T.C. Memo. 1995-455
UNITED STATES TAX COURT
RICHARD BRUCE BEGELFER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24056-91. Filed September 26, 1995.
Richard Bruce Begelfer, pro se
Bruce M. Wilpon, for respondent.
MEMORANDUM OPINION
GOLDBERG, Special Trial Judge: This case was heard pursuant
to the provisions of section 7443A(b)(3) and Rules 180, 181, and
182.1
Respondent determined a deficiency in petitioner's Federal
income tax for 1987 in the amount of $6,538 and an addition to
1
All section references are to the Internal Revenue Code as
amended and in effect for the year in issue. All Rule references
are to the Tax Court Rules of Practice and Procedure.
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tax in the amount of $1,635 for substantial understatement of tax
pursuant to section 6661.
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.
Some of the facts have been stipulated and are so found.
The stipulation of facts and attached exhibits are incorporated
herein by this reference. At the time the petition was filed,
petitioner resided in Long Beach, New York. Subsequently,
petitioner relocated to Texas in November 1992.
During a part of 1987, petitioner resided in Bridgeport,
Connecticut. In February of that year, petitioner lost his job
when his employer became insolvent and decided to discontinue
operations. Because of financial difficulties, petitioner sold
his principal residence on May 1, 1987, and realized a capital
gain of $36,171. Petitioner did not report this gain on his 1987
Federal income tax return. Rather, petitioner chose to defer
recognition of the gain because he intended to replace his home
within the replacement period provided by section 1034.
Petitioner moved to the New York City area, and in August
1987 found full-time employment as a sales agent. During this
2
At trial, respondent conceded that petitioner was not liable
for an addition to tax for substantial understatement of tax
under sec. 6661 for the 1987 taxable year.
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period, petitioner attempted to purchase a new principal
residence. However, because he did not have an established
commission sales record, petitioner could not secure a mortgage.
Petitioner was dismissed from his sales agent position in March
1988, after his employer discovered he was interviewing for
salaried employment. As petitioner continued this employment
search, he accepted part-time work assignments, which sometimes
required physical labor. During one of these assignments,
petitioner sustained serious injuries to his back, neck, and
ankle, which left him unable to work for several months.
In February of 1989, petitioner found full-time employment
and immediately sought to purchase a new residence. After an
unsuccessful attempt at acquiring a home, petitioner finally
succeeded in purchasing a residence on July 21, 1989, in Long
Beach, New York. Because of his injuries, petitioner has since
relocated to Austin, Texas, but he continues to own the New York
residence.
Petitioner contends that because of the recent physical and
financial hardships he has endured, as well as his good faith
effort to purchase another principal residence, the replacement
period provided by section 1034 should be waived. Respondent
argues simply that because petitioner did not purchase and use a
replacement residence within the statutory period, he is not
entitled to the benefits of section 1034(a). As unfortunate as
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petitioner's circumstances might appear, we concur with
respondent.
Generally, any gain on the sale of a personal residence must
be recognized by the taxpayer. Sec. 1001(c). An exception to
this rule, allowing for nonrecognition of such gain, is provided
by section 1034. Section 1034(a) provides that if the taxpayer
sells his principal residence, and within a 24-month period
before or after the date of the sale, another property is
purchased and used by the taxpayer as a principal residence, gain
from the sale will be recognized only to the extent that the
taxpayer's adjusted sale's price of the old residence exceeds the
taxpayer's cost of purchasing the new residence. Sec. 1034(a).
When applying the time limitations to the provisions of
section 1034(a), the courts have long adopted a very strict
approach. The decisions consistently hold that the time limits
of section 1034 are uniformly applicable and that the courts are
without authority to waive or extend those statutory limitations
to take account of circumstances that may have caused delay in
purchasing a replacement residence. Henry v. Commissioner, T.C.
Memo. 1982-469; see Kern v. Granquist, 291 F.2d 29 (9th Cir.
1961); Elam v. Commissioner, 58 T.C. 238 (1972), affd. per curiam
477 F.2d 1333 (6th Cir. 1973); Chavez v. Commissioner, T.C. Memo.
1983-199. Extensions of the time limitations of section 1034(a)
are available only when a specific statutory provision so
provides. Moore v. Townsend, 577 F.2d 424, 428 n.7 (7th Cir.
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1978). For example, section 1034(h) and section 1034(k) extend
the normal replacement period of section 1034(a) in the case of,
respectively, a member of the armed forces on extended active
duty and an individual whose tax home is outside the United
States. No provision is made for the consideration of equitable
factors in determining whether the replacement period requirement
has been met.
Petitioner purchased the New York residence 80 days beyond
the statutory period prescribed in section 1034. Moreover,
petitioner does not fall within the statutory provisions
extending the replacement period. As a result, petitioner must
recognize the gain on the sale of the Connecticut residence. We
sympathize with the difficulties petitioner has endured during
these years; however, the strict requirements of section 1034 do
not allow for extenuating circumstances, even if they are beyond
the control of the taxpayer. Chavez v. Commissioner, supra.
To reflect the foregoing,
Decision will be entered
for respondent, except as to
the addition to tax pursuant
to section 6661.