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property before they moved in. On December 27, 1995, the
statutory warranty deed from Uprite Homes to the Webers was
recorded in Washington County, and the closing on the Bowmen Lane
property occurred.
Petitioner went to Southern Oregon on December 26, 1995, to
stay with his parents. On January 5, 1996, the closing occurred
on petitioner’s purchase of the Portland house.
Discussion
Under sections 1001 and 61, taxpayers generally must
recognize in the year of sale all gain or loss realized upon the
sale or exchange of property. Section 1034, however, provides an
exception which allows taxpayers to defer recognition of gain
when sale proceeds are reinvested in a new principal residence.2
Section 1034(a) 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.
Respondent determined that petitioner must report gain from
the sale of his personal residence in 1993 because a qualifying
replacement residence was not purchased and used within 2 years
as required by section 1034. The 2-year deadline for petitioner
to reinvest in a new residence and thereby qualify for gain
2 Although sec. 1034 was repealed by sec. 312(b) of the
Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 839, and
the rollover provision was replaced by an expanded and revised
sec. 121, sec. 1034 was in effect for the year at issue herein.
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