please provide a good court case to go along with statement as well

Charlie and his wife lived in the house for the last 15 years. In 2013 due to some unknown reasons, he demolished the house and constructed a house on the same lot. The house was completed in 2014 and decided not to stay in the same house. He sold the house in 2014 at a gain of $547,000. He excluded gain of $500,000 (exclusion allowed for MFJ) and paid capital gain on $47,000. He was audited for 2014 and the IRS had a different idea