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agreements and concessions by the parties, the remaining issues
are: (1) Whether petitioners are entitled to roll over the gain
on the sale of their residence under section 1034,1 (2) if
entitled to roll over the gain whether any of the improvements
made to the new principal residence qualify for the rollover, and
(3) whether petitioners are liable for additions to tax for
negligence for the 1987 and/or the 1988 taxable year(s).
FINDINGS OF FACT2
Petitioners, at the time their petition was filed, resided
in San Jose, California. Petitioners' 1988 residence (Freemont
property) had not been listed for sale when they were approached
by a real estate broker who presented an attractive offer that
petitioners accepted. The sale occurred on June 21, 1988. The
gain realized on the sale of the Freemont property was $238,380.
The sale occurred quickly and petitioners, who were required to
vacate, purchased as a transitional measure the model townhouse
in a new development while they searched for a permanent
replacement residence. Petitioners were aware that to obtain the
rollover of any gain from the sale of the Freemont property under
section 1034 they would have to obtain and use replacement
1 All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
2 The parties’ stipulation of facts and attached exhibits
are incorporated by this reference.
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