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
may prescribe and shall specify the assets for which
such election is 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
treated—
(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,
1997.
Subsection (d) shall not apply to property to which this
subsection applies.
SEC. 103. CAPITAL LOSS DEDUCTION ALLOWED WITH RE-
SPECT TO SALE OR EXCHANGE OF PRINCIPAL
RESIDENCE.
(a) IN GENERAL.—Subsection (c) of section 165 of
the Internal Revenue Code of 1986 (relating to limitation
on losses of individuals) is amended by striking ‘‘and’’ at
the end of paragraph (2), by striking the period at the
end of paragraph (3) and inserting ‘‘; and’’, and by adding
at the end the following new paragraph:
‘‘(4) losses arising from the sale or exchange of
the principal residence (within the meaning of sec-
tion 1034) of the taxpayer.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to sales and exchanges after De-
cember 31, 1996, in taxable years ending after such date.
TITLE II—CREDITS FOR
FAMILIES
SEC. 201. FAMILY TAX CREDIT.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after section 23 the follow-
ing new section:
‘‘SEC. 24. FAMILY TAX CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to $500 multiplied
by the number of qualifying children of the taxpayer.
‘‘(b) QUALIFYING CHILD.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘qualifying child’
means any individual if—
‘‘(A) the taxpayer is allowed a deduction
under section 151 with respect to such individ-
ual for such taxable year,
‘‘(B) such individual has not attained the
age of 18 as of the close of the calendar year
in which the taxable year of the taxpayer be-
gins, and
‘‘(C) such individual bears a relationship to
the taxpayer described in section 32(c)(3)(B)
(determined without regard to clause (ii) there-
of).
‘‘(2) EXCEPTION FOR CERTAIN NONCITIZENS.—
The term ‘qualifying child’ shall not include any in-
dividual who would not be a dependent if the first
sentence of section 152(b)(3) were applied without
regard to all that follows ‘resident of the United
States’.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of chapter
1 of such Code is amended by inserting after the item
relating to section 23 the following new item:
‘‘Sec. 24. Family tax credit.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 202. CREDIT TO REDUCE MARRIAGE PENALTY.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after section 24 the follow-
ing new section:
‘‘SEC. 24A. CREDIT TO REDUCE MARRIAGE PENALTY.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a joint
return for the taxable year, there shall be allowed as a
credit against the tax imposed by this chapter for such
taxable year an amount equal to the marriage penalty re-
duction credit.
‘‘(b) LIMITATIONS.—
‘‘(1) DOLLAR
LIMITATION.—The amount of
credit allowed by subsection (a) for the taxable year
shall not exceed $145.
‘‘(2) CREDIT
DISALLOWED
FOR
INDIVIDUALS
CLAIMING SECTION 911, ETC.—No credit shall be al-
lowed under this section for any taxable year if ei-
ther spouse claims the benefits of section 911, 931,
or 933 for such taxable year.
‘‘(c) MARRIAGE PENALTY REDUCTION CREDIT.—For
purposes of this section—
‘‘(1) IN GENERAL.—The marriage penalty re-
duction credit is an amount equal to the excess (if
any) of—
‘‘(A) the joint tax amount of the taxpayer,
over