24. LO.4 Gary, who is single, sells his principal residence (owned and occupied by him for seven years) in November 2013 for a realized gain of $148,000. He had purchased a more expensive new residence eight months prior to the sale. He anticipates that he will occupy this new house as his principal residence for only about 18 additional months.

He expects it to appreciate substantially while he owns it. Gary would like to recognize the realized gain on the 2013 sale to offset a large investment loss from the sale of stock.

Can he recognize the realized gain of $148,000 on the sale of his principal residence in 2013? Explain.