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 INDIVID-
UAL 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
3 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 220(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.—Section
4975 of such Code (relating to prohibited transactions)
is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) 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 220(d)(2)(A)
to such account.’’; and
(2) by inserting ‘‘or an individual investment
account described in section 220(b)’’ in subsection
(e)(1) after ‘‘described in section 408(a)’’.
(f) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL
INVESTMENT ACCOUNTS.—Section 6693 of such Code (re-
lating to failure to provide reports on individual retirement
account or annuities) is amended—
(1) by inserting ‘‘OR
ON
INDIVIDUAL
IN-
VESTMENT
ACCOUNTS’’ after ‘‘ANNUITIES’’ in
the heading of such section; and
(2) by adding at the end of subsection (a) the
following: ‘‘The person required by section 220(g) to
file a report regarding an individual investment ac-
count at the time and in the manner required by
such section shall pay a penalty of $50 for each fail-
ure unless it is shown that such failure is due to rea-
sonable cause.’’
(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 (24), by striking the period at
the end of paragraph (25) and inserting ‘‘; and’’, and by
adding at the end thereof the following new paragraph:
‘‘(26) to the extent provided in section
220(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 220 and insert-
ing the following:
‘‘Sec. 220. Individual investment accounts.
‘‘Sec. 221. 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.’’
(4) The table of sections for subchapter B of
chapter 68 of such Code is amended by striking the
item relating to section 6693 and inserting the fol-
lowing:
‘‘Sec. 6693. Failure to provide reports on individual retirement
accounts or annuities or on individual investment
accounts.’’
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
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