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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
daughter.
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
(continued...)
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