re: I'm stumped by this tax question

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They aren't putting the money back into a home owned by them though. It's an odd situation

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I'm pretty sure if it has been your primary home for longer than 2yrs, you don't have to put the money back into a new home for it to be tax free.


ETA

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Individuals can exclude up to $250,000 in profit from the sale of a main home (or $500,000 for a married couple) as long as you have owned the home and lived in the home for a minimum of two years. Those two years do not need to be consecutive. In the 5 years prior to the sale of the house, you need to have lived in the house for at least 24 months in that 5-year period. In other words, the home must have been your principal residence.

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