OK, I'm a real estate broker but don't know the tax code well enough to make this decision.  

1.  I own a home that was a principal residence for 2 years
2.  I let a friend stay there and pay the mortgage (did not file anything with IRS) after I'd lived there 2 years.  I held the house to increase equity and didn't know when I'd want to move back.
3.  When my friend moved in, I bought another house to live in & have been there for 1 year.

I'm wanting to sell my "new house" and move back into my old house.  Can I sell my new house and being that it's over 1 year since ownership, pay the 15% real estate tax to the govt and call this investment property.  Then when I sell the old house (probably about 4 months from now) still claim that as a principal residence for the past 2 out of 5 years and walk away tax free?

I beleive you can claim your tax benefit having lived in a house two of the last five years. Also, selling a house in less than 1 year, you pay tax on the gain as straight income. After one year, you prorate down from 10%. An exception is made based on whether you have a good reason for your move such as the child molestor that moved in next door.

This is based on a recollection of a conversation with my accountant about a similiar situation I found myself in a couple of years ago. I may have it wrong or the laws may have changed. This area of tax law is a mine field and you should not do anything without professional help.