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that the determination of whether a property is used by a
taxpayer as his principal residence "depends upon all the facts
and circumstances in each case, including the good faith of the
taxpayer." Generally, for property to be "used by the taxpayer
as his principal residence" within the meaning of section
1034(a), that taxpayer must physically occupy and live in the
dwelling. Houlette v. Commissioner, 48 T.C. 350, 354 (1967);
Stolk v. Commissioner, 40 T.C. 345, 353-356 (1963), affd. 326
F.2d 760 (2d Cir. 1964). See generally Perry v. Commissioner, 91
F.3d 82 (9th Cir. 1996), affg. T.C. Memo. 1994-247, for a recent
summary of applicable rules.
For 1988, we have specifically found that petitioners did
not occupy 14 Siros as their principal place of residence. We
also found that, when he prepared and filed petitioners' return
for 1988, petitioner was familiar with the requirements for
deferral of gain under section 1034 and knew that petitioners did
not qualify for deferral with respect to the gain on the property
at 14 Siros, but nonetheless claimed the deferral on the return
in order to defeat or avoid the taxes known to be owing on the
gain that they realized from sale of that property. In addition,
petitioners reported sale of their actual residence, Apricot, as
a sale of business property, thereby concealing the identity of
their actual residence. We reject the testimony by both
petitioners at trial that they actually resided at 14 Siros and
that they received rental income from a tenant at Apricot.
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