Douglass H. and Suzanne M. Bartley - Page 16

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          longer needed the family homestead.8  See, e.g., H. Rept. 749, 88th         
          Cong., 1st Sess. (1963), 1964-1 C.B. (Part 2) 125, 169-171, 284-            
          288; S. Rept. 830, 88th Cong., 2d Sess. (1964), 1964-1 C.B. (Part           

               8    In adopting this one-time exclusion provision,                    
          Congress' intent was as follows:                                            
                         The Congress believed that the taxes                         
                    imposed upon an individual with respect to                        
                    gain that he or she realizes on the sale or                       
                    exchange of his or her principal residence,                       
                    in many instances, may be unduly high,                            
                    especially in view of recent inflation                            
                    levels and the increasing cost of housing.                        
                    The Congress believed that, in most                               
                    situations, the nonrecognition provisions of                      
                    present law operate adequately to allow                           
                    individuals to move from one residence to                         
                    another without recognition of gain or                            
                    payment of tax.  However, where an                                
                    individual has owned his or her principal                         
                    residence for a number of years and sells it                      
                    either to purchase a smaller, less expensive                      
                    dwelling, or to move into rental quarters,                        
                    any tax due on the gain realized may be too                       
                    high.  While the provisions of prior law                          
                    relating to the exclusion of gain by                              
                    taxpayers who attained the age of 65 may                          
                    ameliorate this situation somewhat, the                           
                    Congress believed that the prior dollar                           
                    limits and age restriction were unrealistic                       
                    in view of increasing housing costs and                           
                    decreasing retirement ages.  In addition,                         
                    the Congress believed that the holding                            
                    period of a principal residence which is                          
                    involuntarily converted should be tacked to                       
                    that of a replacement residence for purposes                      
                    of meeting the use and occupancy                                  
                    requirements needed to qualify for the                            
                    exclusion upon a sale of the replacement                          
          Staff of Joint Comm. on Taxation, General Explanation of the                
          Revenue Act of 1978, at 255-256 (J. Comm. Print 1979).                      

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