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under section 1034. We hold that they may not. In so holding,
we conclude that petitioners failed to establish that they sold
their old residence less than 2 years after they bought their new
residence.
The parties agree that, if petitioners must recognize gain
on the sale of the old residence, respondent erred in determining
a deficiency for 1989 and petitioners must recognize gain in
1991, the year they sold it.
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years in issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
Background
The facts have been fully stipulated under Rule 122 and are
so found.
A. Petitioners
Petitioners resided in Clackamas, Oregon, when they filed
the petition in this case.
In 1988, petitioners owned a home at 740 Fifth Avenue, Blue
Lake, California (the Blue Lake residence, or Blue Lake
property). The Blue Lake property was petitioners' principal
residence until August 5, 1988. Petitioners had mortgages on
the Blue Lake property with Home Federal Bank in San Diego,
California, and Beneficial Finance in Eureka, California.
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