122 T.C. No. 5
UNITED STATES TAX COURT
ESTATE OF JOHN W. CLAUSE, DECEASED, THOMAS Y. CLAUSE, PERSONAL
REPRESENTATIVE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12995-01. Filed February 9, 2004.
P, prior to his death, sold all of his shares in C to
C’s employee stock ownership plan in 1996. P purchased
qualified replacement property with most of the proceeds
from the sale within a year of the sale. P’s 1996 original
Federal tax return was filed timely (i.e., on or before Apr.
15, 1997) and did not report the transaction. On Nov. 28,
2000, after R began examining P’s original tax return for
1996, P filed an amended Federal tax return for 1996
indicating to R that certain proceeds from the sale had been
reinvested in qualified replacement property. On Oct. 17,
2001, R received a second Federal tax return for 1996 from P
that attached certain statements of election pursuant to
I.R.C. sec. 1042 regarding the sale in 1996.
Held: P is not able to defer recognition of the gain
that resulted from the sale because P failed to elect such
treatment as required by I.R.C. sec. 1042.
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