-27-
Commissioner, 796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo.
1984-601.
Respondent has alleged several items that petitioners
omitted from their reported income for the years in issue that
result in an underpayment of tax. Respondent also contends that
petitioners failed to cooperate and to produce books and records
and that such failure is evidence of fraudulent intent.
Respondent contends that petitioners filed a false Form 2119
relating to their gain from sale of 14 Siros when they knew they
were not entitled to application of section 1034 to that sale.
Section 1034 clearly applies only to property used by a taxpayer
as his or her principal residence. The concept of principal
residence is neither complicated nor arcane. By 1988, petitioner
had been involved in real estate transactions for over 2 years
and had earned an M.B.A. degree. He testified that he read the
instructions concerning section 1034. In their brief,
petitioners do not contend that they were entitled to apply
section 1034; they merely argue:
While perhaps the home at Apricot should have been
considered their principal residence and the home at
14 Siros should have been left out of the equation, to
take the best advantage under the tax laws is what the
Petitioners thought they could legally do. They
believed that the intent to make 14 Siros their home,
coupled with the actions such as delivery of furniture
and so forth, adequately complied with the law relative
to Internal Revenue Code sec. 1034.
The phrase "principal residence" is not defined by the Code;
however, section 1.1034-1(c)(3)(i), Income Tax Regs., provides
Page: Previous 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 NextLast modified: May 25, 2011