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If the homeowner has two houses and uses each as a residence for successive periods of time (such as alternating between Florida in the winter and Washington during the rest of the year), the property that the homeowner uses most of the year usually will be considered the principal residence. There are circumstances that would permit you to have two principal residences. For example: In 2001 and 2002, you lived in Washington, but in 2003 and 2004 you lived in Vermont. Each home will be considered your principal residence, but you can claim the exclusion only once every two years. Thus, if you sell the Washington property in 2005, and sell the Vermont property two years and one day after you sold in Washington, as long as you have owned and used each property for the requisite two out of five years before sale, you can take the exclusion on both properties for the year each was sold. _____Real Estate Columns_____ The Nation's Housing Housing Counsel Shaping the City From the Ground Up Note that a cooperative apartment, a mobile home or a boat may also be considered a "principal residence," as long as there is a kitchen, sleeping quarters and bathroom facilities. The operative words are "owned and used." If you are married, the exclusion of gain applies as long as either spouse meets the requirement. Marital status is determined on the date the house is sold. In the event of a divorce in which one spouse is given ownership pursuant to a divorce decree or separation agreement, the use requirement will include any time that the former spouse owned the property before the transfer to the other spouse. The burden of proof will be on you, the homeowner, to demonstrate that a home you sell was your principal residence. How do you prove it? Keep a driver's license that shows your former address. Keep utility bills that could show when you lived in the house. Keep a voter registration card that shows the old address. If you have do not meet the use and occupancy requirements, you may still be eligible for the "reduced maximum exclusion" -- that is, a smaller tax exclusion based on a shorter time in residence. If the reason for selling your house was because of a change in place of employment (if the new job is at least 50 miles farther from your home), health reasons or other unforeseen circumstances, you may still be eligible to exclude part of your gain. If you think any of those conditions apply to you, you or your tax adviser will want to review the IRS's detailed explanations. The reduced exclusion is equal to the number of days of use multiplied by the quotient of $500,000 divided by 730 days. If you do not file a joint tax return, change the $500,000 to $250,000. The result, basically, is that if you qualify for the reduced exclusion, and you lived in the house exactly one year, the maximum amount of your profit that is tax-free would be half what it would have been if you had lived there a full two years. Your home may be your castle, but whether it is also regarded as your principal residence will depend on how carefully you have documented the facts. For a more comprehensive discussion, see IRS Publication 523, Selling Your Home, available free on the IRS Web site, www.irs.gov. Next Saturday: Mortgage interest deductions Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.