                  T.C. Summary Opinion 2001-17



                      UNITED STATES TAX COURT



                ANTHONY J. TAYLOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13049-98S.                Filed February 22, 2001.



     Anthony J. Taylor, pro se.

     Robert W. Dillard, for respondent.



     CARLUZZO, 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 1996.   The decision to be entered is

not reviewable by any other court, and this opinion should not be

cited as authority.
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     Respondent determined a $1,760 deficiency in petitioner’s

1996 Federal income tax.   The issue for decision is whether gain

realized on the sale of petitioner’s residence is excludable from

his gross income.

Background

     Some of the facts have been stipulated and are so found.

Petitioner filed a timely 1996 Federal income tax return.      At the

time the petition was filed, petitioner resided in Daytona Beach,

Florida.

     Petitioner was born in New Jersey in 1931.    Since the late

1960’s until his retirement, petitioner was employed as a truck

driver.    He was married to Ann Maureen Taylor (Ms. Taylor) until

their divorce in November 1981.

     In 1969, petitioner and Ms. Taylor purchased a house located

at 207 Squaw Trail, Hopatcong, New Jersey, for $21,500 (the New

Jersey residence).   After substantial improvements were

completed, petitioner and Ms. Taylor moved in and raised their

four children there.

     Pursuant to their divorce, petitioner and Ms. Taylor each

received a one-half interest in the New Jersey residence.      Ms.

Taylor died in September 1982.    Petitioner’s four children

inherited her interest in that property.    On various dates

between September 1984 and December 1986, each of petitioner’s

children sold or otherwise formally transferred his or her
                              - 3 -

interest in the New Jersey residence to petitioner; as of the

latter date and until the date it was sold, petitioner was its

sole owner and occupant.

     In 1982, petitioner began a regular practice of visiting one

of his sons in Florida during those winter months when it was too

cold for petitioner to work in New Jersey.    During these visits,

petitioner stayed at his son’s residence in Daytona Beach,

Florida.

     In 1988, petitioner purchased investment property in Daytona

Beach, Florida (the Florida property).   The property consists of

two small apartment buildings and two cottages.   Petitioner’s son

moved into one of the apartments there (the apartment) and

managed the Florida property for petitioner.   The two cottages

and other apartments were rented to third parties.   Thereafter,

when petitioner traveled to Florida for the winter months, he

stayed with his son at the apartment.

     Sometime during 1991, petitioner decided to work as a truck

driver in Florida during the winter months.    In order to do so,

he was required to obtain a Florida commercial driver’s license

and register his truck in that State.    In 1992, he did both and

began to work in Florida that winter.    Petitioner expected to be

in Florida at the time of the November 1992 presidential election

so earlier that year he registered to vote in Florida.

     As it turned out, the income petitioner earned in Florida
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during the winter months was sufficient to support him for the

entire year.    He stopped working in New Jersey and did not file a

New Jersey State income tax return for those years that he had no

income earned from employment within that State.    Petitioner’s

1994, 1995, and 1996 Federal income tax returns were filed

listing the apartment as petitioner’s address; the Schedules C,

Profit or Loss From Business, included with those returns also

listed the apartment as the address of petitioner’s business.

Forms 1099 issued to petitioner by third parties for those years

were sent to the apartment.

     From 1992 to 1996, although he no longer worked in New

Jersey, petitioner returned to the New Jersey residence in the

spring and remained there through the summer and some of the fall

seasons each year.    During those years he was the only occupant

of the house.    The utilities always remained in service and the

house always remained furnished.    With the exception of some

clothing and an automobile that he kept in Florida, petitioner

kept his personal belongings at the New Jersey residence.

Petitioner’s children who lived in New Jersey watched the New

Jersey residence when petitioner was in Florida, but none of the

children lived there or had keys to it.

     Petitioner sold the New Jersey residence on July 5, 1996,

for $85,000.    In connection with the sale, petitioner received

$21,000 in cash and a note from the purchasers.    The note is
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secured by a mortgage held by petitioner.    In 1996, petitioner

received principal payments totaling $937 in connection with the

above-referenced note.

     After he sold the New Jersey residence, petitioner moved

all of his furniture and other items of personal property from

the New Jersey residence to the apartment.    His son moved out

of the apartment, and petitioner began to manage his Florida

property.    From that point on he no longer regularly spent

extended periods in New Jersey.    In 1996, petitioner sold his

truck and effectively retired as a commercial driver.    In 1997,

petitioner moved from the apartment to another residence he

purchased in Florida.

     Petitioner did not include any gain on the sale of the New

Jersey house in the income he reported on his 1996 Federal income

tax return.    In the notice of deficiency, respondent determined

that petitioner realized a gain on the sale (computed by using

the original purchase price as petitioner’s basis), allowed

installment sale treatment, and adjusted petitioner’s income

accordingly.   Other adjustments made in the notice of deficiency

are not in dispute.

Discussion

     Generally, the gain realized on the sale of a personal

residence is includable in the taxpayer’s income.    See secs.

61(a)(3), 1001(c).    At the election of the taxpayer, however, and
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subject to conditions and limitations then in effect and not in

dispute in this case, gross income does not include gain from the

sale of property if during the 5-year period ending on the date

of the sale, the property has been owned and used by the taxpayer

as the taxpayer’s principal residence for periods aggregating

3 years or more.   See sec. 121(a).1

     Petitioner claims that the New Jersey residence was his

principal residence from the time that he and his wife purchased

it until the date in 1996 when he sold it.   Relying upon section

121(a), petitioner argues that any gain realized from the sale of

that house is therefore excludable from his income.   According to

respondent, the exclusion provided in section 121(a) does not

apply to the sale of the New Jersey residence because that house

was not petitioner’s principal residence for the requisite period

prescribed in the statute.

     According to respondent, as of no later than the close of

1992, the New Jersey residence was no longer petitioner’s

principal residence.   Respondent points out that at that time,

petitioner held a Florida driver’s license, had his truck

registered in that State, was registered to vote there, and spent

significant amounts of time in Florida during 1992 and each year

thereafter.   Respondent also points out that starting in 1994,


     1
       Sec. 121 was amended by sec. 312 of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, 111 Stat. 836, effective for sales
and exchanges after May 6, 1997.
                               - 7 -

petitioner filed his Federal income tax returns using a Florida

address and did not file New Jersey State income tax returns

after he stopped doing business in New Jersey.

     Whether a taxpayer’s residence qualifies as the taxpayer’s

principal residence for purposes of section 121 is a question of

fact that is resolved with reference to “all the facts and

circumstances in each case, including the good faith of the

taxpayer.”   Sec. 1.1034-1(c)(3)(i), Income Tax Regs.; see also

Thomas v. Commissioner, 92 T.C. 206, 244 (1989); Clapham v.

Commissioner, 63 T.C. 505, 508 (1975); sec. 1.121-3(a), Income

Tax Regs.

     The factors relied upon by respondent in support of his

position are certainly relevant to the question before us, but

they are not determinative, particularly when weighed against

petitioner’s explanation for each event, his personal situation

during the relevant periods, and petitioner’s use of the New

Jersey residence, as his residence for the entire time that he

owned it.

     The New Jersey residence was purchased by petitioner for use

as a personal residence and it was consistently owned and used by

him for that purpose until he sold it.   It remained fully

furnished, and the majority of petitioner’s personal property was

located there until it was sold.   The New Jersey residence was

never rented to others or held for rent to others.   Nor was it
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used or occupied by petitioner’s children after they had

otherwise moved from it.

     From 1992 until July 1996, petitioner, a native of New

Jersey, was making a gradual transition from living and working

in New Jersey to retirement in Florida.     While he spent time at

both locations, he never abandoned his New Jersey residence.

After purchasing the Florida property, he routinely returned to

live at the New Jersey residence for the spring, summer, and

portions of the fall.

     Taking into account all of the facts and circumstances

presented, we are satisfied that during the period from July

1991 to July 1996, petitioner used the New Jersey residence as

his principal residence for at least 36 full months.     See sec.

1.121-1(c), Income Tax Regs.   We therefore find that it was

petitioner’s principal residence, as that term is used in

section 121, for the requisite period prescribed by that section.

Accordingly, petitioner is entitled to exclude from his 1996

gross income the gain realized on the sale of the New Jersey

residence, and we so hold.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     Based on the foregoing,

                                            Decision will be

                                       entered for petitioner.
