QPRI Exclusion Question – Short Sale Timing

TL;DR: Client bought a house, rented it, stopped payments, short sale coming. Can they move back in just before closing to qualify for QPRI and exclude forgiven debt?

Details: • Bought house Mar 2023, lived there until Dec 2023. • Rented Jan 2024 – Jan 2025; vacant since. • Mortgage payments stopped Jan 2025. • Requested short sale Mar 2025, expected closing end of Oct 2025, ~$100k forgiven. • Currently in an apartment lease; plan: terminate lease, move back in, update addresses/utilities before short sale. • Motivation: emotional closure. It’s their first and only home and sad to let it go.

Question: If they move back in before closing, does QPRI likely apply, or are there timing/other IRS issues to be aware of?