Donald D. Bowers and Deborah Bowers - Page 26

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            Burlington house as their principal residence.  On October 14,                             
            1993, respondent issued the notice of deficiency.  Through                                 
            amended pleadings, respondent alleged that petitioners' basis in                           
            the Burlington property was $160,030, not $182,634 as stated on                            
            the return, and asserted corresponding increases in the                                    
            deficiency, addition to tax, and accuracy-related penalty.                                 
            Petitioners allege that their basis in the Burlington house was                            
            greater than the amount claimed on their return.                                           
                                    ULTIMATE FINDINGS OF FACT                                          
                  1.  The Burlington house was not the principal residence of                          
            either petitioner in 1989.                                                                 
                  2.  The gain in the amount determined below must be                                  
            recognized in 1989.                                                                        
                  3.  Petitioners' 1989 tax return was not timely filed, and                           
            they are liable for the delinquency addition.                                              
                  4.  Petitioners were negligent and disregarded rules or                              
            regulations in claiming deferral of the gain on the sale of the                            
            Burlington house.                                                                          
                  Generally, sections 1001 and 61 require a taxpayer to                                
            recognize gain realized on the sale of property in the year of                             
            the sale.  Section 1034, however, requires a taxpayer to defer                             
            recognition of gain realized on the sale of the taxpayer's                                 
            principal residence in certain circumstances.  If the taxpayer                             
            purchases and uses a new principal residence within the specified                          

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