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On September 29, 1997, petitioners obtained a temporary
occupancy permit to live on the Robinhood property. Beginning on
October 1, 1997, during the construction of the residence,
petitioners lived in a mobile home on concrete foundation pillars
located on the Robinhood property. On August 19, 1998,
construction was completed. Petitioners moved into the new
residence some time after October 30, 1997.
Respondent determined that petitioners must include the gain
of $30,282 from the sale of the residence in income for taxable
year 1995 because petitioners did not establish that they
“reinvested in a new personal residence of sufficient cost to
defer gain within the time period specified in the Internal
Revenue Code.”
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. Section 1034(a), 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.2 The section reads in
pertinent part as follows:
2Sec. 1034 was repealed by sec. 312 of the Taxpayer Relief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.
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