I have a question regarding tax laws and the sale of properties.
Here's a little background. I have lived in my home for about 3 years, and my last home was converted into the rental property 3 years ago, thus I lived in the now-rental property 2 out of the last 5 years.
A situation is coming up where I may sell both properties in 2014. I expect to sell the current home at a small loss. The rental property may end up with a small profit (largely due to depreciation taken in the past 3 years). I understand that both properties individually qualify for the 250,000/500,000 capital gains tax deduction, but if I do end up selling both properties, I can only take the deduction on one of them because the sales will not be two years apart.
How will this scenario play out? Hypothetically if I sell the home at a small loss in March and sell the rental property in April with a small gain, is it my choice to specifically apply the deduction to the sale of the rental property?
Are there other questions I should be asking myself but might not be aware of?
Thanks in advance for your help!