as distributions) is amended by redesignating paragraphs
(3), (4), and (5) as paragraphs (4), (5), and (6), respec-
tively, and by inserting after paragraph (2) the following
new paragraph:
‘‘(3) EXCEPTION ONLY TO APPLY TO CERTAIN
LOANS.—Paragraph (2) shall apply to any loan only
if such loan is—
‘‘(A) a qualified first-time homebuyer loan
(as defined in paragraph (7)),
‘‘(B) a qualified higher education loan (as
defined in paragraph (8)),
‘‘(C) a qualified medical expense loan (as
defined in paragraph (9)), or
‘‘(D) a qualified unemployment loan (as
defined in paragraph (10)).’’
(b) DEFINITIONS.—Subsection (p) of section 72 of
such Code is amended by adding at the end the following
new paragraphs:
‘‘(7) 
QUALIFIED
FIRST-TIME
HOMEBUYER
LOAN.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (3), the term ‘qualified first-time home-
buyer loan’ means any loan received by an indi-
vidual to the extent the amount of the loan is
used within a reasonable period to pay qualified
acquisition costs with respect to a principal res-
idence of a first-time homebuyer who is such in-
dividual, the spouse of such individual, or any
child, grandchild, or ancestor of such individual
or the individual’s spouse.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if—
‘‘(I) such individual (and if mar-
ried, such individual’s spouse) had no
present ownership interest in a prin-
cipal residence during the 2-year pe-
riod ending on the date of acquisition
of the principal residence to which
this paragraph applies, and
‘‘(II) subsection (h) or (k) of sec-
tion 1034 did not suspend the run-
ning of any period of time specified in
section 1034 with respect to such in-
dividual on the day before the date
the loan is received.
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which construction or re-
construction of such a principal resi-
dence is commenced.
‘‘(8) QUALIFIED HIGHER EDUCATION LOAN.—
For purposes of paragraph (3)—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education loan’ means any loan received
by an individual to the extent the amount of the
loan is used within a reasonable period to pay
expenses for tuition, fees, books, supplies, and
equipment required for the enrollment or at-
tendance of—
‘‘(i) the individual,
‘‘(ii) the individual’s spouse, or
‘‘(iii) any child (as defined in section
151(c)(3)), grandchild, or ancestor of the
individual or the individual’s spouse,
at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.
‘‘(9) QUALIFIED
MEDICAL
EXPENSE
LOAN.—
The term ‘qualified medical expense loan’ means any
loan received by an individual to the extent the
amount of the loan does not exceed the amount al-
lowable as a deduction under section 213 to the indi-
vidual for amounts paid during the taxable year for
medical care (determined without regard to whether
the taxpayer itemizes deductions for such taxable
year).
‘‘(10) QUALIFIED UNEMPLOYMENT LOAN.—The
term ‘qualified unemployment loan’ means any loan
to an individual after separation from employment,
if—
‘‘(A) such individual has received unem-
ployment compensation for 12 consecutive
weeks under any Federal or State unemploy-
ment compensation law by reason of such sepa-
ration, and
‘‘(B) such loan is received during any tax-
able year during which such unemployment
compensation is paid or the succeeding taxable
year.
To the extent provided in regulations, a self-em-
ployed individual shall be treated as meeting the re-
quirements of subparagraph (A) if, under Federal or
State law, the individual would have received unem-
ployment compensation but for the fact the individ-
ual was self-employed.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to loans made after the date of
the enactment of this Act.
Æ