- 15 -
things, section 1034 was generally more useful when trading up a
residence. As the excerpt above illustrates, presumably Congress
realized that section 1034 favored wealthy taxpayers. However,
this does not equate to a constitutional violation. See, e.g.,
Black v. Commissioner, supra.
We now turn to petitioners' age discrimination argument.
Section 121,6 a companion to section 1034,7 permitted taxpayers 55
and older to exclude from gross income up to $125,000 of gain from
the sale of property which they had owned and used as their
principal residence for 3 or more of the 5 years immediately before
the sale. The purpose of the section 121 exclusion rule was to
enable an older taxpayer to sell his home without being required to
pay tax on the realized appreciation or invest all the proceeds
from the old residence in a new residence. Congress concluded that
although section 1034 generally provided adequately for the younger
taxpayer who changed residences, it did not provide adequate tax
benefits for the taxpayer whose family had grown up and who no
6 The one-time exclusion for gain on the sale of
residences applied to homes sold before May 7, 1997. Sec. 121
was amended by sec. 312(a) and (d)(1), Taxpayer Relief Act of
1997, 111 Stat. 836, 839.
7 Sec. 121 differed from sec. 1034 as follows: (1) Under
sec. 121, a $125,000 ceiling existed on the amount of gain
excludable ($62,500 in the case of a separate return by a married
individual); (2) sec. 121 permanently excluded the gain from
income instead of only postponing recognition and could be used
only once in a lifetime; (3) sec. 121 was available only to
taxpayers over 55 years old; and (4) the sec. 121 exclusion was
elective and did not require the purchase of a new residence.
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011