2008 Vacation home sale/tax

My husband and I have owned a vacation home since 1979--strictly vacation, never rented. We are older now and live in another state and plan to sell. After we determine our basis, is there any chance the new capital gains break for this year will let us off the tax hook? Or will it be 15% on our gain? Or something else? Thank you.

The sale of vacation homes are caught in the middle. They do not qualify under Section 121 as a primary residence, and they do not qualify under Section 1031 as rental or investment property. So, they are generally taxable.

However, the IRS issued Revenue Procedure 2008-16 (http://www.exeter1031.com/1031_exchange_revenue_procedure_2008_16.aspx) this year that allows you to qualify for 1031 exchange treatment with the sale of your vacation property and defer the payment of taxes by acquiring another rental or investment property. You would have to hold the property for another two years in order to meet the safe harbor guidelines provided in Rev. Proc. 2008-16 though.