Martin Feldman and Lynne Z. Gold-Bikin - Page 5

                                        - 5 -                                         
          "ROLLOVER OF GAIN ON SALE OF PRINCIPAL RESIDENCE", requires                 
          taxpayers, in certain circumstances, to defer recognition of gain           
          realized on the sale of their principal residence.  Under section           
          1034, if a taxpayer sells a principal residence (old residence)             
          and, within a period beginning 2 years before the date of such              
          sale and ending 2 years after such sale, purchases a new                    
          principal residence (new residence), then the taxpayer recognizes           
          gain realized on the sale only to the extent that the adjusted              
          sale price4 of the old residence exceeds the cost of purchasing             
          the new residence.  Sec. 1034(a) and (b).  Thus, by applying all            
          of the sale proceeds (net of selling costs) from the old                    
          residence towards the purchase of a new residence, a taxpayer               
          defers recognition on all of the gain realized on the sale of the           
          taxpayer’s old residence.  Sec. 1.1034-1(a), Income Tax Regs.  If           
          less than all of the sale proceeds are so applied, the taxpayer             
          recognizes gain to the extent of the difference between the net             
          proceeds and the cost of the new residence, limited, however, to            
          the gain realized on the sale.  Id.  The provisions of section              
          1034 are mandatory.  Sec. 1.1034-1, Income Tax Regs.                        
               In order to qualify for the rollover treatment provided for            
          in section 1034, a taxpayer must purchase a new principal                   
          residence within the replacement period.  Whether a residence is            


          4The adjusted sale price is the amount realized (selling                    
          price minus selling expenses) reduced by expenses of fixing up              
          the residence preparatory to sale.  Sec. 1034(b).                           




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  Next

Last modified: May 25, 2011