- 4 - Under sections 61(a) and 1001(c), taxpayers generally must recognize in the year of sale all gain or loss realized upon the sale or exchange of property.2 Section 1034(a),3 however, provides an exception under which, if certain requirements are met, taxpayers defer recognition of gain when sale proceeds are reinvested in a new principal residence. The section reads in pertinent part as follows: SEC. 1034(a). Nonrecognition of Gain.--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. Petitioner purchased the Lee’s Summit residence on May 12, 1994, but did not sell the Compton residence until September 27, 1996-- beyond the expiration of the section 1034(a) two-year period. Petitioner urges this Court to relax the rigidity of the two-year requirement for several reasons. First, she used money from a 2See also secs. 1221 through 1223 for the definition of a capital asset and related terms, and sec. 1(h) for the rate of tax imposed on long-term capital gains. 3Sec. 1034 was repealed by sec. 312 of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 836, generally effective for sales and exchanges after May 6, 1997. The sec. 1034 rollover provision was replaced by an expanded and revised sec. 121.Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011