Rowland G. and Valerie J. Pilaria - Page 9




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                              (B) the taxpayer’s intention                            
                         not to purchase a new residence                              
                         within the period specified in                               
                         subsection (a), or                                           
                              (C) a failure to make such                              
                         purchase within such period; and                             
                         (2) such deficiency may be assessed                          
                    before the expiration of such 3-year period                       
                    notwithstanding the provisions of any other                       
                    law or rule of law which would otherwise                          
                    prevent such assessment.                                          
          Thus, the statutory period for the assessment of any deficiency             
          attributable to any part of the gain realized on the sale or                
          exchange of a taxpayer’s principal residence will not expire                
          until 3 years after the Commissioner is notified of:  (1) The               
          taxpayer’s purchase of a new residence; (2) the taxpayer’s                  
          intention not to purchase a new residence within the period                 
          specified in section 1034(a); or (3) the taxpayer’s failure to              
          purchase a new residence within the period specified in section             
          1034(a).                                                                    
               Section 1034(l) provides a cross-reference to the one-time             
          exclusion of gain under section 121.                                        
               C.  Section 121                                                        
               Section 121, One-Time Exclusion Of Gain From Sale Of                   
          Principal Residence By Individual Who Has Attained Age 55,                  
          provides in pertinent part:                                                 
                    SEC. 121(a). General Rule.–-At the election of the                
               taxpayer, gross income does not include gain from the                  
               sale or exchange of property if--                                      






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