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Bay Development, Ltd. (Bay), is a corporation incorporated
under the laws of Israel. Petitioner is the sole shareholder and
director of Bay.
On April 18, 1990, Bay purchased a house at 115 Yefe Nof
Street, Haifa, Israel (the Haifa property). Bay paid a total of
$769,676 for the Haifa property. Petitioner provided Bay with
all of the funds Bay used to purchase the Haifa property. Upon
Bay's purchase of the Haifa property, it became petitioner's
principal residence.
On October 15, 1990, petitioner timely filed a Form 1040 for
1989 (the return). Petitioner attached a Form 2119, Sale of Your
Home, to the return. On line 2a of the Form 2119, in response to
the question of whether petitioner had bought or built a new
"main home", petitioner placed an "x" in the box under the column
labeled "No".
OPINION
Petitioner contends that she meets the requirements of
section 1034 and is entitled to defer recognition of the gain she
realized on her sale of the California residence. Respondent
argues that petitioner failed to purchase a new residence within
the replacement period required by section 1034(a), and therefore
she does not qualify for nonrecognition treatment.
Section 1034(a) provides for rollover of gain on the sale of
a principal residence:
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