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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.
In sum, gain realized upon the sale of a taxpayer’s principal
residence is subject to deferral under section 1034(a) if the
taxpayer acquires a new principal residence (at a cost equal to
or exceeding the sale price of the old residence) within the 2-
year period preceding or following the sale of the old residence.
Section 1034(j) provides an extended period for the
assessment of a deficiency attributable to any gain realized on
the sale or exchange of a taxpayer’s principal residence. In
contrast to section 6501(a), which provides that the period of
limitations on assessment generally expires 3 years after a tax
return is filed, section 1034(j) provides:
SEC. 1034(j). Statute of Limitations.–-If the
taxpayer during a taxable year sells at a gain property
used by him as his principal residence, then--
(1) the statutory period for the
assessment of any deficiency attributable to
any part of such gain shall not expire before
the expiration of 3 years from the date the
Secretary is notified by the taxpayer (in
such manner as the Secretary may by
regulations prescribe) of–-
(A) the taxpayer’s cost of
purchasing the new residence which
the taxpayer claims results in
nonrecognition of any part of such
gain,
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Last modified: May 25, 2011