1099 S primary residency qualification taxable gain deduction CPA

[Tony Rodriguez]

Hello, I have a 1099 S taxable gain deduction question.

Background:

I own two homes free and clear, I’ve owned property A for 12 years and property B for 3 years. When I purchased property B I moved in it to rehab it for the first year and then I’ve used it to live in it Monday to Friday, I spend the weekends in my other home or in my girlfriend’s house most of the time. My parents live in Property A and they pay all the bills for that property. All my documentation, driver license, mail etc has the property A address, I never bothered to change anything when I purchased property B.

Issue:

I’m now selling property B and hope to not have a taxable gain. I purchased the home in August, 2015 so I have owned it for over 3 years and I’ve paid all the bills ever since I purchased it. I bought property B for $100K and will list it for about $300K, so I will have a gain of $200K, I also spent about $50K in the rehab.

Question:

When I sell property B I will receive a 1099 S since the selling price will be over $250K, I will claim that I lived in the property for 2 years in my income tax return even though my personal documentation says otherwise, the question I have is; will the IRS question reject my claim? I’m not sure how to prove that I lived in property B for over 2 years other that the bills, I can also get affidavit from my parents stating that they lived in property A and that I never lived with them during the last 3 years. Does anybody if I will able to avoid the taxable gain when I sell property B? has anybody ever been in this situation?