from cool website
You general plan of moving into each house for two years prior to selling may or may not work anymore due to a fairly recent tax change that took effect in 2009 that impacts how taxes are calculated on real estate that for some time are not a primary residence.
Your alternate plan of transferring ownership of the house to your kids should be compared to other possibilities such as holding onto the properties until death and letting the houses pass to your heirs by way of inheritance, or selling the houses yourself. Each has slightly different tax treatments. By working through these scenarios you and your tax adviser can figure out which tactic will work best for each property.
William Perez
Guide to Tax Planning
taxes.about.com
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