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Aagaard v. Commissioner, 56 T.C. 191, 204 (1971); Kerns v.
Commissioner, T.C. Memo. 1984-22. Thus, if the condominium
became petitioner's primary residence on August 27, 1988, under
section 1034(c)(4), the Castro Valley house would have ceased to
be petitioner's primary residence and would not have been his
primary residence when it was sold on April 27, 1990.
If the condominium was petitioner's principal residence,
section 1034(a) would not apply to the gain on the sale of the
Castro Valley house by virtue of section 1034(c)(4). Nor would
section 1034(a) apply to such gain if the condominium was not
petitioner's primary residence, because in that event petitioner
did not purchase and use a new principal residence within the 4-
year replacement period required by section 1034(a). Therefore,
in either event, petitioner must recognize the gain realized on
the sale of the Castro Valley house in the year of the sale.
The amount of gain petitioner realized on the sale of the
Castro Valley house, however, depends upon whether the Castro
Valley house or the condominium became petitioner's new principal
residence with respect to the sale of petitioner's former
residence. If the Castro Valley house was not petitioner's new
principal residence for purposes of the deferral of gain on the
sale of petitioner's former residence, petitioner's adjusted
basis in the Castro Valley house was not reduced by the amount of
the deferred gain. Therefore, we must determine whether the
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