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On April 23, 2001, respondent assessed against petitioners the
amount of tax reported on their amended return. As such, the
assessment in this case is attributable in its entirety to the
gain that petitioners realized on the sale of their home in 1994.
The period of limitation for the assessment of such gain is,
therefore, governed by section 1034(j). Applying section 1034(j)
to the facts of this case, respondent’s 3-year period of
limitations to assess the tax for the taxable year 1994 began on
March 22, 2001, when petitioners notified respondent that they
failed to purchase a replacement home. Respondent assessed
petitioners on April 23, 2001. We conclude that respondent’s
assessment of petitioners’ unpaid liability was made within the
period of limitations.
In the alternative, petitioners request an “exemption under
the 1997 tax law allowing a one-time exclusion of the capital
gains tax resulting from the sale of a residence.”12 In their
motion, petitioners state, in pertinent part, as follows:
a. The sale of the petitioner’s residence was for
medical concerns. To the petitioner’s understanding
the one time exclusion tax law was enacted, in part, to
allow homeowners the use of the capital gains from
their primary residence to pay medical expenses. The
petitioner’s have met this intent of the law.
Respondent, however, contends that petitioners do not qualify for
12 For the year in issue, sec. 121 provides a taxpayer, who
attained the age of 55, a one-time exclusion of gain up to
$125,000 from the sale of a principal residence. We note that
petitioners had not attained the age of 55 in 1994.
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