In order to be entitled to the benefits of section 1034, petitioners must prove that they have satisfied all of the section's requirements. Welch v. Helvering, supra; Shaw v. Commissioner, 69 T.C. 1034, 1038 (1978); Rule 142. The record is not clear as to whether Coral Gables is the ‘new residence‘, within the meaning of sec. 1034(a).
Because petitioner's sales price of the 55-acre tract, less its cost of purchasing the other property, exceeds its gain, the nonrecognition provisions of section 512(a)(3)(D) are not available to petitioner and it must recognize the full amount of its gain on the land sale, $148,640. See Shaw v. Commissioner, 69 T.C. 1034, 1036 (1978); Boesel v. Commissioner, 65 T.C. 378, 385 (1975) (in both cases, computation of gain recognized under section 1034). SEC. 1034.SALE OR EXCHANGE OF RESIDENCE.(a) Nonrecognition of Gain.—If property (in this section called ‘old residence‘) used by the taxpayer as his principal residence is sold by him after December 31, 1953, and, within a period beginning 18 months before the date of such sale and ending 18 months after such date, property (in this section called ‘new residence‘) is purchased and used by the taxpayer as his principal residence, gain (if any) from such sale shall be recognized only to the extent that the taxpayer's adjusted sales price (as defined in subsection (b)) of the old residence exceeds the taxpayer's cost of purchasing the new residence.
Although the application of this statute may effect a harsh result in petitioners' case, the time limits of section 44 must be enforced as Congress intended. See generally Shaw v. Commissioner, 69 T.C. 1034, 1038 (1978) (application of time limitations of section 1034). Decision will be entered for the respondent.
In both the Bayley and Sheahan cases, the record was clear that the taxpayer intended to occupy the new house as a principal residence but had not done so within the time provided for such occupancy by section 1034. As was pointed out in Shaw v. Commissioner, 69 T.C. 1034, 1038 (1978), the limitations of section 1034 have been recognized and consistently given effect even though the result may seem harsh. Because of the provision of section 44(c)(1) defining “new principal residence” to mean “principal residence” within the meaning of section 1034, the only reasonable construction of section 44 is that in order to be entitled to the credit provided by that section a taxpayer must occupy the newly constructed house as a principal residence between March 12, 1975, and January 1, 1977, by living in the new house on a day-to-day basis.