J. Ramsay Farah and Elizabeth Farah - Page 20

               Respondent argues that petitioners’ lack of affiliation with           
          social organizations in the Berlin area indicates that the                  
          Hagerstown house was their principal residence.  Petitioners were           
          involved in the Rotary Club, the Northwood Swim Club, the YMCA,             
          and the Maryland Symphony Orchestra while living in Hagerstown.             
          The record indicates petitioners discontinued affiliation with              
          the Hagerstown organizations in 1997.  Petitioners did not become           
          involved with similar organizations in Berlin.  Petitioners                 
          explain that they did not join a swim club in Berlin because they           
          lived on the water.  Furthermore, they did not join similar                 
          organizations because Dr. Farah spent a great deal of time                  
          traveling, and Ms. Farah spent much of her time caring for her              
               For the foregoing reasons, we hold on the preponderance of             
          the evidence that the Berlin house was Ms. Farah’s principal                
          residence from July 31, 1997 through September 24, 2001, and that           
          the Berlin house was Dr. Farah’s principal residence from June              
          30, 1998 through April 30, 2001.  Therefore, petitioners have               
          each met the 2-year use requirement of section 121 and are                  
          entitled to exclude up to $500,000 of the gain from the sale of             
          the Berlin house.9                                                          

               9The parties dispute whether the purchase price of the                 
          Berlin house was $315,000 as respondent contends, or $365,000 as            
          petitioner contends.  The parties stipulated that in addition to            
          the purchase price of the property, petitioners are entitled to             

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