Craig F. and Lynn M. Rehberg - Page 10

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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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