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First of all when the house is sold for 400k - you realize 200k gain.If you include that gain into your taxable income - there is no issues - and the IRS will be more than happy to accept your taxes on that gain.
When you choose to exclude that gain from your taxable income as that was your primary residence at least two out of last five years before the sale - there might be a question - if that is a true sale transaction?
If yes - that was a true sale transaction - there is no issues.
Later you might decide to purchase the same property again - there is nothing illegal - but you might want to claim section 121 exclusion some time down the road - if yes - the same question might come up - if that was a true sale agreement - or that was a scheme specifically implemented to claim section 121 exclusion on the same property twice?
If any on these sale transaction will be considered as not true sale - potentially the IRS may disallow exclusion.
That might be rare situation - and the possibility that the IRS audits and rejects such exclusion is relatively low - but legally that is possible.
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