I

103D CONGRESS

1ST SESSION H. R. 504

To amend the Internal Revenue Code of 1986 to allow penalty-free withdrawals from an individual’s individual retirement account for use by such

individual or the children of such individual in acquiring a first home,

and to provide that a parent’s guarantee of a loan to his child shall

not be a gift for gift tax purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 21, 1993

Mr. DARDEN introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to allow penalty-free withdrawals from an individual’s individual retirement account for use by such individual or the children of such individual in acquiring a first home, and

to provide that a parent’s guarantee of a loan to his

child shall not be a gift for gift tax purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘American Dream As5 sistance Act of 1992’’.
2

•HR 504 IH

1 SEC. 2. PENALTY-FREE WITHDRAWALS FOR FIRST-TIME

2 HOMEBUYERS.

3 (a) IN GENERAL.—Paragraph (2) of section 72(t) of

4 the Internal Revenue Code of 1986 (relating to exceptions

5 to 10-percent additional tax on early distributions from

6 qualified retirement plans) is amended by adding at the

7 end thereof the following new subparagraph:

8 ‘‘(D) DISTRIBUTIONS FROM INDIVIDUAL

9 RETIREMENT PLANS FOR FIRST HOME PUR10 CHASES.—Distributions to an individual from

11 an individual retirement plan which are quali12 fied first-time homebuyer distributions (as de13 fined in paragraph (6)).’’

14 (b) FIRST-TIME HOMEBUYER DISTRIBUTIONS.—Sec15 tion 72(t) of such Code is amended by adding at the end

16 thereof the following new paragraph:

17 ‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS18 TRIBUTIONS.—For purposes of paragraph (2)(D)—

19 ‘‘(A) IN GENERAL.—The term ‘qualified

20 first-time homebuyer distribution’ means any

21 payment or distribution received by an individ22 ual to the extent such payment or distribution

23 is used by the individual before the close of the

24 60th day after the day on which such payment

25 or distribution is received to pay qualified ac26 quisition costs with respect to a principal resi-
3

•HR 504 IH

1 dence of a first-time homebuyer who is such in2 dividual or the child of such individual.

3 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

4 For purposes of this paragraph, the term

5 ‘qualified acquisition costs’ means the costs of

6 acquiring, constructing, or reconstructing a res7 idence. Such term includes any usual or reason8 able settlement, financing, or other closing

9 costs.

10 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

11 DEFINITIONS.—For purposes of this para12 graph—

13 ‘‘(i) FIRST-TIME HOMEBUYER.—The

14 term ‘first-time homebuyer’ means any in15 dividual if such individual (and if married,

16 such individual’s spouse) had no present

17 ownership interest in a principal residence

18 during the 3-year period ending on the

19 date of acquisition of the principal resi20 dence to which this paragraph applies.

21 ‘‘(ii) PRINCIPAL RESIDENCE.—The

22 term ‘principal residence’ has the same

23 meaning as when used in section 1034.

24 ‘‘(iii) DATE OF ACQUISITION.—The

25 term ‘date of acquisition’ means the date—
4

•HR 504 IH

1 ‘‘(I) on which a binding contract

2 to acquire the principal residence to

3 which subparagraph (A) applies is en4 tered into, or

5 ‘‘(II) on which construction or re6 construction of such a principal resi7 dence is commenced.

8 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC9 QUISITION.—If—

10 ‘‘(i) any amount is paid or distributed

11 from an individual retirement plan to an

12 individual for purposes of being used as

13 provided in subparagraph (A), and

14 ‘‘(ii) by reason of a delay in the acqui15 sition of the residence, the requirements of

16 subparagraph (A) cannot be met,

17 the amount so paid or distributed may be paid

18 into an individual retirement plan as provided

19 in section 408(d)(3)(A)(i) without regard to

20 section 408(d)(3)(B), and, if so paid into such

21 other plan, such amount shall not be taken into

22 account in determining whether section

23 408(d)(3)(A)(i) applies to any other amount.’’
5

•HR 504 IH

1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to payments and distributions after

3 the date of the enactment of this Act.

4 SEC. 3. PARENT’S GUARANTEE OF CHILD’S LOAN NOT GIFT

5 FOR GIFT TAX PURPOSES.

6 (a) IN GENERAL.—Section 2503 of the Internal Rev7 enue Code of 1986 (defining taxable gifts) is amended by

8 adding at the end thereof the following new subsection:

9 ‘‘(h) EXCLUSION FOR GUARANTEE BY PARENT OF

10 LOAN TO CHILD OR CHILD’S BUSINESS, ETC.—

11 ‘‘(1) IN GENERAL.—The mere making of a

12 qualified guarantee shall not be treated as a transfer

13 of property by gift for purposes of this chapter.

14 ‘‘(2) QUALIFIED GUARANTEE.—For purposes of

15 this subsection, the term ‘qualified guarantee’ means

16 any guarantee by an individual of a loan to—

17 ‘‘(A) any lineal descendent of such individ18 ual or any spouse of such a lineal descendent,

19 or

20 ‘‘(B) any business enterprise all of the in21 terests in which (other than any interest as a

22 creditor) are owned by individuals described in

23 subparagraph (A).’’
6

•HR 504 IH

1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to guarantees made before, on,

3 or after the date of the enactment of this Act.

Æ