My husband and I have come across our dream property but we have not owned our current home for two years to avoid possible capital gains tax.
If we were to get penalized do they tax on only the profit you make, or the sell price of the home?
You will only pay tax on the profit that you make. You will be able to claim the original cost basis and any improvements you made as well as the expenses for closing costs. And only at the favorable capital gains rate.
If you really love the new place that could be more valuable to you then a tax bill is painful.