-7-
Petitioner contends that he may defer recognition of gain under
section 1034 because he timely bought a replacement residence.
We disagree.
The adjusted sale price of petitioner's old residence
($208,387) exceeded the cost of his new residence ($36,292) by
$172,095. Petitioner may not defer recognition of any of the
gain because the gain on the sale of his old residence ($71,001)
is less than the difference between the adjusted sale price of
the old residence and the cost of the new residence.
Petitioner contends that he had a cost basis in the
residence at 3545 Sierra Lane equal to its net sale price because
he used his own labor to build it and improve the property and
his labor was worth $208,387, and he contends that respondent
bears the burden of proving that petitioner's assertions are
incorrect.
We disagree. Petitioner's basis in his labor is zero. See
sec. 1012. Petitioner bears the burden of proving that
respondent's deficiency determination is in error. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
B. Dividend Income
Gross income includes dividends. See sec. 61(a)(7).
Petitioner offered no evidence to dispute respondent's
determination that he received, but did not report, dividends of
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