Once upon a time, if an owner sold a home and realized a gain on the sale, he or she reported the transaction to the tax collector and paid tax on the net profit.

Things have changed. For some years now owners have been able to defer recognition [for tax purposes] of the gain on sales of their homes if they replaced them by buying another residences costing at least as much as the selling price of the old homes. In addition, there was an exclusion of part or all of the gain if you were 65 or older.

Now the Revenue Act of 1978 has substantially improved the chance of escaping tax altogether by reducing the age minimum and by increasing the amount of gain that can be sheltered.

But there are rules -- and if you now own your home or expect to buy one in the near future, you should know those rules and their implications.

Who is eligible for the tax exclusion? Anyone who has reached the age of 55 before the date of sale qualifies. For a husband and wife who own their home jointly [in any of the several forms of joint ownership], only one spouse needs to meet this age requirement as long as the couple files a joint return for the year of sale.

In order to be eligible, the home sold must have been your principal residence; a summer home or resort property does not qualify.

A condominium or cooperative apartment -- even a mobile home or houseboat -- is eligible if it was your principal home and meets the other rules.

[If you used part of your home for business purposes, then you must apportion the exclusion according to the same ratio you used for deducing home expenses.]

The property need not have been your home on the date of sale. It is only necessary that you owned the place and occupied it as your principal residence for a total of three years during the five-year period immediately preceding the sale.

If you were 65 or older on the date of sale and you do not qualify under this three- or-five-years rule, you may elect instead to apply the old five-of-eight-years rule for sales made before July 26, 1981.

Another break for the over-65s: If you had already taken advantage of the earlier [and smaller] tax exclusion on sale of a previous residence, this is a whole new ball game. You can still use the entire new exclusion if you otherwise qualify.

Sound like a good deal? It is -- and the $100,000 tag makes it even better. That $100,000 ceiling on the exclusion refers not to the selling price of your home but to the amount of gain you can exclude.

But there is a catch. This is a one-shot exclusion; once used, it is gone forever. This once-in-a-lifetime limitation applies even if you don't use the maximum authorized exclusion.

That is, if you realize a capital gain of, say, $15,000 on sale of your home and elect to exclude the gain, the whole $100,000 allowable exclusion is gone. There is no way for you to save the unused balance [$85,000 in this example] for use in a later sale of another home.

And in the case of married taxpayers, the election applies to both husband and wife; neither spouse may again take advantage of this provision. This restriction to one-time use holds even if they are later divorced and one of them remarries -- even if his or her new spouse had never used the exclusion.4tDo the long-range implications are considerable. If you sell your home and buy a new home which qualifies for deferral of tax on all [or even a large part] of the gain, you would probably do well to use the deferral feature and forego the exclusion.

Even if you do not buy a new home, it might be advisable to pass up the exclusion if the amount of gain [and thus the tax liability] is relatively small and there is any chance at all that you may buy another home some time in the future.

On the other hand, if you have realized a substantial gain and you do not contemplate buying a replacement residence, then here is a great opportunity to add a sizable chunk of cash to your retirement nest egg without losing a big bite to the tax collectors.

Just be sure you have thorougly examined all the ramifications -- and the available alternatives -- before you use up your once and only chance at what is surely one of the very few genuine bargains in the tax laws.