Exceptions

Paragraph (2) shall not apply in the case of a residence which is compulsorily or involuntarily converted (within the meaning of section 1033(a)) if the taxpayer acquires a new principal residence during the 2-year period beginning on the date of the disposition or cessation referred to in paragraph (2). Paragraph (2) shall apply to such new principal residence during the recapture period in the same manner as if such new principal residence were the converted residence.

In the case of a transfer of a residence to which section 1041(a) applies—

(i) paragraph (2) shall not apply to such transfer, and

(ii) in the case of taxable years ending after such transfer, paragraphs (1) and (2) shall apply to the transferee in the same manner as if such transferee were the transferor (and shall not apply to the transferor).

In the case of any credit allowed with respect to the purchase of a principal residence after December 31, 2008 —

(i) paragraph (1) shall not apply, and

(ii) paragraph (2) shall apply only if the disposition or cessation described in paragraph (2) with respect to such residence occurs during the 36-month period beginning on the date of the purchase of such residence by the taxpayer.

(i) In general In the case of the disposition of a principal residence by an individual (or a cessation referred to in paragraph (2)) after December 31, 2008 , in connection with Government orders received by such individual, or such individual’s spouse, for qualified official extended duty service— (I) paragraph (2) and subsection (d)(2) shall not apply to such disposition (or cessation), and (II) if such residence was acquired before January 1, 2009 , paragraph (1) shall not apply to the taxable year in which such disposition (or cessation) occurs or any subsequent taxable year.

(ii) Qualified official extended duty service For purposes of this section, the term “qualified official extended duty service” means service on qualified official extended duty as— (I) a member of the uniformed services, (II) a member of the Foreign Service of the United States, or (III) an employee of the intelligence community.

(iii) Definitions Any term used in this subparagraph which is also used in paragraph (9) of section 121(d) shall have the same meaning as when used in such paragraph.