I
105TH CONGRESS
1ST SESSION
H. R. 2310
To amend the Internal Revenue Code of 1986 to exclude from income capital
gain from the sale of a principal residence.
IN THE HOUSE OF REPRESENTATIVES
JULY 30, 1997
Mr. PORTER 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 income capital gain from the sale of a principal
residence.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. EXCLUSION FROM INCOME OF GAIN FROM
SALE OF PRINCIPAL RESIDENCE.
(a) IN GENERAL.—Section 121 of the Internal Reve-
nue Code of 1986 is amended to read as follows:
‘‘SEC. 121. EXCLUSION OF GAIN FROM SALE OF PRINCIPAL
RESIDENCE.
‘‘(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
3 years or more.
‘‘(b) SPECIAL RULES.—
‘‘(1) PROPERTY HELD JOINTLY BY HUSBAND
AND WIFE.—For purposes of this section, if—
‘‘(A) property is held by a husband and
wife as joint tenants, tenants by the entirety, or
community property,
‘‘(B) such husband and wife make a joint
return under section 6013 for the taxable year
of the sale or exchange, and
‘‘(C) one spouse satisfies the holding and
use requirements of subsection (a) with respect
to such property,
then both husband and wife shall be treated as satis-
fying the holding and use requirements of subsection
(a) with respect to such property.
‘‘(2) PROPERTY OF DECEASED SPOUSE.—For
purposes of this section, in the case of an unmarried
individual whose spouse is deceased on the date of
the sale or exchange of property, if the deceased
spouse (during the 5-year period ending on the date
of the sale or exchange) satisfied the holding and
use requirements of subsection (a) with respect to
such property, then such individual shall be treated
as satisfying the holding and use requirements of
subsection (a) with respect to such property.
‘‘(3) TENANT-STOCKHOLDER IN COOPERATIVE
HOUSING CORPORATION.—For purposes of this sec-
tion, if the taxpayer holds stock as a tenant-stock-
holder (as defined in section 216) in a cooperative
housing corporation (as defined in such section),
then—
‘‘(A) the holding requirements of sub-
section (a) shall be applied to the holding of
such stock, and
‘‘(B) the use requirements of subsection
(a) shall be applied to the house or apartment
which the taxpayer was entitled to occupy as
such stockholder.
‘‘(4) INVOLUNTARY
CONVERSIONS.—For pur-
poses of this section, the destruction, theft, seizure,
requisition, or condemnation of property shall be
treated as the sale of such property.
‘‘(5) PROPERTY USED IN PART AS PRINCIPAL
RESIDENCE.—In the case of property only a portion
of which, during the 5-year period ending on the
date of the sale or exchange, has been owned and
used by the taxpayer as his principal residence for
periods aggregating 3 years or more, this section
shall apply with respect to so much of the gain from
the sale or exchange of such property as is deter-
mined, under regulations prescribed by the Sec-
retary, to be attributable to the portion of the prop-
erty so owned and used by the taxpayer.
‘‘(6) DETERMINATION OF MARITAL STATUS.—
In the case of any sale or exchange, for purposes of
this section—
‘‘(A) the determination of whether an indi-
vidual is married shall be made as of the date
of the sale or exchange; and
‘‘(B) an individual legally separated from
his spouse under a decree of divorce or of sepa-
rate maintenance shall not be considered as
married.
‘‘(7) APPLICATION OF SECTION 1033.—In apply-
ing section 1033 (relating to involuntary conver-
sions), the amount realized from the sale or ex-
change of property shall be treated as being the
amount determined without regard to this section,
reduced by the amount of gain not included in gross
income pursuant to an election under this section.
‘‘(c) ELECTION TO HAVE SECTION NOT APPLY.—If
the taxpayer so elects with respect to any sale or exchange,
this section shall not apply to such sale or exchange.’’
(b) REPEAL
OF NONRECOGNITION
OF GAIN
ON
ROLLOVER OF PRINCIPAL RESIDENCE.—Section 1034 of
such Code (relating to rollover of gain on sale of principal
residence) is hereby repealed.
(c) CLERICAL AND CONFORMING AMENDMENTS.—
(1) The following provisions of the Internal
Revenue Code of 1986 are each amended by striking
‘‘section 1034’’ and inserting ‘‘section 121’’: sections
25(e)(7), 
56(e)(1)(A), 
56(e)(3)(B)(i),
143(i)(1)(C)(i)(I), 
163(h)(4)(A)(i)(I),
280A(d)(4)(A), 
464(f)(3)(B)(i), 
1033(h)(4),
1274(c)(3)(B), 6334(a)(13), and 7872(f)(11)(A).
(2) Paragraph (4) of section 32(c) of such Code
is amended by striking ‘‘(as defined in section
1034(h)(3))’’ and by adding at the end the following
new sentence: ‘‘For purposes of the preceding sen-
tence, the term ‘extended active duty’ means any pe-
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 Revenue
Reconciliation Act of 1997)’’ 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 this parenthet-
ical)’’ 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 this par-
enthetical)’’ 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 this parenthet-
ical)’’ 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.—The amendments made by
this section shall apply to sales and exchanges occurring
after lllllllll.
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