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residence, there shall be included only so much of
his cost as is attributable to the acquisition,
construction, reconstruction, and improvements
made which are properly chargeable to capital
account, during the period specified in
subsection(a).
(Section 1034 was repealed by section 312(b) of the Taxpayer
Relief Act of 1997, Pub. L. 105-34, 111 Stat. 839, generally
effective for sales and exchanges of principal residences after
May 6, 1997. The section 1034 rollover provision was replaced by
an expanded and revised section 121.)
General Interpretation
As a threshold matter, section 1034 specifies that gain must
be reinvested in property “purchased and used by the taxpayer as
his principal residence” in order for nonrecognition treatment to
be available. In ascertaining what is meant by “used” as a
“principal residence”, this Court has stated in an oft-quoted
pronouncement: “The elements of residence are the fact of abode
and the intention of remaining, and the concept of residence is
made up of a combination of acts and intention. Neither bodily
presence alone nor intention alone will suffice to create a
residence.” Stolk v. Commissioner, 40 T.C. 345, 353 (1963),
affd. 326 F.2d 760 (2d Cir. 1964); see also Perry v.
Commissioner, 91 F.3d 82, 85 (9th Cir. 1996), affg. T.C. Memo.
1994-247.
With respect to the abode element, courts have consistently
focused upon actual, physical use and occupancy as a prerequisite
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