I believe that is a myth. If you own the home for less than 2 years you are subject to capital gains tax. We owned a house and sold it after 1 1/2 years and bought another one, but were still subject to it due to not owning it for 2 years. This was 5 years ago, though. At that time the law had just been changed to reflect that.

There have been many changes in Tax Laws over the past 5 years. Check with a Tax Specialist to be sure of the exact current laws; both Federally and in YOUR STATE! However, I believe that the key here is still that this has been your PRIMARY residence...you LIVED in the house. If you were renting this property out, living in another house, you would have to then move into the rental property and live in IT for at least two full years before you could sell it as a primary residence and then purchase a new PRIMARY residence with the proceeds and avoid Capital Gains. I have a rental property in San Diego currently, while I live in PA...this is the law in CA/and Fed currently for MY rental property. HOWEVER there is now another new law in CA. I don't know if it has taken effect on a National level or not.....instead of you checking off a box on the paperwork given to you by your Real Estate Agent (or with your Sell by Owner kit) that you DID live in the house...this was sort of an "honor system" thing and your Agent WOULD NOT be held responsible if you lied....they are NOW with holding the amount of taxes you would be liable for in escrow, UNTIL the Government SAYS to release them to you, I assume...after "they" have checked out weather or not you DID live in "the house" as a primary residence or NOT...if you did...you gets your money...if you lied...THEY GETS YOUR MONEY...and probably, I'd bet... YOU gets some interesting paperwork, phone calls or visits from someone with fines and or possible other repercussions that could have nasty effects on your freedom. THIS little nugget was just explained to me 2 weeks ago by my agent in San Diego...she said it is SO NEW...that the escrow and Title companies have (at least as of 2 weeks ago) NO CLUE, how it is going to work and exactly what THEIR ROLL in it will be...they are not happy campers at all. I want to sell the San Diego house at some point, but not at this time....hopefully the dust will settle on this interesting mess, before I do.