James P. De Ocampo and Marla L. De Ocampo - Page 7

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          residence.  The Court of Appeals stated:                                    
               Congress intended to enable homeowners to use the sales                
               proceeds from a sale of the old residence for buying                   
               their own home.  The purpose of Section 1034 was not to                
               permit a taxpayer to re-invest the proceeds from the sale              
               of his home in the home of another person without                      
               recognizing for federal income tax purposes the gain                   
               realized by the sale.  The clear statutory language                    
               requires that a new residence be purchased and used by                 
               the taxpayer.  That the residence must be owned by the                 
               taxpayer is made evident by the exception in subsection                
               (g) of Section 1034 permitting either the husband or the               
               wife to hold the residence in his or her name.  If a                   
               third party owns the residence, the purchase requirements              
               are not met.                                                           
          Id. at 502 (fn. refs. omitted).                                             
               In May v. Commissioner, T.C. Memo. 1974-54, the taxpayer               
          received proceeds from the disposition of her principal residence           
          pursuant to a divorce settlement.  She gave a portion of the                
          proceeds to her daughter, who used the money as a downpayment on            
          three houses, and the taxpayer spent some of the proceeds on                
          improvements to her daughter's houses.  The taxpayer advanced the           
          money to her daughter so that the taxpayer's ex-husband would not           
          know the taxpayer's whereabouts or what property was acquired with          
          the funds.  She also did not want the property to become part of            
          her estate.  The taxpayer claimed that the gain from the sale of            
          her interest in her former residence should be deferred under               
          section 1034 to the extent the proceeds were used to acquire                
          additional residential property and make improvements.  We                  
          disagreed and held that the taxpayer was not entitled to deferral           
          of gain because the property was purchased by her daughter, who             





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