under paragraph (1) shall be reduced by the 
amount which bears the same ratio to the 
amount which would be includible in gross in-
come under paragraph (1) (without regard to 
this subparagraph) as the qualified start-up ex-
penditures bear to such aggregate distributions. 
‘‘(C) 
DISALLOWANCE
OF
EXCLUDED 
AMOUNTS AS DEDUCTION, CREDIT, OR EXCLU-
SION.—No deduction, credit, or exclusion shall 
be allowed to the taxpayer under any other sec-
tion of this chapter for any qualified start-up 
expenditure to the extent taken into account in 
determining the amount of the exclusion under 
this paragraph. 
‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.— 
‘‘(A) IN
GENERAL.—If any excess con-
tribution is contributed for a taxable year to 
any small business start-up savings account of 
an individual, paragraph (1) shall not apply to 
distributions from the small business start-up 
savings accounts of such individual (to the ex-
tent such distributions do not exceed the aggre-
gate excess contributions to all such accounts of 
such individual for such year) if— 
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‘‘(i) such distribution is received by 
the individual on or before the last day 
prescribed by law (including extensions of 
time) for filing such individual’s return for 
such taxable year, and 
‘‘(ii) such distribution is accompanied 
by the amount of net income attributable 
to such excess contribution. 
‘‘(B) EXCESS
CONTRIBUTION.—For pur-
poses of subparagraph (A), the term ‘excess 
contribution’ means any contribution (other 
than a rollover contribution described in para-
graph (4)) which when added to all previous 
contributions for the taxable year exceeds the 
amount allowable as a contribution under sub-
section (b)(1). 
‘‘(4) ROLLOVER
CONTRIBUTION.—Paragraph 
(1) shall not apply to any amount paid or distrib-
uted from a small business start-up savings account 
to the account beneficiary to the extent the amount 
received is paid into a small business start-up sav-
ings account for the benefit of such beneficiary not 
later than the 60th day after the day on which the 
beneficiary receives the payment or distribution. For 
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purposes of this paragraph, rules similar to the rules 
of section 408(d)(3)(D) shall apply. 
‘‘(5) TRANSFER OF ACCOUNT INCIDENT TO DI-
VORCE.—The transfer of an individual’s interest in 
a small business start-up savings account to an indi-
vidual’s spouse or former spouse under a divorce or 
separation instrument described in subparagraph 
(A) of section 71(b)(2) shall not be considered a tax-
able transfer made by such individual notwith-
standing any other provision of this subtitle, and 
such interest shall, after such transfer, be treated as 
a small business start-up savings account with re-
spect to which such spouse is the account bene-
ficiary. 
‘‘(6) TREATMENT AFTER DEATH OF ACCOUNT 
BENEFICIARY.— 
‘‘(A) TREATMENT IF DESIGNATED BENE-
FICIARY
IS
SPOUSE.—If the account bene-
ficiary’s surviving spouse acquires such bene-
ficiary’s interest in a small business start-up 
savings account by reason of being the des-
ignated beneficiary of such account at the death 
of the account beneficiary, such account shall 
be treated as if the spouse were the account 
beneficiary. 
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‘‘(B) OTHER CASES.— 
‘‘(i) IN GENERAL.—If, by reason of 
the death of the account beneficiary, any 
person acquires the account beneficiary’s 
interest in a small business start-up sav-
ings account in a case to which subpara-
graph (A) does not apply— 
‘‘(I) such account shall cease to 
be a small business start-up savings 
account as of the date of death, and 
‘‘(II) an amount equal to the fair 
market value of the assets in such ac-
count on such date shall be includible 
if such person is not the estate of 
such beneficiary, in such person’s 
gross income for the taxable year 
which includes such date, or if such 
person is the estate of such bene-
ficiary, in such beneficiary’s gross in-
come for the last taxable year of such 
beneficiary. 
‘‘(ii) SPECIAL RULES.— 
‘‘(I) REDUCTION
OF
INCLUSION 
FOR
PREDEATH
EXPENSES.—The 
amount includible in gross income 
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under clause (i) by any person (other 
than the estate) shall be reduced by 
the amount of qualified start-up ex-
penditures which were incurred by the 
decedent before the date of the dece-
dent’s death and paid by such person 
within 1 year after such date. 
‘‘(II) DEDUCTION
FOR
ESTATE 
TAXES.—An 
appropriate 
deduction 
shall be allowed under section 691(c) 
to any person (other than the dece-
dent or the decedent’s spouse) with 
respect to amounts included in gross 
income under clause (i) by such per-
son. 
‘‘(e) COMMUNITY PROPERTY LAWS.—This section 
shall be applied without regard to any community property 
laws. 
‘‘(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 subsection (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 
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account would, except for the fact that it is not a trust, 
constitute a small business start-up account described in 
subsection (a). 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) ADJUSTMENT FOR INFLATION.—In the case of 
a taxable year beginning after December 31, 2014, the 
dollar amount in subsection (b)(1) shall be increased by 
an amount equal to— 
‘‘(1) such dollar amount, multiplied by 
‘‘(2) the cost-of-living adjustment determined 
under section 1(f)(3) for the calendar year in which 
the taxable year begins, determined by substituting 
‘calendar year 2013’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof. 
If any amount as increased under the preceding sentence 
is not a multiple of $100, such amount shall be rounded 
to the nearest multiple of $100. 
‘‘(h) REPORTS.—The trustee of a small business 
start-up savings account shall make such reports regard-
ing such account to the Secretary and to the individual 
for whom the account is, or is to be, maintained with re-
spect to contributions (and the years to which they relate), 
distributions, aggregating $10 or more in any calendar 
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