Paul L. Blanton and Cynthia D. Blue-Blanton - Page 8

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          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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