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The auditor going through your books does not necessarily want you are able to a problem, but he has to look for a problem. It's his job, and he has to justify it, along with the time he takes to do it. You execute even much better than the capital gains rate if, as an alternative to selling, you just do a cash-out re-finance. The proceeds are tax-free! By the time you estimate taxes and selling costs, you could come out better by re-financing with more cash in your pocket than if you sold it outright, plus you still own the house and continue to benefit against the income upon it!