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included in their gross income and subject to tax for 1995.3
Respondent concluded that petitioners were not eligible for the
tax benefits of section 121 or section 1034 because the Solvang
property was not their principal residence at the time it was
sold.
Petitioners filed with the Court a joint petition for
redetermination. The petition included the allegation that
respondent’s determination that the Solvang property was not
petitioners’ principal residence at the time it was sold is
barred by the general 3-year period of limitations under section
6501(a). Respondent filed an answer to the petition including
the allegation that the deficiency, which is attributable to
respondent’s determination that the gain that petitioners
realized on the sale of the Solvang property was includable in
their gross income for 1995, is subject to the period of
limitations prescribed in section 1034(j).
As indicated, petitioners filed a motion for partial summary
judgment, to which respondent filed an objection. The matter was
called for hearing at the Court’s motions session in Washington,
D.C. Counsel for respondent appeared at the hearing and offered
3 Respondent determined that petitioners were required to
report a gain of $428,087 on the sale of the Solvang property as
follows: Sale price ($530,000) minus expenses of sale ($18,413)
minus adjusted basis ($83,500). As a consequence of the increase
in petitioners’ adjusted gross income, petitioners were subject
to related adjustments attributable to the phase-out of personal
exemptions and itemized deductions.
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Last modified: May 25, 2011