in 1 year later for a few weeks, and then move out. The key is to be able to document that you actually lived there (possibly difficult?).
Good luck
However,
If during the time you did rent out the property you depreciated it, you would have to recognize the amount taken as a depreciation deduction as an unrecaptured section 1250 gain, correct?
Correct???
Anyone???