riod of active duty pursuant to a call or order to
such duty for a period in excess of 90 days or for
an indefinite period.’’
(3) Subparagraph (A) of 143(m)(6) of such
Code is amended by inserting ‘‘(as in effect on the
day before the date of the enactment of the Prin-
cipal Residence Tax Exclusion Act of 1996)’’ after
‘‘1034(e)’’.
(4) Subsection (e) of section 216 of such Code
is amended by striking ‘‘such exchange qualifies for
nonrecognition of gain under section 1034(f)’’ and
inserting ‘‘such dwelling unit is used as his principal
residence (within the meaning of section 121)’’.
(5) Section 512(a)(3)(D) of such Code is
amended by inserting ‘‘(as in effect on the day be-
fore the date of the enactment of the Principal Resi-
dence Tax Exclusion Act of 1996)’’ after ‘‘1034’’.
(6) Paragraph (7) of section 1016(a) of such
Code is amended by inserting ‘‘(as in effect on the
day before the date of the enactment of the Prin-
cipal Residence Tax Exclusion Act of 1996)’’ after
‘‘1034’’ and by inserting ‘‘(as so in effect)’’ after
‘‘1034(e)’’.
(7) Paragraph (3) of section 1033(k) of such
Code is amended to read as follows:
‘‘(3) For exclusion from gross income of gain
from involuntary conversion of principal residence,
see section 121.’’
(8) Subsection (e) of section 1038 of such Code
is amended to read as follows:
‘‘(e) PRINCIPAL RESIDENCES.—If—
‘‘(1) subsection (a) applies to a reacquisition of
real property with respect to the sale of which gain
was not recognized under section 121 (relating to
gain on sale of principal residence); and
‘‘(2) within 1 year after the date of the reacqui-
sition of such property by the seller, such property
is resold by him,
then, under regulations prescribed by the Secretary, sub-
sections (b), (c), and (d) of this section shall not apply
to the reacquisition of such property and, for purposes of
applying section 121, the resale of such property shall be
treated as a part of the transaction constituting the origi-
nal sale of such property.’’
(9) Paragraph (7) of section 1223 of such Code
is amended by inserting ‘‘(as in effect on the day be-
fore the date of the enactment of the Principal Resi-
dence Tax Exclusion Act of 1996)’’ after ‘‘1034’’.
(10) Paragraph (7) of section 1250(d) of such
Code is amended to read as follows:
‘‘(7) DISPOSITION OF PRINCIPAL RESIDENCE.—
Subsection (a) shall not apply to a disposition of
property to the extent used by the taxpayer as his
principal residence (within the meaning of section
121, relating to gain on sale of principal residence).’’
(11) Subsection (c) of section 6012 of such
Code is amended by striking ‘‘(relating to one-time
exclusion of gain from sale of principal residence by
individual who has attained age 55)’’ and inserting
‘‘(relating to gain from sale of principal residence)’’.
(12) Paragraph (2) of section 6212(c) of such
Code is amended by striking subparagraph (C) and
by redesignating the succeeding subparagraphs ac-
cordingly.
(13) Section 6504 of such Code is amended by
striking paragraph (4) and by redesignating the suc-
ceeding paragraphs accordingly.
(14) The item relating to section 121 in the
table of sections for part III of subchapter B of
chapter 1 of such Code is amended to read as fol-
lows:
‘‘Sec. 121. Exclusion of gain from sale of principal residence.’’
(15) The table of sections for part III of sub-
chapter O of chapter 1 of such Code is amended by
striking the item relating to section 1034.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to sales and exchanges after
December 31, 1996.
(2) BINDING CONTRACTS, ETC.—At the election
of the taxpayer, the amendments made by this sec-
tion shall not apply to a sale or exchange after De-
cember 31, 1996, if—
(A) such sale or exchange is pursuant to a
contract which was binding on September 25,
1996, and at all times before such sale or ex-
change, or
(B) without regard to such amendments,
gain would not be recognized under section
1034 of the Internal Revenue Code of 1986 (as
in effect on the day before the date of the en-
actment of this Act) on such sale or exchange
by reason of a new residence acquired on or be-
fore such date.
This paragraph shall not apply to any sale or ex-
change by an individual if the treatment provided by
section 877(a)(1) of the Internal Revenue Code of
1986 applies to such individual.
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