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Good afternoon. When you sell your principal residence, you are eligible for an exclusion from capital gains
from the sale of your principal residence of up to $250,000 ($500,000, if married). That means that up to $500,000 of gain can be excluded from being taxable, so, yes, you would want to take advantage of this exclusion. You can find a full explanation of this exclusion and the requirements in IRS
Publication 523 which you can find at : http://www.irs.gov/publications/p523/ar02.html#en_US_2012_publink1000200709
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