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to the benefit of deferring gain recognition. Explicit and
unambiguous judicial language such as the following has left
little room for question: “for property to be ‘used by the
taxpayer as his principal residence’ within the meaning of
section 1034(a), that taxpayer must physically occupy and live in
the house.” Perry v. Commissioner, supra at 85 (quoting Young v.
Commissioner, T.C. Memo. 1985-127).
Concerning the intent element, section 1.1034-1(c)(3)(i),
Income Tax Regs., interpreting section 1034 provides:
Whether or not property is used by the taxpayer as his
residence, and whether or not property is used by the
taxpayer as his principal residence (in the case of a
taxpayer using more than one property as a residence),
depends upon all the facts and circumstances in each
case, including the good faith of the taxpayer.
Courts have likewise reiterated that intent is to be taken into
account, but they have nonetheless steadfastly adhered to the
principle that intent alone, divorced from actual use, will not
satisfy section 1034. See United States v. Sheahan, 323 F.2d
383, 385-387 (5th Cir. 1963); Bayley v. Commissioner, 35 T.C.
288, 295-297 (1960). As stated by the court in United States v.
Sheahan, 323 F.2d at 385:
It is true that the good faith of the taxpayer is a
circumstance to be weighed, and it may be the decisive
factor in a close case in determining whether one of
two houses is the principal residence, or whether the
house is a residence, but there must be supporting
facts to show that the taxpayer used the new property
as his principal residence.
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Last modified: May 25, 2011