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On brief, petitioners argue that the burden of proof on the
issue of whether the Berlin house was petitioners’ principal
residence should shift to respondent. Our resolution of the
issue is based on the preponderance of the evidence rather than
the allocation of the burden of proof; therefore, we need not
address petitioners’ section 7491(a) argument. See Estate of
Bongard v. Commissioner, 124 T.C. 95, 111 (2005). Petitioners
bear the burden of proof on all other issues affecting their
liability for the deficiency in their Federal income tax.
B. Section 121 and Principal Residence
Section 121 provides for the exclusion from gross income of
up to $250,000 of gain from the sale or exchange of property, if
the property was owned and used by the taxpayer as the taxpayer’s
principal residence for periods aggregating 2 years or more
during the 5-year period preceding the sale or exchange. A
husband and wife filing a joint return may exclude a maximum of
$500,000 of the gain from gross income if at least one spouse
meets the ownership requirement and both spouses meet the use
requirement of section 121(a). Sec. 121(b).
Petitioners argue that they may exclude the gain from the
sale of the Berlin house and the South Point Road lot from their
gross income pursuant to section 121 because they owned and used
the two properties as their principal residence from July 1997
through September 2001. Respondent argues petitioners are not
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