I
105TH CONGRESS
1ST SESSION
H. R. 507
To amend the Internal Revenue Code of 1986 to exempt from income tax
the gain from the sale of a business closely held by an individual who
has attained age 62, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 4, 1997
Mr. ANDREWS 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 exempt
from income tax the gain from the sale of a business
closely held by an individual who has attained age 62,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. EXCLUSION FROM INCOME TAX OF GAIN FROM
SALE OF CLOSELY HELD BUSINESS BY INDI-
VIDUALS WHO HAVE ATTAINED AGE 62.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 138 as section 139 and by insert-
ing after section 137 the following new section:
‘‘SEC. 138. SALE OF CLOSELY HELD BUSINESS BY INDIVID-
UALS WHO HAVE ATTAINED AGE 62.
‘‘(a) IN GENERAL.—In the case of an individual,
gross income does not include the gain (whether received
in single sum or otherwise) from the sale or exchange of
a qualified interest in a closely held business if—
‘‘(1) the individual has attained age 62 before
the date of such sale or exchange,
‘‘(2) the adjusted gross income of the individual
for the tax year in which such sale or exchange oc-
curs does not exceed $1,000,000 (determined with-
out regard to such sale or exchange), and
‘‘(3) the individual so elects.
‘‘(b) ONE-TIME EXCLUSION.—Subsection (a) shall
not apply to any sale or exchange by the taxpayer if an
election under subsection (a) with respect to any other sale
or exchange is in effect.
‘‘(c) QUALIFIED INTEREST
IN
A CLOSELY HELD
BUSINESS.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the term ‘qualified interest in a closely held
business’ means an interest in a closely held busi-
ness (as defined by section 6166(b)(1)) if the fair
market value of the assets of such business is
$500,000 or less, determined at the time of such
sale or exchange.
‘‘(2) 
RULE
FOR
APPLYING
SECTION
6166(b)(1).—For purposes of paragraph (1), rules
similar to rules of paragraphs (2) and (9) of sub-
section (b) and subsection (c) of section 6166 shall
apply.
‘‘(3) AGGREGATION RULES.—All persons treat-
ed as a single employer under subsection (a) or (b)
of section 52 or subsection (m) or (o) of section 414
shall be treated as one person for purposes of para-
graph (1).
‘‘(d) ELECTION.—An election under subsection (a)
may be made or revoked at any time before the expiration
of the period for making a claim for credit or refund of
the tax imposed by this chapter for the taxable year in
which the sale or exchange occurred.’’
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of such Code
is amended by striking the item relating to section 138
and inserting the following:
‘‘Sec. 138. Sale of closely held business by individuals who have
attained age 62.
‘‘Sec. 139. Cross reference to other Acts.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after De-
cember 31, 1996, with respect to a sale or exchange after
December 31, 1996.
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