what is the taxes situation on RE sale?

A couple filing jointly and selling a principal residence is entitled to exclude $500k of capital gain from reportable Federal income....but only once every two years as you note.

Not sure about state and local income taxes. NJ taxes everything that moves.......

Transfer taxes are another matter....paid at closing....

Does the 500K exclusion still apply if filing jointly but co-op has only one spouse as a shareholder?

The IRS site says nothing about the number of owners, just "filing jointly".
What about the time between buying the new apt. and selling the old one? Does it have a limit? The IRS site is mum. They are crafty folks...

If you own a principal residence and sell it more than two years after selling your last principal residence....you get the exclusion. Buying another one the next day doesn't change your reporting....

You then have to hold the new place for at least two more years before you can claim the exclusion again.

Really an amazingly favorable provision and one which I have argued elsewhere was a contributing factor to the bubble....where else can you get that kind of tax deal on a capital gain? Certainly not on common stocks....

Of course, no capital loss is permitted on a principal residence.....have to convert to a rental and then get into an argument with the IRS over valuation at time of conversion....assuming you get audited.

mjsalisb, I meant to ask this: you buy the new one, then sell the old one. Does the time between buying the new one and selling the second one matter?

I think you're okay on the timing here as long as you the old one remains your principal residence. A limited overlap isn't a problem as I understand the rules. Obviously since this is big money you're talking about here (tax on up to $500K is big money where I come from) you should run you're exact circumstances by an expert.....

But the IRS isn't going to deny your exclusion if you buy a replacement home on June 1st and don't sell the old place until June 30th....normal stuff.....might get trickier if you buy new in June 2008 and then sell old place in December 2009....IRS might want to know if old place became a second home....for which no exclusion is available as I understand things....

You buy the new one, put the old one on the market and it sells in 10 months - 1 year. At no point it's a second home. I think the spread (overlapping, as you said) could be up to 2 years.