Estate of John W. Clause, Deceased, Thomas Y. Clause, Personal Respresentative - Page 1

                                   122 T.C. No. 5                                     

                               UNITED STATES TAX COURT                                

                            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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