I
107TH CONGRESS
1ST SESSION
H. R. 2041
To amend the Internal Revenue Code of 1986 to exclude from gross income
gain from the sale of securities which are used to pay for higher edu-
cation expenses.
IN THE HOUSE OF REPRESENTATIVES
MAY 26 (legislative day, MAY 25), 2001
Mr. KNOLLENBERG 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 exclude
from gross income gain from the sale of securities which
are used to pay for higher education expenses.
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 ‘‘Equity in Education
Act of 2001’’.
SEC. 2. EXCLUSION FROM GROSS INCOME FOR GAIN FROM
SALE OF SECURITIES USED TO PAY HIGHER
EDUCATION EXPENSES.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 139 as section 139A and by in-
serting after section 138 the following new section:
‘‘SEC. 139. EXCLUSION FROM GROSS INCOME FOR GAIN
FROM SALE OF SECURITIES USED TO PAY
HIGHER EDUCATION EXPENSES.
‘‘(a) GENERAL RULE.—In the case of an individual
who elects the application of this section and who pays
qualified higher education expenses during the taxable
year, no amount shall be includible in gross income by rea-
son of the sale during such year of any qualified security.
‘‘(b) LIMITATION WHERE GAIN ON SALE OR EX-
CHANGE EXCEEDS HIGHER EDUCATION EXPENSES.—
‘‘(1) IN GENERAL.—If—
‘‘(A) the aggregate gain on the sale of any
qualified securities by the taxpayer during the
taxable year exceeds
‘‘(B) the qualified higher education ex-
penses paid by the taxpayer during such taxable
year,
the amount excludable from gross income under sub-
section (a) shall not exceed the applicable fraction of
the amount excludable from gross income under sub-
section (a) without regard to this subsection.
‘‘(2) APPLICABLE FRACTION.—For purposes of
subparagraph (A), the term ‘applicable fraction’
means the fraction the numerator of which is the
amount described in paragraph (1)(B) and the de-
nominator of which is the amount described in para-
graph (1)(A).
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section—
‘‘(1) QUALIFIED SECURITY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
security’ means any security (as defined in sec-
tion 1236(c)) which is traded on an established
securities market.
‘‘(B) EXCEPTION.—Such term shall not in-
clude any security held in a qualified retirement
plan (as defined in section 4974(c)) or in an ac-
count or under an arrangement which is exempt
from tax under this title.
‘‘(2) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—The term ‘qualified higher education ex-
penses’ has the meaning given such term by section
530(b)(2), reduced by the amount of such expenses
taken into account for purposes of any other provi-
sion of this chapter.
‘‘(3) EXCLUSION
NOT
APPLICABLE
TO
GAIN
TREATED AS ORDINARY INCOME.—This section shall
not apply to any gain which is treated as ordinary
income for purposes of this subtitle.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of such Code
is amended by striking the item relating to section 139
and inserting the following new items:
‘‘Sec. 139. Exclusion from gross income for gain from sale of se-
curities used to pay higher education expenses.
‘‘Sec. 139A. Cross references to other Acts.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenses paid after December
31, 2001 (in taxable years beginning after such date), for
education furnished in academic periods beginning after
such date.
Æ