-8-
not owned and used the W. 22d property as their principal
residence for at least 3 years.
OPINION
A. Whether Petitioners Had Owned and Used the W. 22d Property
for 3 Years
The issue for decision is whether $125,000 of the gain
petitioners realized in 1992 from the sale of their W. 22d
property is excludable under section 121. Generally, a taxpayer
must recognize gain on the sale of a personal residence.
However, during the year in issue, taxpayers 55 and older could
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. Sec. 121(a) and (b).1 The term "principal residence" in
section 121 has the same meaning as in section 1034 and the
regulations thereunder. Sec. 1.121-3(a), Income Tax Regs.
The parties dispute whether petitioners had owned and used
the W. 22d property for 3 years when they sold it in 1992.
1 Sec. 121(a) provides as follows:
SEC. 121(a) General Rule--At the election of the
taxpayer, gross income does not include gain from the sale
or exchange of property if--
(1) the taxpayer has attained the age of 55 before
the date of such sale or exchange, and
(2) during the 5-year period ending on the date of
the sale or exchange, such property has been owned and
used by the taxpayer as his principal residence for
periods aggregating 3 years or more.
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