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Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933);
Feldman v. Commissioner, 20 F.3d 1128, 1132 (11th Cir. 1994).
Issue 1. Whether Petitioners Failed To Report Gain From the Sale
of Property
Under section 1001(c), a taxpayer must generally recognize
all gain or loss realized upon the sale or exchange of property.
An exception to section 1001(c) is section 1034(a),4 which
allows a taxpayer to defer a gain when proceeds of a property
sale are rolled over into a new principal residence. However,
section 1034(a) further provides that the property sold must be
the taxpayer's principal residence. Petitioners' Fort Lauderdale
property contained only a foundation and never served as
petitioners' principal residence.
Section 121 permits taxpayers over the age of 55 to exclude
from gross income gain from the sale of property (not to exceed
$125,000) which has been their principal residence for 3 of the 5
years prior to sale. Sec. 121(a) and (b). While petitioners are
4 Sec. 1034(a) provides, in pertinent part, as follows:
(a) Nonrecognition of Gain.--If property (in this
section called "old residence") used by the taxpayer as his
principal residence is sold by him and, within a period
beginning 2 years before the date of such sale and ending 2
years after such date, property (in this section called "new
residence") is purchased and used by the taxpayer as his
principal residence, gain (if any) from such sale shall be
recognized only to the extent that the taxpayer's adjusted
sales price (as defined in subsection (b)) of the old
residence exceeds the taxpayer's cost of purchasing the new
residence.
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