Hello,

My wife and I are both in the military and are in the process of selling our rental property. We purchased the home in Oct 2004 and lived in it until Oct 2006 (exactly 2 years) before moving 36 miles away to a different duty station. We lived at that duty station until Apr 2011 (4.5 years) and during that time my wife deployed for 9 months while I remained at our new duty station and then I deployed for a year while my wife remained behind. In Apr 2011 we moved again, more than 50 miles away, qualifying for extended duty.

Does our individual time away qualify for extended duty? How much time are we able to suspend? The projected gain is less than $500K, would we owe capital gains tax?

Also, I want to make sure I understand depreciation recapture correctly. We depreciated the property using the 27.5 year straight line method. Original purchase price was $195K and the adjusted basis is $240,280. We claimed $37,850 depreciation so the book value is $202,430. The sale price is $200K.

Am I correct in assuming we do not owe depreciation recapture since the sale price is less then the book value?

Thanks
Mac mil-2-mil