First-Time Homebuyer Tax Credit Act of 1997

Summary: First-Time Homebuyer Tax Credit Act of 1997 - Amends the Internal Revenue Code to allow a first-time homebuyer who purchases a principal residence a tax credit of ten percent of the purchase price of such residence.  Limits the credit to $5,000.  Requires married individuals filing jointly to both be first-time homebuyers.  Allows the use of 50 percent of the credit in the first taxable year in which the residence is purchased and the remaining 50 percent in the succeeding taxable year.  Makes this credit applicable to residences acquired after January 1, 1997, and before January 1, 1998, or for which a binding contract is entered into during such period.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``First-Time Homebuyer Tax Credit Act 
of 1997''.

SEC. 2. CREDIT FOR FIRST-TIME HOMEBUYERS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 23 the 
following new section:

``SEC. 24. PURCHASE OF PRINCIPAL RESIDENCE BY FIRST-TIME HOMEBUYER.

    ``(a) Allowance of Credit.--If an individual who is a first-time 
homebuyer purchases a principal residence (within the meaning of 
section 1034), there shall be allowed to such individual as a credit 
against the tax imposed by this chapter an amount equal to 10 percent 
of the purchase price of the principal residence.
    ``(b) Limitations.--
            ``(1) Maximum credit.--The credit allowed under subsection 
        (a) shall not exceed $5,000.
            ``(2) Limitation to one residence.--The credit under this 
        section shall be allowed with respect to only one residence of 
        the taxpayer.
            ``(3) Married individuals filing jointly.--In the case of a 
        husband and wife who file a joint return, the credit under this 
        section is allowable only if both the husband and wife are 
        first-time homebuyers, and the amount specified under paragraph 
        (1) shall apply to the joint return.
            ``(4) Other taxpayers.--In the case of individuals to whom 
        paragraph (3) does not apply who together purchase the same new 
        principal residence for use as their principal residence, the 
        credit under this section is allowable only if each of the 
        individuals is a first-time homebuyer, and the sum of the 
        amount of credit allowed to such individuals shall not exceed 
        the lesser of $5,000 or 10 percent of the total purchase price 
        of the residence. The amount of any credit allowable under this 
        section shall be apportioned among such individuals under 
        regulations to be prescribed by the Secretary.
            ``(5) Carryforward of unused credits.--If the credit 
        allowable under subsection (a) for any taxable year exceeds the 
        limitation imposed by section 26(a) for such taxable year 
        reduced by the sum of the credits allowable under this subpart 
        (other than this section and section 23), such excess shall be 
        carried to the succeeding taxable year and added to the credit 
        allowable under subsection (a) for such taxable year. No credit 
        may be carried forward under this subsection to any taxable 
        year following the fifth taxable year after the taxable year in 
        which the residence is purchased. For purposes of the preceding 
        sentence, credits shall be treated as used on a first-in first-
        out basis.
            ``(6) Year for which credit allowed.--Fifty percent of the 
        credit allowed by subsection (a) shall be allowed in the 
        taxable year in which the residence is purchased and the 
        remaining fifty percent of the credit shall be allowed in the 
        succeeding taxable year.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Purchase price.--The term `purchase price' means the 
        adjusted basis of the principal residence on the date of the 
        acquisition thereof.
            ``(2) First-time homebuyer.--
                    ``(A) In general.--The term `first-time homebuyer' 
                means any individual if such individual has not had a 
                present ownership interest in any residence (including 
                an interest in a housing cooperative) at any time 
                within the 36-month period ending on the date of 
                acquisition of the residence on which the credit 
                allowed under subsection (a) is to be claimed. An 
                interest in a partnership, S corporation, or trust that 
                owns an interest in a residence is not considered an 
                interest in a residence for purposes of this paragraph 
                except as may be provided in regulations.
                    ``(B) Certain individuals.--Notwithstanding 
                subparagraph (A), an individual is not a first-time 
homebuyer on the date of purchase of a residence if on that date the 
running of any period of time specified in section 1034 is suspended 
under subsection (h) or (k) of section 1034 with respect to that 
individual.
            ``(3) Special rules for certain acquisitions.--No credit is 
        allowable under this section if--
                    ``(A) the residence is acquired from a person whose 
                relationship to the person acquiring it would result in 
                the disallowance of losses under section 267 or 707(b), 
                or
                    ``(B) the basis of the residence in the hands of 
                the person acquiring it is determined--
                            ``(i) in whole or in part by reference to 
                        the adjusted basis of such residence in the 
                        hands of the person from whom it is acquired, 
                        or
                            ``(ii) under section 1014(a) (relating to 
                        property acquired from a decedent).
    ``(d) Recapture for Certain Dispositions.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), if the taxpayer disposes of property with respect to the 
        purchase of which a credit was allowed under subsection (a) at 
        any time within 36 months after the date the taxpayer acquired 
        the property as his principal residence, then the tax imposed 
        under this chapter for the taxable year in which the 
        disposition occurs is increased by an amount equal to the 
        amount allowed as a credit for the purchase of such property.
            ``(2) Acquisition of new residence.--If, in connection with 
        a disposition described in paragraph (1) and within the 
        applicable period prescribed in section 1034, the taxpayer 
        purchases a new principal residence, then the provisions of 
        paragraph (1) shall not apply and the tax imposed by this 
        chapter for the taxable year in which the new principal 
        residence is purchased is increased to the extent the amount of 
        the credit that could be claimed under this section on the 
        purchase of the new residence (determined without regard to 
        subsection (e)) is less than the amount of credit claimed by 
        the taxpayer under this section.
            ``(3) Death of owner; casualty loss; involuntary 
        conversion; etc.--The provisions of paragraph (1) do not apply 
        to--
                    ``(A) a disposition of a residence made on account 
                of the death of any individual having a legal or 
                equitable interest therein occurring during the 36-
                month period to which reference is made under paragraph 
                (1),
                    ``(B) a disposition of the old residence if it is 
                substantially or completely destroyed by a casualty 
                described in section 165(c)(3) or compulsorily or 
                involuntarily converted (within the meaning of section 
                1033(a)), or
                    ``(C) a disposition pursuant to a settlement in a 
                divorce or legal separation proceeding where the 
                residence is sold or the other spouse retains the 
                residence as a principal residence.
    ``(e) Property to Which Section Applies.--
            ``(1) In general.--The provisions of this section apply to 
        a principal residence if--
                    ``(A) the taxpayer acquires the residence on or 
                after January 1, 1997, and before January 1, 1998, or
                    ``(B) the taxpayer enters into, on or after January 
                1, 1997, and before January 1, 1998, a binding contract 
                to acquire the residence, and acquires and occupies the 
                residence before July 1, 1998.''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 23 the following new item:

                              ``Sec. 24. Purchase of principal 
                                        residence by first-time 
                                        homebuyer.''
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1997.