Sale or Other Disposition of a Principal Residence. In 1970, Mr. and Mrs. Self purchased their first principal residence for $80,000. In 1995, they sold the house for $300,000 and purchased a new residence for $1.5 million. At that time, the Selfs were allowed to defer the $220,000 gain because they purchased a more expensive residence, but the basis of the residence was reduced by the gain deferred. The Taxpayer Relief Act of 1997 eliminated this deferral provision and made it easier for taxpayers who sell a principal residence to exclude the gain resulting from the sale even if they do not purchase a replacement residence. In 2001, the Selfs spent $200,000 to add a porch to their house that overlooks the small pond behind their house. In 2004, they hired painters to paint the entire house at a cost of $18,000. They estimate that $20,000 has been spent on routine repairs since- 1995, bur insurance of $11,000 was collected for the repairs resulting from a small tornado in 2008. No casualty loss deduction was allowed. They hold the residence as joint tenants