I 
108TH CONGRESS 
1ST SESSION H. R. 3397
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 
OCTOBER 29, 2003
Mr. MCCRERY 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 2003’’. 
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 223 as section 224 and by insert-
ing after section 222 the following new section: 
‘‘SEC. 223. 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—
‘‘(A) IN
GENERAL.—The term ‘qualified 
first-time homebuyer distribution’ has the 
meaning given to such term by section 72(t)(8). 
‘‘(B) DOLLAR
LIMITATION.—The aggre-
gate amount which may be treated as qualified 
first-time homebuyer distributions for all tax-
able years shall not exceed $15,000. 
‘‘(C) BASIS REDUCTION.—The basis of any 
principal residence described in subparagraph 
(A) shall be reduced by the amount of any 
qualified first-time homebuyer distribution.
‘‘(3) TRANSFER OF ACCOUNT INCIDENT TO DI-
VORCE.—The transfer of an individual’s interest in 
an individual investment account to his former 
spouse under a divorce decree or under a written in-
strument incident to a divorce shall not be consid-
ered a taxable transfer made by such individual not-
withstanding any other provision of this subtitle, and 
such interest at the time of the transfer shall be 
treated as an individual investment account of such 
spouse and not of such individual. Thereafter such 
account shall be treated, for purposes of this sub-
title, as maintained for the benefit of such spouse.
‘‘(d) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION FROM TAX.—An individual in-
vestment account shall be exempt from taxation 
under this subtitle unless such account has ceased to 
be such an account by reason of paragraph (2). Not-
withstanding the preceding sentence, any such ac-
count shall be subject to the taxes imposed by sec-
tion 511 (relating to imposition of tax on unrelated 
business income of charitable, etc. organizations). 
‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE 
INDIVIDUAL
ENGAGES
IN
PROHIBITED
TRANS-
ACTION.—
‘‘(A) IN GENERAL.—If, during any taxable 
year of the individual for whose benefit the indi-
vidual investment account is established, that 
individual engages in any transaction prohibited 
by section 4975 with respect to the account, the 
account shall cease to be an individual invest-
ment account as of the first day of that taxable 
year. 
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING 
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be an individual investment ac-
count by reason of subparagraph (A) on the 
first day of any taxable year, paragraph (1) of 
subsection (c) shall be applied as if there were
a distribution on such first day in an amount 
equal to the fair market value (on such first 
day) of all assets in the account (on such first 
day). 
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, an individual for 
whose benefit an individual investment account is es-
tablished uses the account or any portion thereof as 
security for a loan, the portion so used shall be 
treated as distributed to that individual. 
‘‘(4) ROLLOVER
CONTRIBUTIONS.—Subsection 
(c)(1) shall not apply to any amount paid or distrib-
uted out of an individual investment account to the 
individual for whose benefit the account is main-
tained if such amount is paid into another individual 
investment account for the benefit of such individual 
not later than the 60th day after the day on which 
he receives the payment or distribution. 
‘‘(e) COST-OF-LIVING ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in a calendar year after 2003, the 
$15,000 amount contained in subsection (c)(2)(B) 
shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(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 2002’ 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 (18) the following new para-
graph: 
‘‘(19) INDIVIDUAL INVESTMENT ACCOUNT CON-
TRIBUTIONS.—The deduction allowed by section 223 
(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 the 
value of any individual investment account (as defined in
section 223(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 223(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
(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, 2002.
Æ