Rowland G. and Valerie J. Pilaria - Page 19




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          gross income under section 121.  However, on their second Form              
          2119, filed May 26, 1998, petitioners reported the purchase price           
          of their new principal residence and notified respondent of their           
          election to exclude $125,000 of gain under section 121 and to               
          defer recognition of the balance of the gain under section 1034.            
               Under the circumstances, the filing of petitioners’ second             
          Form 2119 on May 26, 1998, satisfied the notice requirement under           
          section 1034(j)(1)(A) and initiated the running of the 3-year               
          period of limitations on assessment with regard to both                     
          petitioners’ election to exclude $125,000 of gain from their                
          gross income under section 121 and their claim to defer                     
          recognition of the balance of the gain under section 1034(a).               
          See sec. 1.1034-1(i)(2), Income Tax Regs.  It follows that the              
          3-year period of limitations remained open on March 20, 2001--the           
          date the notice of deficiency in this case was issued to                    
          petitioners.                                                                
               Consistent with the foregoing, we shall deny petitioners’              
          motion for partial summary judgment.  To reflect the foregoing,             


                                             An order will be issued                  
                                        denying petitioners’ motion for               
                                        partial summary judgment.                     










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