This document contains final regulations relating to the exclusion of gain from the sale or exchange of a taxpayer's principal residence. The final regulations apply to a taxpayer who has not owned and used the property as the taxpayer's principal residence for two of the preceding five years or who has excluded gain from the sale or exchange of a principal residence within the preceding two years. The final regulations reflect changes to the law by the Taxpayer Relief Act of 1997, as amended by the Internal Revenue Service Restructuring and Reform Act of 1998, and the Military Family Tax Relief Act of 2003.