I
106TH CONGRESS
1ST SESSION
H. R. 3394
To amend the Internal Revenue Code of 1986 to provide individuals with
an election to reduce the basis of depreciable real property in lieu
of gain recognition on such property.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 16, 1999
Mr. MCCRERY 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 provide
individuals with an election to reduce the basis of depre-
ciable real property in lieu of gain recognition on such
property.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Real Estate Flexibility
Act of 1999’’.
SEC. 2. ELECTION TO REDUCE BASIS IN LIEU OF GAIN REC-
OGNITION ON DISPOSITION BY INDIVIDUALS
OF DEPRECIABLE REAL PROPERTY.
(a) IN GENERAL.—Section 1001 of the Internal Rev-
enue Code of 1986 (relating to the determination of
amount of and recognition of gain or loss) is amended by
adding the following new subsection:
‘‘(f) ELECTION TO REDUCE BASIS AND EXCLUDE
PORTION OF DEBT ASSUMPTION.—
‘‘(1) IN
GENERAL.—In the case of an indi-
vidual, if—
‘‘(A) there is a disposition of real property
located in the United States and held by the
taxpayer for investment or used in a trade or
business of the taxpayer,
‘‘(B) such disposition is to an unrelated
person, and
‘‘(C) as part of such disposition, any
amount of qualified debt is discharged or is as-
sumed by an unrelated person,
the taxpayer may elect to reduce the amount real-
ized on such disposition by the amount described in
subparagraph (C).
‘‘(2) LIMITATION.—The amount of the reduc-
tion under paragraph (1) shall not exceed the
amount which would result in the tax imposed by
‘‘(ii) any interest in a partnership to
the extent such interest would be described
in section 1017(a)(3)(C) if such section
only referred to property described in
clause (i) of this subparagraph.
‘‘(C) MANNER OF REDUCTION.—The man-
ner in which basis is reduced under this sub-
section shall be the same as under section
1017.
‘‘(4) QUALIFIED DEBT.—For purposes of para-
graph (1), the term ‘qualified debt’ means, with re-
spect to any property, indebtedness secured by such
property throughout the 2-year period ending on the
date of the disposition of such property but only if
such indebtedness is taken into account in deter-
mining the amount realized on the disposition. In-
debtedness secured by such property which results
from the refinancing of indebtedness securing such
property shall be treated as a continuation of the
prior indebtedness but only to the extent that the
amount of the indebtedness resulting from such refi-
nancing does not exceed the amount of the refi-
nanced indebtedness.
‘‘(5) UNRELATED
PERSON.—For purposes of
this subsection, persons are unrelated unless their
relationship is described in section 267(b) or 707(b).
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations as are necessary to apply this
subsection to dispositions made by partnerships and
S corporations.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to dispositions occurring on or
after the date of the enactment of this Act.
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