-15-
entitled to the exclusion for either property because the
Hagerstown house was petitioners’ principal residence at all
times.
Whether a residence qualifies as the taxpayer’s principal
residence for purposes of section 121 is a question of fact that
is resolved with reference to all the facts and circumstances.
Sec. 1.121-1(b)(2), Income Tax Regs.; see also Thomas v.
Commissioner, 92 T.C. 206, 244 (1989); Clapham v.
Commissioner, 63 T.C. 505, 508 (1975). “If a taxpayer alternates
between 2 properties, using each as a residence for successive
periods of time, the property that the taxpayer uses a majority
of the time during the year ordinarily will be considered the
taxpayer’s principal residence.” Sec. 1.121-1(b)(2), Income Tax
Regs.6 In order to meet the 2-year use requirement, occupancy of
the residence is required.7 Sec. 1.121-1(c)(2)(i), Income Tax
Regs.
6Sec. 1.121-1, Income Tax Regs., generally applies to sales
and exchanges that occurred on or after Dec. 24, 2002. However,
for sales or exchanges of a principal residence before Dec. 24,
2002, but after May 7, 1997, taxpayers may elect to apply sec.
1.121-1, Income Tax Regs., by filing a return for the taxable
year of the sale or exchange that does not include the gain from
the sale. Sec. 1.121-4(j), Income Tax Regs. The sale of the
Berlin residence took place on Oct. 27, 2001. Petitioners’ 2001
return did not include the gain from the sale of the Berlin
residence. Therefore, sec. 1.121-1, Income Tax Regs., applies to
the sale. Nevertheless, our decision in this case would be the
same whether or not sec. 1.121-1, Income Tax Regs., applied.
7Short temporary absences, such as for vacation, are counted
as periods of use. Sec. 1.121-1(c)(2)(i), Income Tax Regs.
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