J. Ramsay Farah and Elizabeth Farah - Page 15

          entitled to the exclusion for either property because the                   
          Hagerstown house was petitioners’ principal residence at all                
               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              

               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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