                  T.C. Summary Opinion 2001-30



                     UNITED STATES TAX COURT



                CYNTHIA MARIE BYE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12806-99S.                    Filed March 14, 2001.


     Cynthia Marie Bye, pro se.

     Ralph W. Jones, for respondent.



     DEAN, Special Trial Judge:     This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.    Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the year in issue.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.

     Respondent determined a deficiency of $7,159 in
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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 at 2105 NE

95th Avenue, Vancouver, Washington (2105 house).   In 1990

petitioner purchased a residence located at 17217 NW 61st Avenue,

Ridgefield, Washington (Ridgefield house).   The 2105 house was

converted to rental property in 1990, and the Ridgefield house

was petitioner’s primary residence from 1990 through September

1994.

     In September 1994 petitioner sold the Ridgefield house and

converted the 2105 house to her primary residence.   Petitioner

reported the sale of the Ridgefield house on her 1994 Form 1040

PC, U.S. Individual Income Tax Return, and deferred the gain.

     On March 26, 1996, petitioner purchased and occupied a

residence at 2106 NE 104th Avenue, Vancouver, Washington (2106

house).   On March 27, 1996, petitioner sold the 2105 house.

     On September 30, 1996, petitioner filed a Form 1040X,

Amended U.S. Individual Income Tax Return, for taxable year 1994,
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applying the deferred gain from the sale of the Ridgefield house

to the 2106 house.   Petitioner’s 1996 Form 1040 incorrectly

reported the gain from the sale of the 2105 house on Form 4797,

Sales of Business Property.   Petitioner filed Form 1040X for 1996

to remove the gain from Form 4797 and to correctly report it on

Form 2119, Sale of Your Home, and to elect to defer the gain.

Petitioner’s Form 2119 indicates that petitioner had not bought

or built a “new main home” at the time the form was completed but

that she planned to replace her home within the replacement

period.   Petitioner did not file a second 1040X for 1994 to

reverse the rollover of gain that was reported on the 1040X for

1994.

     The notice of deficiency is based on a determination that

the Ridgefield house was rental property and that petitioner thus

did not meet the requirements of section 1034.   In the

alternative, the notice of deficiency states that gain from the

sale was not properly computed.   At trial and in his trial

memorandum, respondent abandoned these arguments and asked us to

consider whether petitioner is prohibited from rolling over into

a “new residence” the gain from the second sale within 2 years of

an “old residence” when petitioner also rolled over into the “new

residence” the gain from the first sale of an “old residence”.

Respondent explained that the rollover of the first residence in

1994 was disallowed because petitioner also filed a claim for the
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1996 rollover, which claim still could be acted upon.    Respondent

further explained that “the issuance of the 1994 statutory notice

should not be used as a means to deny petitioner the benefit of

the election for 1994.”

     We understand from petitioner’s testimony that she would

like to roll over the gain from the sale of the second house she

sold (the 2105 house) rather than the gain realized from the sale

of the first house she sold (the Ridgefield house).    She

explained that her accountant incorrectly rolled over the gain

from the sale of the Ridgefield house on her Form 1040X for 1994.

She also testified that her accountant had incorrectly reported

the sale of the 2105 house as the sale of rental property on her

1996 Form 1040.

     Although we are sympathetic to petitioner’s situation, we

are unable to address her 1996 tax year.    This is a court of

limited jurisdiction.   See sec. 7442.   We lack jurisdiction to

redetermine petitioner’s tax liability in years for which the

Commissioner has not issued a notice of deficiency.    See secs.

6213(a) and 6214(a) and (b).    The only notice of deficiency

issued to petitioner was with respect to her 1994 tax year.

     Petitioner’s rollover of gain from the sale of the

Ridgefield house into the 2106 house comports with the

requirements of section 1034.    The provisions of section 1034 are

mandatory; a taxpayer cannot elect to have gain recognized under
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circumstances where this section is applicable.   See Robarts v.

Commissioner, 103 T.C. 72, 75 (1994); sec. 1.1034-1(a), Income

Tax Regs.   Accordingly, petitioner is entitled to the benefits of

the statute in 1994.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                         Decision will be entered

                                    for petitioner.
