Douglass H. and Suzanne M. Bartley - Page 15

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          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.               

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