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section 62(a)(1) provides that such deductions, being
attributable to petitioner’s employment, are allowable as
itemized deductions from adjusted gross income. See sec. 63(a).
Accordingly, we find that subject to certain limitations,
petitioner is entitled to deduct itemized employee deductions on
Schedules A of $289,926 for 1987 and $135,000 for 1988.
V. Sale of Residence
Under former section 1034,10 which was in effect for
petitioner’s 1987 tax year, taxpayers were able to defer gain
realized from the sale of their principal residence if they
purchased a replacement residence and met certain other
conditions. Section 1034, in pertinent part, provided:
SEC. 1034(a). Nonrecognition of Gain.–-If
property (in this section called “old residence”) used
by the taxpayer as his principal residence is sold by
him and, within a period beginning 2 years before the
date of such sale and ending 2 years after such date,
property (in this section called “new residence”) is
purchased and used by the taxpayer as his principal
residence, gain (if any) from such sale shall be
recognized only to the extent that the taxpayer’s
adjusted sales price (as defined in subsection (b)) of
the old residence exceeds the taxpayer’s cost of
purchasing the new residence.
Respondent’s sole contention with regard to the sale of
petitioner’s residence is that if petitioner abandoned the Walnut
Creek residence and had a new “principal residence” before the
10 Sec. 1034 was repealed in connection with the Taxpayer
Relief Act of 1997, Pub. L. 105-34, sec. 312(a) and (b), 111
Stat. 836, 839.
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