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argument in opposition to petitioners’ motion. Although no
appearance was made by or on behalf of petitioners at the
hearing, petitioners filed a reply to respondent’s objection
which they offered to the Court as a statement in lieu of
appearance. See Rule 50(c).
Following the hearing, the parties filed a stipulation,
petitioners filed a memorandum, respondent filed a supplemental
objection to petitioners’ motion, and petitioners filed a
response to respondent’s supplemental objection.
Discussion
A. Tax Benefits Related to Sales/Exchanges of a Principal
Residence
Beginning with the enactment of section 112(n) under the
Revenue Act of 1951, ch. 521, sec. 318, 65 Stat. 452, 494,
Congress has taken steps to diminish the impact of the Federal
income tax on gain arising from the sale or exchange of a
taxpayer’s principal residence. Section 112(n) (a predecessor to
section 1034)4 provided that a taxpayer would not have to
recognize a portion of the gain realized upon the sale or
exchange of his principal residence if, within a specified
period, the taxpayer purchased a new principal residence at a
cost equal to or exceeding the selling price of the old
residence. Section 112(n) did not provide an outright exclusion
4 Sec. 112(n) was recodified as sec. 1034 under the
Internal Revenue Code of 1954, ch. 736, 68A Stat. 306.
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