J. Ramsay Farah and Elizabeth Farah - Page 14

               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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