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property the holding period of which begins after
December 31, 1996.
(2) CERTAIN TRANSACTIONS BETWEEN RELAT-
ED PERSONS.—The amendments made by this sec-
tion shall not apply to the disposition of any prop-
erty acquired after December 31, 1996, from a re-
lated person (as defined in section 1022(g)(2) of the
Internal Revenue Code of 1986, as added by this
section) if—
(A) such property was so acquired for a
price less than the property’s fair market value,
and
(B) the amendments made by this section
did not apply to such property in the hands of
such related person.
(d) ELECTION TO RECOGNIZE GAIN
ON ASSETS
HELD ON JANUARY 1, 1997.—For purposes of the Inter-
nal Revenue Code of 1986—
(1) IN GENERAL.—A taxpayer other than a cor-
poration may elect to treat—
(A) any readily tradable stock (which is an
indexed asset) held by such taxpayer on Janu-
ary 1, 1997, and not sold before the next busi-
ness day after such date, as having been sold
on such next business day for an amount equal
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to its closing market price on such next busi-
ness day (and as having been reacquired on
such next business day for an amount equal to
such closing market price), and
(B) any other indexed asset held by the
taxpayer on January 1, 1997, as having been
sold on such date for an amount equal to its
fair market value on such date (and as having
been reacquired on such date for an amount
equal to such fair market value).
(2) TREATMENT OF GAIN OR LOSS.—
(A) Any gain resulting from an election
under paragraph (1) shall be treated as received
or accrued on the date the asset is treated as
sold under paragraph (1) and shall be recog-
nized notwithstanding any provision of the In-
ternal Revenue Code of 1986.
(B) Any loss resulting from an election
under paragraph (1) shall not be allowed for
any taxable year.
(3) ELECTION.—An election under paragraph
(1) shall be made in such manner as the Secretary
of the Treasury or his delegate may prescribe and
shall specify the assets for which such election is
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made. Such an election, once made with respect to
any asset, shall be irrevocable.
(4) READILY TRADABLE STOCK.—For purposes
of this subsection, the term ‘‘readily tradable stock’’
means any stock which, as of January 1, 1997, is
readily tradable on an established securities market
or otherwise.
(e) TREATMENT OF PRINCIPAL RESIDENCES.—Prop-
erty held and used by the taxpayer on January 1, 1997,
as his principal residence (within the meaning of section
1034 of the Internal Revenue Code of 1986) shall be treat-
ed—
(1) for purposes of subsection (c)(1) of this sec-
tion and section 1022 of such Code, as having a
holding period which begins on January 1, 1997,
and
(2) for purposes of section 1022(c)(2)(B)(ii) of
such Code, as having been acquired on January 1,
1996.
Subsection (d) shall not apply to property to which this
subsection applies.
SEC. 3. ESTABLISHMENT OF AMERICAN DREAM SAVINGS
ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 of the Internal Revenue Code of 1986 (re-
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lating to pension, profit-sharing, stock bonus plans, etc.)
is amended by inserting after section 408 the following
new section:
‘‘SEC. 408A. AMERICAN DREAM SAVINGS ACCOUNTS.
‘‘(a) GENERAL RULE.—Except as provided in this
section, an American Dream Savings Account shall be
treated for purposes of this title in the same manner as
an individual retirement plan.
‘‘(b) AMERICAN DREAM SAVINGS ACCOUNT.—For
purposes of this title, the term ‘American Dream Savings
Account’ or ‘ADS account’ means an individual retirement
plan which is designated at the time of the establishment
of the plan as an American Dream Savings Account. Such
designation shall be made in such manner as the Secretary
may prescribe.
‘‘(c) CONTRIBUTION RULES.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to an ADS account.
‘‘(2) CONTRIBUTION LIMIT.—
‘‘(A) 
IN
GENERAL.—The 
aggregate
amount of contributions (other than rollover
contributions) for any taxable year to all ADS
accounts maintained for the benefit of an indi-
vidual shall not exceed the lesser of—
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‘‘(i) $2,000, or
‘‘(ii) an amount equal to the com-
pensation includible in the individual’s
gross income for such taxable year.
‘‘(B) $4,000 LIMITATION FOR CERTAIN AD-
DITIONAL MARRIED INDIVIDUALS.—
‘‘(i) IN GENERAL.—In the case of an
individual to whom this subparagraph ap-
plies for the taxable year, the limitation of
subparagraph (A)(ii) shall be equal to the
sum of—
‘‘(I) the compensation includible
in such individual’s gross income for
the taxable year, plus
‘‘(II) the compensation includible
in the gross income of such individ-
ual’s spouse for the taxable year re-
duced by the amount of the limitation
under subparagraph (A) applicable to
such spouse for such taxable year.
‘‘(II) INDIVIDUALS TO WHOM CLAUSE
(i) APPLIES.—Clause (i) shall apply to any
individual if—
‘‘(I) such individual files a joint
return for the taxable year, and