Demolition before sale jeopardizes real estate tax break

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DEAR BOB: My sister, brother and I have owned a family home for about 15 years. I lived there until July 2003, so I am eligible for the $250,000 principal residence sale tax exemption. The house has been for sale about a year with no offers. We are thinking of demolishing it and rebuilding with two condos, which would then be sold. Would I still be able to take advantage of the $250,000 exemption on the sale of the condos, as I am on the original house? – Theresa L. DEAR THERESA: No, you would not be eligible. The reason is Internal Revenue Code 121 applies only to the sale of your principal residence where you have resided an aggregate 24 of the 60 months before its sale. Purchase Bob Bruss reports online. Tearing down the house and building two condos would forfeit your $250,000 exemption because the condos were not your principal residence for the required two of the last five years before sale. When a home doesn't sell within a year, something is seriously wrong. The pri...