@NewUserNov2020 wrote:
My intuition says no, I must live in the new house for two years, even though I've lived in the old house for ten years before it was torn down.
Your intuition is correct; you must live in the new house for two years before you would be eligible for the exemption.
The exemption requires a dwelling as well as the land (in this case) and a tear down can in no way be considered to be a major remodel (the entire structure is gone).
I will agree that you can add the basis in your old house, and demolition costs, to the basis of the newly constructed house.
