§1034 — Repealed. Pub. L. 105–34, title III, § 312(b), Aug. 5, 1997, 111 Stat. 839]

Applying section 1034(j) to the facts of this case, respondent’s 3-year period of limitations to assess the tax for the taxable year 1994 began on March 22, 2001, when petitioners notified respondent that they failed to purchase a replacement home.

Accordingly, we hold that petitioner is liable for accuracy-related penalties pursuant to section 6662(a) for 1993 and 1995 with respect to the understatements of tax attributable 3 Sec.

Our holding in Bogley is distinguishable, and we do distinguish it to fit these facts. We also recognize that the taxpayers in Bogley and Rev. Rul. 76-541 (arguing for a subsequent sale to be characterized as part ofthe "old residence") sought the opposite result that Gaggero does here (arguing that aprior sale should not be characterized as part oftl e "old residence"). Nonetheless, we find the underlying principle from Bogley an(1 Rev. Rul. 76-541--that the nonrecognition provisions of section

306, former section 112(n)(1) was recodified as section 1034 (former section 1034).

- 3 - brokerage commission rebates claimed for 1987 and 1988; (5) whether petitioner is entitled to defer gain realized from the 1987 sale of a residence under section 1034 and, if not, the amount of gain to be recognized; (6) whether petitioner is entitled to deduct losses from a horse breeding activity for 1987 through 1991; (7) whether petitioner has shown that respondent's determination that petitioner failed to report.certain items of income was in error; (8) whether petitioner is entitled

f $125,000 of gain on the sale of a principal residence for people age 55 or older under section 121. Petitioners also completed part III of the Form 2119 deferring recognition of the remaining $383,285 of gain (i.e., $508,285 minus $125,000) under section 1034. On March 20, 2001, respondent issued to petitioners a notice of deficiency for 1995. In the notice, respondent determined that petitioners were liable for a tax deficiency of $148,415, an accuracy-related penalty under section 6662(a) of

o. 1999-347 UNITED STATES TAX COURT LEE F. PARKER AND DIANE K. PARKER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 9590-98. Filed October 20, 1999. For purposes of deferring gain on the sale of their former residence under sec. 1034, I.R.C., Ps sought to include expenditures made in the construction of an unfinished dwelling structure. The structure was located on the same lot as the new residence purchased by Ps, and Ps intended eventually to use both buildings for th

The issues to be decided are: (1) Whether petitioner is required under section 1034 to defer recognition of gain he realized on the sale of a residence in 1990.

Respondent maintains that because petitioners failed to satisfy the requirements of section 1034, they should have reported - 6 - the capital gain.

1 All section references are to the Internal Revenue Code (continued...) - 2 - The issues for decision are (1) whether petitioners are entitled to roll over the gain on the sale of their residence under section 1034, and (2) whether petitioners are liable for the accuracy-related penalty for negligence.

The issues to be decided in this case are: (1) Whether the Burlington, Connecticut, house was petitioners' principal residence so that they may defer recognition of the gain on the sale of that house in 1989 under section 1034; (2) if not, what was the amount of petitioners' gain on the sale of the Burlington house that must be recognized in 1989;1 (3) whether petitioners are liable for the addition to tax under section 6651(a)(1); and (4) whether petitioners are liable for the accuracy-related

itioners reported the sale of the Curtis property; the selling price was shown to be $215,000, and expenses of sale as $477. Petitioners' basis in the property was shown as $65,736. Petitioners deferred recognition of the gain ($148,787) pursuant to section 1034. OPINION Issue 1. Sale of Residence Section 1034(a) permits deferral of gain on the sale of a taxpayer's principal residence (old residence) if other property is purchased and used by the taxpayer as a new principal residence within a pe

However, section 1034, captioned 3SEC.

Respondent determined deficiencies in petitioners' Federal income tax of $12,925 for 1989 and $13,294 for 1991. The sole issue for decision is whether petitioners may defer the gain realized on the sale of their old principal residence - 2 - under section 1034. We hold that they may not. In so holding, we conclude that petitioners failed to establish that they sold their old residence less than 2 years after they bought their new residence. The parties agree that, if petitioners must recognize

The section 1034 regulations further provided that property used by the taxpayer as his principal residence ma y include'a houseboat, a house trailer, or stock held by a tenant stockholder in a cooperative housing corporation, if the dwelling which.the taxpayer is entitled to, occupy as such stockholder i s used by him as his principal residence . The focal point of the section 1034 regulations was the dwelling unit a taxpayer uses a s his principal residence . The section 1034 regulations reinf

Section 1034 provides an exception to this general rule and allows a taxpayer to defer recognition of all or part of any gain realized on the sale of a principal residence if other property is purchased and used by the taxpayer as a new principal residence within the period beginning 2 years before the date of the sale and ending 2 years after that

e, and that we would consider any such arguments in deciding the motion to impose sanctions under section 6673. Following the trial, we directed the parties to prepare and submit a supplemental stipulation of facts and to address the application of section 1034. Although the supplemental stipulation of facts makes no mention of section 1034, and neither party made any arguments regarding section 1034 in their posttrial memoranda, we address the effect of section 1034 on petitioner’s sale of prop

ficiency of $7,159 in - 2 - petitioner’s Federal income tax for taxable year 1994. The sole issue for decision is whether petitioner is entitled to nonrecognition of gain from the sale of her personal residence in 1994 pursuant to the provisions of section 1034. The stipulation of facts and the accompanying exhibits are incorporated herein by reference. Petitioner resided in Vancouver, Washington, at the time her petition was filed in this case. In 1982 petitioner purchased a residence located a

-7- Petitioner contends that he may defer recognition of gain under section 1034 because he timely bought a replacement residence.

OPINION Petitioner contends that she meets the requirements of section 1034 and is entitled to defer recognition of the gain she realized on her sale of the California residence.

In our earlier opinion, we held that petitioners, under section 1034, were entitled to roll over a portion of the gain on the sale of their residence.

After considering - 2 - agreements and concessions by the parties, the remaining issues are: (1) Whether petitioners are entitled to roll over the gain on the sale of their residence under section 1034,1 (2) if entitled to roll over the gain whether any of the improvements made to the new principal residence qualify for the rollover, and (3) whether petitioners are liable for additions to tax for negligence for the 1987 and/or the 1988 taxable year(s).

Petitioner alleged in his petition that he met the requirements under section 1034 which would defer his gain.

Section 1034 requires a taxpayer - 15 - to defer recognition of gain realized on the sale of the taxpayer's principal residence in certain circumstances. We are not concerned with a residence in the case before us. Section 1.1034-1(b)(4), Income Tax Regs., is simply not relevant to petitioner in this case. Additionally, petitioner argues that Libe

1034 (b) provides in pertinent part as follows: (b) Adjusted Sales Price Defined -- (1) In general--For purposes of this section, the term "adjusted sales price" means the amount realized, reduced by the aggregate of the expenses for work performed on the old residence in order to assist in its sale. (2) Limitations--The reduction provided in

d to transmute an interest in the Newport Beach property to Mr. Kirst in exchange for certain consideration. The preamble to this agreement indicates that petitioners intended for it to be effective as of April 27, 1990. Issue 1. Principal Property, Section 1034. As a general rule, gain realized from the sale or other disposition of property must be recognized. Sec. 1001(c). Section 1034 provides an exception to this general rule and allows a taxpayer to defer recognition of all or part of any g

For 1988, petitioners reported a total gross income of $82,034, consisting of wages ($77,388), interest ($3,318), and unemployment compensation ($1,328). In addition, they reported the sale of their home, but excluded the gain therefrom pursuant to section 1034. The reported selling price for the home was $180,000; the excluded gain was $14,050. - 10 - Petitioners did not report in 1988 the $40,950 received in advances from Robert Randall Co. As previously discussed, the $40,950 constitutes com

return.4 Under the circumstances presented here, we are not required to, and we generally do not, rely on the testimony of the witnesses presented by petitioners to sustain their burden of establishing error in respondent's determination relating to section 1034. See Lerch v. Commissioner, 877 F.2d 624, 631-632 (7th Cir. 1989), affg. T.C. Memo. 1987-295; Geiger v. Commis- sioner, 440 F.2d 688, 689-690 (9th Cir. 1971), affg. per curiam T.C. Memo. 1969-159; Tokarski v. Commissioner, 87 T.C. 74, 77

though the matter was covered by the settlement stipulation. The issue so presented is whether gain from the sale of a house in Seattle, Washington, which was owned by Mr. Edmondson and his first wife, qualifies for deferred recognition pursuant to section 1034. All section references are to the Internal Revenue Code for the year in issue; all Rule references are to the Tax Court Rules of Practice and Procedure. FINDINGS OF FACT Background At the time they filed their petition, Sherburne M. Edm

Furthermore, petitioner reported she did not intend to utilize the section 1034 basis rollover provision.

Section 1034 allows a taxpayer to defer the recognition of gain realized from the sale of his principal residence, provided he meets the requirements of the statute. It provides, in relevant part, that when property used by a taxpayer as his principal residence is sold by him and, within the period beginning 2 years before the date of such sale and

titioners have failed to prove that respondent's determination regarding the gain realized is incorrect. In the alternative, petitioner argues that the gain realized on the sale of the California property should not be recognized in 1989 pursuant to section 1034. Respondent contends that petitioners are not entitled to deferral because the California property was rented out beginning in 1985, which was more than 3 years prior to the date on which the property was sold. Generally, sections 1001 a

206, 241-242 (1989) (citing section 1.1034-1(c)(3)(i), Income Tax Regs.) (construing the definition of"principal -10- [*10] residence" for purposes offormer section 1034).4 The lack ofa ready market for selling a property may be taken into account in determining whether the property remained the taxpayer's principal residence after he moved out; ifthe taxpayer's efforts to sell the property demonstrate that his dominant motive was to sell the property at the earliest possible date instead ofhold

We denied them their claimed deductions for rental expenses because we thought - 16 - [*16] it inconsistent with their simultaneous claim to nonrecognition oftheir gain under old section 1034.7 81 T.C.

Stovall, that it is appropriate to use the regulations under section 1033(a) as guidance in determining whether the Secre- tary was "notified" under section 4979A(e)(2)(D) ofthe ownership that gives rise to the excise tax under section 4979A(a).'° 9Sec. 1034 was repealed effective May 6, 1997. See Taxpayer ReliefAct of 1997, Pub. L. No. 105-34, sec. 312 (b), (d), 111 Stat. at 839, 841. ¹°We shall not use the regulations under sec. 1034 as guidance since that section was repealed effective May 6

We denied them their claimed deductions for rental expenses because we thought - 16 - [*16] it inconsistent with their simultaneous claim to nonrecognition oftheir gain under old section 1034.7 81 T.C.

d partnership losses totaling $25,000, and NOL carryovers totaling $97,282.2 The return also reported that petitioners had sold their home during 1993 at a gain of $904,596 and that they planned on replacing the home within the applicable period of section 1034. On or about June 4, 1996, petitioners amended their 1993 return primarily to recognize $630,764 of the gain realized on the sale of their home and to offset that gain by $604,345 of NOLs inclusive of (1) the previously mentioned $97,282,

n at the time that the original joint return was filed. In addition to claiming the section 121 exclusion on Form 2119, petitioner and Apostle elected to defer recognition of a portion of the gain realized on the sale of the New York apartment under section 1034. The return reported that they bought a new principal residence for $245,000 during the replacement period provided under section 1034. Petitioner and Apostle did not purchase any property that would have qualified as replacement propert

sation --- 4,320.00 Adjusted gross income 58,850.15 70,313.75 The sale of the Pepper Pike residence is not reported on petitioner’s 1994 return; it is reported on the 1994 return of petitioner’s spouse as the sale of a principal residence subject to section 1034. For each year in issue, petitioner computed his taxable income taking into account his election to itemize deductions. In this regard, his Federal income tax return for each of those years includes a Schedule A, Itemized Deductions. Amo

of the Falls Church house was rolled over into a new residence that was under construction in Fluvanna County, Virginia (the Palmyra house). 2 Respondent concedes that there is no deficiency due from petitioners for the 1997 taxable year. - 3 - See sec. 1034, repealed by sec. 312(b), Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat 839, effective May 6, 1997. Petitioners moved to the Palmyra house once it was completed in April 1997. The Cumberland house was put back on the market for sale

erty. Section 1034(a), however, provides an exception under which, if certain requirements are met, taxpayers defer recognition of gain when sale proceeds are reinvested in a new principal residence.2 The section reads in pertinent part as follows: 2Sec. 1034 was repealed by sec. 312 of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 836, generally effective for sales and exchanges after May 6, 1997. The sec. 1034 rollover provision was replaced by an expanded and revised sec. 121. -

1034 was repealed by sec. 312 of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 836, generally effective for sales and exchanges after May 6, 1997. The sec. 1034 rollover provision was replaced by an expanded and revised sec. 121. - 5 - mortgage of the Compton residence to purchase the Lee’s Summit residence in order to avoid gain

ed $61,156.84 from the sale of the Arden Road house. On July 27, 1994, Mrs. Suhr used the proceeds from the sale of the Arden Road house to buy a house in Gahanna, Ohio, for $112,900, and she thus was eligible for nonrecognition of gain under former section 1034. Discussion A. Background The issue for decision is whether petitioner must recognize gain in 1994 from the sale of the Arden Road house. Generally, a 6 taxpayer must recognize gain on the sale of a personal residence he or she owns. See

5 E.g., according to the notice of deficiency, the gain realized from the sale of the condominium is includable in petitioner’s 1993 income because he has “not established the requirements of section 121 or section 1034 * * * have been met”.

continuation of the old property still unliquidated. See, e.g., Koch v. Commissioner, 71 T.C. 54, 63-64 (1978). However, section 1031(a) does not go so far in implementing this notion as to be a reinvestment rollover provision, like section 1033 or section 1034. A sale of qualified property for cash requires that gain or loss be - 17 - recognized under the general rule of section 1001(c); such a sale does not become part of a qualifying exchange under section 1031(a) even though the cash receiv

(Section 1034 was repealed by section 312(b) of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 839, generally effective for sales and exchanges of principal residences after May 6, 1997. The section 1034 rollover provision was replaced by a revised and expanded section 121.) We agree with respondent that the $65,000 received by petitione

continuation of the old property still unliquidated. See, e.g., Koch v. Commissioner, 71 T.C. 54, 63-64 (1978). However, section 1031(a) does not go so far in implementing this notion as to be a reinvestment rollover provision, like section 1033 or section 1034. A sale of qualified property for cash requires that gain or loss be recognized under the general rule of section 1001(c); such a sale does not become part of a qualifying exchange under section 1031(a) even though the cash received on t

(Section 1034 was repealed by section 312(b) of the Taxpayer Relief Act of 1997, Pub. L. 105-34, 111 Stat. 839, generally effective for sales and exchanges of principal residences after May 6, 1997. The section 1034 rollover provision was replaced by a revised and expanded section 121.) We agree with respondent that the $65,000 received by petitione

y, and we decline to do so. See Cluck v. Commissioner, 105 T.C. 324, 338 (1995). Petitioner wife did not testify. Petitioners failed 3 Petitioners do not contend that any sale of the Danville property would qualify for nonrecognition treatment under sec. 1034. 4 While maintaining that he could not recall if he signed the grant deed, petitioner husband conceded at trial that the signature on it “looks like my signature”. - 6 - to call other witnesses, such as Haq or the notary public who notarize

121(a) and (b).1 The term "principal residence" in section 121 has the same meaning as in section 1034 and the regulations thereunder.

o have used a dwelling unit for personal purposes for any day during the taxable year which occurs before or after a qualified rental period described in subparagraph (B)(i), or before a qualified rental period described in subparagraph (B)(ii), if with respect to such day such unit constitutes the - 9 - principal residence (within the meaning of section 1034) of the taxpayer.

irm of Braunstein & Stern (B&S) advised the Gordons to purchase another principal residence after the sale of the Roslyn residence in order to defer the recognition of the gain from the sale of the Roslyn residence by satisfying the requirements of section 1034. On November 9, 1988, the Gordons purchased for $420,000 and titled in both their names another condominium located at One Lincoln Plaza Condominiums (Lincoln Plaza residence). The Gordons financed that purchase with (1) cash of $100,000

They attached this form to their 1988 Federal tax return, thereby claiming the right to defer under section 1034 a gain of $81,555 realized on sale of 14 Siros.

Gibbons (petitioner) is entitled to additional miscellaneous itemized deductions in 1988; (3) whether petitioner received constructive dividends or wages from Allied's paying his personal expenses in 1988 and 1989; (4) whether petitioner can exclude gain under section 121 and defer gain under section 1034 in 1989; and (5) whether petitioner is liable for the additions to tax and penalty as determined by respondent.

After a concession by respondent,2 the sole issue for our decision is whether petitioner is entitled to nonrecognition treatment under section 1034 for the gain he realized on the sale of his principal residence.

assets used for such purposes within a period beginning 1 year before the date of sale and ending three years after that date. This provision is to be implemented by rules similar to those provided where a taxpayer sells or exchanges his residence (sec. 1034). The committee believes that it is appropriate not to apply the tax on investment income in this case because the organization is merely reinvesting the funds formerly used for the benefit of its members in other types of assets to be used