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properly chargeable to capital account. Sec. 1.1016-2(a), Income
Tax Regs.
A taxpayer is also required to keep permanent books of
account or records that are sufficient to establish the amount of
gross income, deductions, and other information required to be
shown on an income tax return. Sec. 6001; sec. 1.6001-1(a),
Income Tax Regs. The Commissioner’s determination is presumed
correct; the taxpayer has the burden of proving the adjusted
basis of his property.12 Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933).
B. Section 1034
Section 103413 provides for nonrecognition of gain on the
sale of a principal residence:
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.
12Petitioner has not established that he meets the
requirements of sec. 7491(a), and, therefore, the burden of proof
does not shift to respondent.
13Sec. 1034 applies to the sale or exchange of a principal
residence occurring on or before May 6, 1997. Sec. 1034 was
repealed by the Taxpayer Relief Act of 1997, Pub. L. 105-34, sec.
312(b), 111 Stat. 839.
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