Hello again DHC,
If this was not used as their primary home, then they will owe capital gains tax on any gain they have from the sale. Their gain would be calculated by taking the selling price less their basis. Their basis is what they originally paid for the home plus the cost of any improvements they may have made while they owned it.
If they made no improvements, then their gain would simply be $27,500 and this would be taxed as a long term capital gain which currently has a maximum tax rate of 15%. Depending on their total current income, part or all of that gain may actually qualify to be taxed at zero percent. If they are married and filing a joint return, if their other income for the year added to this gain of $27,500 does not exceed $67,900, then they would actually owe no tax on this sale. If their other income including this gain does exceed $67,900, then the part that exceeds the $67,900 would be subject to tax at a rate of 15%.
You asked if the law could change in January of 2010, and the answer is yes, it could. There are talks in Congress now to increase the capital gains tax rate and eliminate the provision for part of a gain to be taxed at zero. If the law is passed they could make it retroactive of January 1st, 2010, but there is no way to know for certain if that will happen.
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Thank you DHC