I
107TH CONGRESS
2D SESSION
H. R. 5063
To amend the Internal Revenue Code of 1986 to provide a special rule
for members of the uniformed services in determining the exclusion
of gain from the sale of a principal residence and to restore the tax
exempt status of death gratuity payments to members of the uniformed
services.
IN THE HOUSE OF REPRESENTATIVES
JULY 8, 2002
Mr. HOUGHTON (for himself, Mr. SAM JOHNSON of Texas, Mr. JONES of
North Carolina, Mr. PICKERING, Mr. GEKAS, and Mr. FORBES) intro-
duced 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
a special rule for members of the uniformed services
in determining the exclusion of gain from the sale of
a principal residence and to restore the tax exempt status
of death gratuity payments to members of the uniformed
services.
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 ‘‘Armed Forces Tax
Fairness Act of 2002’’.
SEC. 2. SPECIAL RULE FOR MEMBERS OF UNIFORMED
SERVICES IN DETERMINING EXCLUSION OF
GAIN FROM SALE OF PRINCIPAL RESIDENCE.
(a) IN GENERAL.—Subsection (d) of section 121 of
the Internal Revenue Code of 1986 (relating to exclusion
of gain from sale of principal residence) is amended by
adding at the end the following new paragraph:
‘‘(9) MEMBERS OF UNIFORMED SERVICES.—
‘‘(A) IN GENERAL.—At the election of an
individual with respect to a property, the run-
ning of the 5-year period described in sub-
section (a) with respect to such property shall
be suspended during any period that such indi-
vidual or such individual’s spouse is serving on
qualified official extended duty as a member of
the uniformed services.
‘‘(B) MAXIMUM PERIOD OF SUSPENSION.—
The 5-year period described in subsection (a)
shall not be extended more than 5 years by rea-
son of subparagraph (A).
‘‘(C) QUALIFIED
OFFICIAL
EXTENDED
DUTY.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘quali-
fied official extended duty’ means any ex-
tended duty while serving at a duty station
which is at least 250 miles from such prop-
erty or while residing under Government
orders in Government quarters.
‘‘(ii) 
UNIFORMED
SERVICES.—The
term ‘uniformed services’ has the meaning
given such term by section 101(a)(5) of
title 10, United States Code, as in effect
on the date of the enactment of this para-
graph.
‘‘(iii) EXTENDED
DUTY.—The term
‘extended duty’ means any period of active
duty pursuant to a call or order to such
duty for a period in excess of 180 days or
for an indefinite period.
‘‘(D) SPECIAL RULES RELATING TO ELEC-
TION.—
‘‘(i) ELECTION LIMITED TO 1 PROP-
ERTY AT A TIME.—An election under sub-
paragraph (A) with respect to any property
may not be made if such an election is in
effect with respect to any other property.
‘‘(ii) REVOCATION OF ELECTION.—An
election under subparagraph (A) may be
revoked at any time.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to elections made after the date
of the enactment of this Act for suspended periods under
section 121(d)(9) of the Internal Revenue Code of 1986
(as added by this section) beginning after such date.
SEC. 3. RESTORATION OF FULL EXCLUSION FROM GROSS
INCOME OF DEATH GRATUITY PAYMENT.
(a) IN GENERAL.—Subsection (b)(3) of section 134
of the Internal Revenue Code of 1986 (relating to certain
military benefits) is amended by adding at the end the
following new subparagraph:
‘‘(C) EXCEPTION
FOR
DEATH
GRATUITY
ADJUSTMENTS MADE BY LAW.—Subparagraph
(A) shall not apply to any adjustment to the
amount of death gratuity payable under chapter
75 of title 10, United States Code, which is
pursuant to a provision of law enacted before
December 31, 1991.’’.
(b) CONFORMING AMENDMENT.—Subparagraph (A)
of section 134(b)(3) of such Code is amended by striking
‘‘subparagraph (B)’’ and inserting ‘‘subparagraphs (B)
and (C)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to deaths occurring
after September 10, 2001.
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