I
106TH CONGRESS
1ST SESSION
H. R. 1611
To amend the Internal Revenue Code of 1986 to allow a deduction for
contributions to individual investment accounts, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 28, 1999
Mr. MCCRERY (for himself, Mr. ENGLISH, and Mr. TAUZIN) 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 allow a
deduction for contributions to individual investment ac-
counts, and for other purposes.
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 ‘‘Individual Investment
Account Act of 1999’’.
SEC. 2. ESTABLISHMENT OF INDIVIDUAL INVESTMENT AC-
COUNTS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
additional itemized deductions for individuals) is amended
by redesignating section 222 as section 223 and by insert-
ing after section 221 the following new section:
‘‘SEC. 222. INDIVIDUAL INVESTMENT ACCOUNTS.
‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual, there shall be allowed as a deduction an amount
equal to the aggregate amount paid in cash for the taxable
year by such individual to an individual investment ac-
count established for the benefit of such individual.
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) INDIVIDUAL INVESTMENT ACCOUNT.—The
term ‘individual investment account’ means a trust
created or organized in the United States for the ex-
clusive benefit of an individual, but only if the writ-
ten governing instrument creating the trust meets
the following requirements:
‘‘(A) No contribution will be accepted un-
less it is in cash.
‘‘(B) The trustee is a bank (as defined in
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary
that the manner in which that person will ad-
minister the trust will be consistent with the re-
quirements of this section.
‘‘(C) No part of the trust assets will be in-
vested in any collectible (as defined in section
408(m)).
‘‘(D) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(2) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—A taxpayer shall be deemed to have made a
contribution on the last day of a taxable year if the
contribution is made on account of such taxable year
and is made not later than the time prescribed by
law for filing the return for such taxable year (not
including extensions thereof).
‘‘(c) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, any amount distributed out
of an individual investment account shall be included
in gross income by the distributee unless such
amount is part of a qualified first-time homebuyer
distribution.
‘‘(2) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTION.—For purposes of this subsection—
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins by sub-
stituting ‘calendar year 1998’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(2) ROUNDING.—If any dollar amount (as in-
creased under paragraph (1)) is not a multiple of
$10, such dollar amount shall be increased to near-
est multiple of $10.
‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this
section, a custodial account shall be treated as a trust if
the assets of such account are held by a bank (as defined
in section 408(n)) or another person who demonstrates,
to the satisfaction of the Secretary, that the manner in
which he will administer the account will be consistent
with the requirements of this section, and if the custodial
account would, except for the fact that it is not a trust,
constitute an individual investment account described in
subsection (b). For purposes of this title, in the case of
a custodial account treated as a trust by reason of the
preceding sentence, the custodian of such account shall be
treated as the trustee thereof.
‘‘(g) REPORTS.—The trustee of an individual invest-
ment account shall make such reports regarding such ac-
count to the Secretary and to the individual for whose ben-
efit the account is maintained with respect to contribu-
tions, distributions, and such other matters as the Sec-
retary may require under regulations. The reports re-
quired by this subsection shall be filed at such time and
in such manner and furnished to such individuals at such
time and in such manner as may be required by those reg-
ulations.’’
(b) DEDUCTION ALLOWED
IN ARRIVING
AT AD-
JUSTED GROSS INCOME.—Subsection (a) of section 62 of
such Code (defining adjusted gross income) is amended
by inserting after paragraph (17) the following new para-
graph:
‘‘(18) INDIVIDUAL INVESTMENT ACCOUNT CON-
TRIBUTIONS.—The deduction allowed by section 222
(relating to individual investment accounts).’’
(c) INDIVIDUAL INVESTMENT ACCOUNTS EXEMPT
FROM ESTATE TAX.—Part III of subchapter A of chapter
11 of such Code is amended by redesignating section 2046
as section 2047 and by inserting after section 2045 the
following new section:
‘‘SEC. 2046. INDIVIDUAL INVESTMENT ACCOUNTS.
‘‘Notwithstanding any other provision of law, there
shall be excluded from the value of the gross estate of the
value of any individual investment account (as defined in
section 222(b)). Section 1014 shall not apply to such ac-
counts.’’
(d) NONRECOGNITION OF GAIN ON SALE OF PRIN-
CIPAL RESIDENCE WHERE AMOUNT EQUAL TO OTHER-
WISE TAXABLE GAIN DEPOSITED INTO INDIVIDUAL IN-
VESTMENT ACCOUNT.—Part III of subchapter B of chap-
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 
INDI-
VIDUAL 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
2 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 222(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.—
(1) Paragraph (1) of section 4975(e) of such
Code (relating to prohibited transactions) is amend-
ed by striking ‘‘or’’ at the end of subparagraph (E),
by redesignating subparagraph (F) as subparagraph
(G), and by inserting the following new subpara-
graph after subparagraph (E):
‘‘(F) an individual investment account de-
scribed in section 222(b), or’’.
(2) Subsection (c) of section 4975 of such Code
is amended by adding at the end the following new
paragraph:
‘‘(6) 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 222(d)(2)(A)
to such account.’’
(f) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL
INVESTMENT
ACCOUNTS.—Paragraph (2) of section
6693(a) of such Code is amended by redesignating sub-
paragraphs (C) and (D) as subparagraphs (D) and (E),
respectively, and by inserting after subparagraph (B) the
following new subparagraph:
‘‘(C) section 222(g) (relating to individual
investment accounts),’’.
(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 (26), by striking the period at
the end of paragraph (27) and inserting ‘‘, and’’, and by
adding at the end thereof the following new paragraph:
‘‘(28) to the extent provided in section
222(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 222 and insert-
ing the following:
‘‘Sec. 222. Individual investment accounts.
‘‘Sec. 223. 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.’’
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
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