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If property (in this section called "old residence")
used by the taxpayer as his principal residence is sold
by him and, within a period beginning 2 years before
the date of such sale and ending 2 years after such
date, property (in this section called "new residence")
is purchased and used by the taxpayer as his principal
residence, gain (if any) from such sale shall be
recognized only to the extent that the taxpayer's
adjusted sales price (as defined in subsection (b)) of
the old residence exceeds the taxpayer's cost of
purchasing the new residence.
Section 1034 is strictly construed. See Boesel v.
Commissioner, 65 T.C. 378, 386 (1975); see also Lokan v.
Commissioner, T.C. Memo. 1979-380; Bazzell v. Commissioner, T.C.
Memo. 1967-101. If a taxpayer is to receive nonrecognition
treatment under section 1034, it is essential that he or she
maintain continuity of title. See Starker v. United States, 602
F.2d 1341, 1351 (9th Cir. 1979); Marcello v. Commissioner, 380
F.2d 499, 502 (5th Cir. 1967), affg. on this issue and remanding
on other issues T.C. Memo. 1964-299; Boesel v. Commissioner,
supra; see also De Ocampo v. Commissioner, T.C. Memo. 1997-161;
Allied Marine Sys., Inc. v. Commissioner, T.C. Memo. 1997-101,
affd. without published opinion sub nom. Gibbons v. Commissioner,
155 F.3d 558 (4th Cir. 1998); Edmondson v. Commissioner, T.C.
Memo. 1996-393; May v. Commissioner, T.C. Memo. 1974-54. This
requirement operates to prevent taxpayers from enjoying the
benefits of tax deferral while placing themselves in a position
as nontitleholders to escape future recognition. See Boesel v.
Commissioner, supra at 388.
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Last modified: May 25, 2011