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case inasmuch as petitioners reported the sale of the Solvang
property on the Form 2119 attached to their 1995 Federal income
tax return which was filed more than 3 years before the issuance
of the notice of deficiency. Respondent counters that: (1)
Section 1034(j) prescribes the period for the assessment of the
deficiency–-a deficiency which is attributable to gain realized
by petitioners upon the sale of property that they characterized
as their principal residence; and (2) that period remained open
as of the date that the notice of deficiency was mailed to
petitioners.
F. Analysis
The deficiency in this case is attributable in its entirety
to respondent’s determination that petitioners’ gross income for
1995 included the gain that petitioners realized upon the sale of
what they characterized as their principal residence. Consistent
with the plain language of section 1034(j) and section 6504(4),
we hold that the period of limitations set forth in section
1034(j) governs the assessment of the deficiency in this case.
Because we conclude that the period of limitations remained open
at the time the notice of deficiency was issued to petitioners,
we shall deny petitioners’ motion for partial summary judgment.
A portion of the gain from a sale or exchange of property
qualifies for exclusion from gross income under section 121 if
the property was owned and used by the taxpayer as his principal
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