‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins by sub-
stituting ‘calendar year 2004’ for ‘calendar year 
1992’ in subparagraph (B) thereof. 
‘‘(2) ROUNDING.—If any dollar amount (as in-
creased under paragraph (1)) is not a multiple of 
$10, such dollar amount shall be increased to near-
est multiple of $10. 
‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this 
section, a custodial account shall be treated as a trust if 
the assets of such account are held by a bank (as defined 
in section 408(n)) or another person who demonstrates, 
to the satisfaction of the Secretary, that the manner in 
which he will administer the account will be consistent 
with the requirements of this section, and if the custodial 
account would, except for the fact that it is not a trust, 
constitute an individual investment account described in 
subsection (b). For purposes of this title, in the case of 
a custodial account treated as a trust by reason of the 
preceding sentence, the custodian of such account shall be 
treated as the trustee thereof. 
‘‘(g) REPORTS.—The trustee of an individual invest-
ment account shall make such reports regarding such ac-
count to the Secretary and to the individual for whose ben-
efit the account is maintained with respect to contribu-
tions, distributions, and such other matters as the Sec-
retary may require under regulations. The reports re-
quired by this subsection shall be filed at such time and 
in such manner and furnished to such individuals at such 
time and in such manner as may be required by those reg-
ulations.’’. 
(b) DEDUCTION ALLOWED
IN ARRIVING
AT AD-
JUSTED GROSS INCOME.—Subsection (a) of section 62 of 
such Code (defining adjusted gross income) is amended 
by inserting before the last sentence the following new 
paragraph: 
‘‘(21) INDIVIDUAL INVESTMENT ACCOUNT CON-
TRIBUTIONS.—The deduction allowed by section 224 
(relating to individual investment accounts).’’. 
(c) INDIVIDUAL INVESTMENT ACCOUNTS EXEMPT 
FROM ESTATE TAX.—Part III of subchapter A of chapter 
11 of such Code is amended by redesignating section 2046 
as section 2047 and by inserting after section 2045 the 
following new section: 
‘‘SEC. 2046. INDIVIDUAL INVESTMENT ACCOUNTS. 
‘‘Notwithstanding any other provision of law, there 
shall be excluded from the value of the gross estate the 
value of any individual investment account (as defined in
section 224(b)). Section 1014 shall not apply to such ac-
counts.’’. 
(d) NONRECOGNITION OF GAIN ON SALE OF PRIN-
CIPAL RESIDENCE WHERE AMOUNT EQUAL TO OTHER-
WISE TAXABLE GAIN DEPOSITED INTO INDIVIDUAL IN-
VESTMENT ACCOUNT.—Part III of subchapter B of chap-
ter 1 of such Code is amended by inserting after section 
121 the following new section: 
‘‘SEC. 121A. EXCLUSION OF GAIN FROM SALE OF PRINCIPAL 
RESIDENCE 
IF 
REINVESTMENT 
IN 
INDI-
VIDUAL INVESTMENT ACCOUNT. 
‘‘(a) GENERAL RULE.—Gross income does not in-
clude gain from the sale or exchange of property if, during 
the 5-year period ending on the date of the sale or ex-
change, such property has been owned and used by the 
taxpayer as his principal residence for periods aggregating 
2 years or more. 
‘‘(b) LIMITATION.—The amount of gain excluded 
from gross income under subsection (a) shall not exceed 
the amount paid in cash (during the 1-year period begin-
ning on the date of the sale or exchange) to an individual 
investment account (as defined in section 224(b)) estab-
lished for the benefit of the taxpayer or his spouse. 
‘‘(c) CERTAIN RULES ON OWNERSHIP AND USE TO 
APPLY.—Rules similar to the rules of section 121(d) shall
apply for purposes of determining ownership and use 
under this section.’’. 
(e) TAX ON PROHIBITED TRANSACTIONS.— 
(1) Paragraph (1) of section 4975(e) of such 
Code (relating to prohibited transactions) is amend-
ed by redesignating subparagraphs (F) and (G) as 
subparagraphs (G) and (H), respectively, and by in-
serting the following new subparagraph after sub-
paragraph (E): 
‘‘(F) an individual investment account de-
scribed in section 224(b), ’’. 
(2) Subsection (c) of section 4975 of such Code 
is amended by adding at the end the following new 
paragraph: 
‘‘(7) SPECIAL RULE FOR INDIVIDUAL INVEST-
MENT ACCOUNTS.—An individual for whose benefit 
an individual investment account is established shall 
be exempt from the tax imposed by this section with 
respect to any transaction concerning such account 
(which would otherwise be taxable under this sec-
tion) if, with respect to such transaction, the ac-
count ceases to be an individual investment account 
by reason of the application of section 224(d)(2)(A) 
to such account.’’.
(f) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL 
INVESTMENT
ACCOUNTS.—Paragraph (2) of section 
6693(a) of such Code is amended by redesignating sub-
paragraphs (D) and (E) as subparagraphs (E) and (F), 
respectively, and by inserting after subparagraph (C) the 
following new subparagraph: 
‘‘(D) section 224(g) (relating to individual 
investment accounts),’’. 
(g) ADJUSTMENT
OF BASIS
OF RESIDENCE AC-
QUIRED THROUGH USE OF ACCOUNT.—Subsection (a) of 
section 1016 of such Code is amended by striking ‘‘and’’ 
at the end of paragraph (30), by striking the period at 
the end of paragraph (31) and inserting ‘‘, and’’, and by 
adding at the end thereof the following new paragraph: 
‘‘(32) to the extent provided in section 
224(c)(2)(C), in the case of a residence the acquisi-
tion of which was made in whole or in part with 
funds from an individual investment account.’’. 
(h) CLERICAL AMENDMENTS.— 
(1) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by 
inserting after the item relating to section 121 the 
following new item: 
‘‘Sec. 121A. Exclusion of gain from sale of principal residence if reinvestment 
in individual investment account.’’.
(2) The table of sections for part VII of sub-
chapter B of chapter 1 of such Code is amended by 
striking the item relating to section 224 and insert-
ing the following: 
‘‘Sec. 224. Individual investment accounts. 
‘‘Sec. 225. Cross reference.’’. 
(3) The table of sections for part III of sub-
chapter A of chapter 11 of such Code is amended by 
striking the item relating to section 2046 and insert-
ing the following new items: 
‘‘Sec. 2046. Individual investment accounts. 
‘‘Sec. 2047. Disclaimers.’’. 
(i) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2004. 
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