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residence on or before January 31, 1992, in order to qualify the
gain from the sale of their California residence for nonrecogni-
tion under section 1034. The only dispute herein concerns the
date on which petitioners first used the 3405 house as their
principal residence.
Petitioners contend that they used the 3405 house as their
principal residence by January 31, 1992, and that therefore the
gain from the sale of their California residence qualifies for
nonrecognition under section 1034. Respondent disagrees.6
The determinations of whether property (1) is used by a
taxpayer as his or her residence and (2) is used as his or her
principal residence depends upon all the facts and circumstances.
Sec. 1.1034-1(c)(3), Income Tax Regs. For purposes of section
1034, property is "used" by a taxpayer as his or her new resi-
dence if that taxpayer physically occupies or lives in that
property. United States v. Sheahan, 323 F.2d 383, 386 (5th Cir.
1963); Bayley v. Commissioner, 35 T.C. 288, 295 (1960). A resi-
dence is a taxpayer's "principal residence" if it is his or her
"chief or main" place of residence, considering all relevant
facts, including the amount of time the taxpayer spends at one
6 Respondent determined in the notice of deficiency that the
3395 residence, and not the 3405 house, was petitioners' "new
residence" for purposes of sec. 1034 and that, accordingly,
petitioners should have recognized the gain realized on the sale
of the California residence to the extent that that gain exceeded
the purchase price of the 3395 residence.
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