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attachments for 1989 (original joint return). The original joint
return was timely filed pursuant to an extension. Katz & Katz,
Certified Public Accountants, of Brooklyn, New York (Katz &
Katz), prepared the original joint return. Petitioner and
Apostle signed the original joint return.
The original joint return included Form 2119, Sale of Your
Home. Although neither petitioner nor Apostle was eligible to
claim the one-time exclusion of $125,000 from the gain on the
sale of the New York apartment under section 121, this exclusion
was claimed on Form 2119. Petitioner knew that she was not
eligible to claim the section 121 exclusion at the time that the
original joint return was filed.
In addition to claiming the section 121 exclusion on
Form 2119, petitioner and Apostle elected to defer recognition of
a portion of the gain realized on the sale of the New York
apartment under section 1034. The return reported that they
bought a new principal residence for $245,000 during the
replacement period provided under section 1034. Petitioner and
Apostle did not purchase any property that would have qualified
as replacement property under section 1034 during the replacement
period.
By claiming the section 121 exclusion and making the section
1034 election on Form 2119, petitioner and Apostle recognized
only $288,000 of the $564,000 gain realized on the sale of the
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Last modified: May 25, 2011