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The mere fact that the King of Prussia property is held as
tenants by the entirety does not determine the amount of the
$229,472 in construction and reconstruction that is included in
petitioner husband’s cost of purchasing the King of Prussia
property. For Federal tax law purposes, the phrase “taxpayer’s
cost of purchasing the new residence” includes contributions of
both the taxpayer and the taxpayer’s spouse to determine
nonrecognition of gain under section 1034, if the taxpayer falls
under the provisions of section 1034(g) and section 1.1034-1(f),
Income Tax Regs. Petitioner husband fails to satisfy those
provisions yet seeks their benefit.
Petitioners contend that the private agreement executed
approximately 11 months after petitioner husband has sold the
Wyndmoor property and 5 months after he had acquired a 50-percent
ownership interest in the King of Prussia property allows him to
include all of the reconstruction expenses in his cost of
purchasing the King of Prussia property. Under the terms of this
agreement petitioner husband was to use the proceeds from the
sale of the Wyndmoor property to do major renovations on the King
of Prussia property. This private agreement cannot rewrite
history and fails to change the Federal tax consequences of
transactions which took place months before it was executed. Nor
does the agreement (or any other evidence of record) establish
that petitioner husband in fact paid more than half the cost of
the renovations.
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Last modified: May 25, 2011