I 
111TH CONGRESS 
1ST SESSION H. R. 3520 
To amend the Internal Revenue Code of 1986 to exclude capital gains on 
sales and exchanges of residences purchased in a foreclosure sale. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 31, 2009 
Mr. SMITH of Nebraska (for himself, Mr. ROHRABACHER, and Mr. LANCE) 
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 exclude 
capital gains on sales and exchanges of residences pur-
chased in a foreclosure sale. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. EXCLUSION OF CAPITAL GAIN ON SALES AND 
EXCHANGES OF HOMES PURCHASED IN A 
FORECLOSURE SALE. 
(a) IN GENERAL.—Part I of subchapter P of chapter 
1 of the Internal Revenue Code of 1986 (relating to treat-
ment of capital gains) is amended by adding at the end 
the following new section: 
VerDate Nov 24 2008 
22:49 Aug 04, 2009
Jkt 079200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H3520.IH
H3520
PWALKER on DSK8KYBLC1PROD with BILLS
‘‘SEC. 1203. GAIN ON SALES AND EXCHANGES OF HOMES 
PURCHASED IN A FORECLOSURE SALE. 
‘‘(a) IN GENERAL.—Gross income shall not include 
qualified gain. 
‘‘(b) QUALIFIED GAIN.—For purposes of subsection 
(a), the term ‘qualified gain’ means any gain from the sale 
or exchange of any qualified residential property which is 
acquired after the date of the enactment of this section, 
as the result of having bid on such property at foreclosure, 
or by operation of an agreement or process of law, after 
there was a default (or a default was imminent) on indebt-
edness which such property secured. 
‘‘(c) QUALIFIED RESIDENTIAL PROPERTY.—For pur-
poses of this section, the term ‘qualified residential prop-
erty’ means a residential property which— 
‘‘(1) is a capital asset, 
‘‘(2) is located in the United States, and 
‘‘(3) consists of from 1 to 4 dwelling units. 
‘‘(d) BASIS REDUCTION.—The basis of any qualified 
residential property shall be reduced by the amount of any 
exclusion determined under this section with respect to 
such property. 
‘‘(e) TERMINATION.—Subsection (a) shall not to sales 
and exchanges after the end of the 18-month period begin-
ning on the date of the enactment of this section.’’. 
VerDate Nov 24 2008 
22:49 Aug 04, 2009
Jkt 079200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H3520.IH
H3520
PWALKER on DSK8KYBLC1PROD with BILLS
(b) BASIS.—Section 1016(a) of such Code is amend-
ed by striking ‘‘and’’ at the end of paragraph (36), by 
striking the period at the end of paragraph (37) and in-
serting ‘‘, and’’, and by adding at the end the following 
new paragraph: 
‘‘(38) to the extent provided in section 
1203(d).’’. 
(c) CONFORMING AMENDMENT.—The table of sec-
tions for part I of subchapter P of chapter 1 of such Code 
is amended by adding at the end the following new item: 
‘‘Sec. 1203. Gain on sales and exchanges of homes purchased in a foreclosure 
sale.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to property purchased 
on or after the date of the enactment of this Act. 
Æ 
VerDate Nov 24 2008 
22:49 Aug 04, 2009
Jkt 079200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6301
E:\BILLS\H3520.IH
H3520
PWALKER on DSK8KYBLC1PROD with BILLS