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the same circumstances outlined in current section 165. See
secs. 23(e), I.R.C. 1939, 165(c).
The regulations promulgated under section 23 of the Internal
Revenue Code of 1939 are virtually identical to the current
regulations. They provided: “A loss on the sale of residential
property purchased or constructed by the taxpayer for use as his
personal residence and so used by him up to the time of the sale
is not deductible.” Sec. 29.23(e)-1, Regs. 111 (1943).
Petitioners argue that because they did not live in the
residence on the property before the purported sale to the Trust,
the claimed loss should be allowed. The taxpayers in Jones v.
Commissioner, supra, never lived on the property, and the Court
of Appeals for the Ninth Circuit ruled that no loss was
allowable.
Petitioners also argue that Jones is distinguishable because
the taxpayers in Jones did not purchase the property with the
intent to sell it at a profit. As stated, petitioners herein
stipulated that they intended to construct on the property “their
personal residence”, and petitioner testified that petitioners
were attracted to the property because they were “looking for a
house in Hawaii to live in.” Clearly, petitioners purchased the
property with the intent to build thereon their personal
residence.
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Last modified: May 25, 2011