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principal residence within 2 years of the sale of the former
residence. Respondent argues that the Montclair property was
purchased by Mr. De Ocampo's parents, not petitioners, and
therefore section 1034 is not applicable.
Section 1034 has been strictly construed. See, e.g., Boesel
v. Commissioner, 65 T.C. 378, 390 (1975); Lokan v. Commissioner,
T.C. Memo. 1979-380; Bazzell v. Commissioner, T.C. Memo. 1967-101.
Maintaining continuity of title is the key to receiving
nonrecognition treatment under section 1034. Starker v. United
States, 602 F.2d 1341, 1351 (9th Cir. 1979); Allied Marine Sys.,
Inc. v. Commissioner, T.C. Memo. 1997-101; see also Edmondson v.
Commissioner, T.C. Memo. 1996-393. In Marcello v. Commissioner,
380 F.2d 499 (5th Cir. 1967), affg. on this issue T.C. Memo. 1964-
299, the taxpayers, husband and wife, sold their principal
residence and moved into a new principal residence, legal title to
which was acquired by the husband's mother. In an unrecorded
affidavit, the mother stated that she held title to the residence
for convenience only, that the residence was purchased by and for
her son, who paid the purchase price, and that she would convey the
property to him whenever required to do so, for no consideration.
The mother held the mortgage on the property, but her son made the
payments. The Court of Appeals for the Fifth Circuit agreed with
this Court that the taxpayers did not qualify under section 1034
for deferral of gain realized from the sale of their former
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