The IRS allows a homeowner an exemption on capital gains tax from the sale of your primary residence, if you used the home as your primary residence in at least two of the five years preceding the sale. Since you have indicated that your father did not move to another residence until 2005, it is possible he still qualifies for the exemption. An example would be - If you owned a home from Jan 1, 2003 and sold it on Jan 1, 2008, as long as you lived there for two years sometime during that five year span, you would qualify for the exclusion on the sale. So if he lived there from 1/1/03 to 1/1/05 he would qualify.
If your father does not qualify for the exclusion of sale, then he would be taxed on the gain he realized from the sale of home, which would be the sales price less his basis. The gain would be taxed at the long term capital gains tax rate which is currently capped at 15%.
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