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acquisition of 20 The Point. Petitioners' 1988 Forms W-2 were
mailed to petitioners at Mary Street. Petitioners' 1989 and 1990
Forms W-2 were mailed to the Alessandro office.
In 1988, Marc and Julie both lived in Riverside. At this
time, Terry's mother lived in San Bernardino, California.
OPINION
Issue 1. Whether Petitioners Must Recognize Gain From the Sale of
20 The Point
As a general rule, gain realized from the sale or other
disposition of property must be recognized. Sec. 1001(c).
Section 1034, which provides an exception to this general rule,
allows a taxpayer to defer recognition of all or part of any gain
realized on the sale of a principal residence (old residence) if
other property is purchased and used by the taxpayer as a new
principal residence (new residence) within the period beginning 2
years before the date of the sale and ending 2 years after that
date (the replacement period). Under section 1034(a), gain is
recognized only to the extent that the "adjusted sales price", as
defined in section 1034(b), of the old property exceeds the cost
of purchasing the new property.
The primary issue is whether petitioners' realized gain on
the sale of 20 The Point is entitled to the nonrecognition
treatment of section 1034. Respondent determined that section
1034(a) is inapplicable because 20 The Point was a business asset
and was not used by petitioners as their principal residence.
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Last modified: May 25, 2011