If I purchase a home, live in it for two years, demolish it, and build a new house, can I still claim the Section 121 exclusion? Or does it reset the clock? From this 2010 case, it seems the clock does reset:
The IRS argued that the construction of a new residence on the same property as the original residence disqualified the sale from the exclusion.
But that's the only information I can find online. Surely more has been written on the matter in the last 13 years, but if so, I can't find it.
This question is related, but the link in the accepted answer only talks about improvements, not about demolition and rebuilding: Is a "primary residence" the property or the structure itself for real estate sale tax purposes?