Marvin DeBough v. Douglas Shulman, Comm. IRS

KELLY, Circuit Judge.

In 1966, Marvin DeBough purchased a residence and surrounding 80 acres of mixed-use land in Delano, Minnesota (the property) for $25,000. On July 11, 2006, DeBough agreed to sell the property for $1.4 million to Stonehawk Corporation and Catherine Constantine Properties, Inc. (the buyers) pursuant to an installment contract. ' The buyers’ indebtedness was secured by the property.

Because the property was his principal residence, DeBough excluded $500,000 of gain from income on his 2006 tax return pursuant to 26 U.S.C. § 121 (the principal-residence exclusion). This left…