We have outgrown the home we've lived in 15 years, it is time to move on.
We are exploring our different options to do so. One of the situations we are considering is tearing the place down and building a new house on the same property.
Normally as I understand it, on sale of this property, we would be eligible for the capital gains exception since we have been here more than 2 years.
I've read through IRS Publication 523 and there are some statements in there that make me uncertain if this holds in the case of a complete rebuild such as:
Home Moved to New Location
If you move your home from the land it was on, that land no longer counts as part of your home. For example, if you move a mobile home to a new lot and sell the old lot, you can’t treat the sale of the old lot as the sale of your home.
Here it seems they consider the structure the defining component of the 'home', and the land secondary: The 'home' is wherever the structure is. I could see them treating the tear-down and rebuild scenario similarly: If it isn't the same structure, it is not the same 'home' anymore.
If we tear down the existing house and rebuild a new one in its place, are we still eligible for the capital gains exception or do we have to live in the new structure for 2 years?