I
104TH CONGRESS
1ST SESSION
H. R. 1215
To amend the Internal Revenue Code of 1986 to strengthen the American
family and create jobs.
IN THE HOUSE OF REPRESENTATIVES
MARCH 13, 1995
Mr. ARCHER 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 strengthen
the American family and create jobs.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Contract With America Tax Relief Act of 1995’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; amendment of 1986 Code.
TITLE I—AMERICAN DREAM RESTORATION
Sec. 101. Family tax credit.
Sec. 102. Credit to reduce marriage penalty.
Sec. 103. Establishment of American dream savings accounts.
Sec. 104. Spousal IRA computed on basis of compensation of both spouses.
TITLE II—SENIOR CITIZENS’ EQUITY
Subtitle A—Repeal of Increase in Tax on Social Security Benefits
Sec. 201. Repeal of increase in tax on Social Security benefits.
Subtitle B—Treatment of Long-term Care Insurance and Services
Sec. 211. Treatment of long-term care insurance.
Sec. 212. Qualified long-term care services treated as medical care.
Sec. 213. Certain exchanges of life insurance contracts for long-term care in-
surance contracts not taxable.
Sec. 214. Exclusion from gross income for amounts withdrawn from certain re-
tirement plans for long-term care insurance.
Subtitle C—Treatment of Accelerated Death Benefits
Sec. 221. Treatment of accelerated death benefits by recipient.
Sec. 222. Tax treatment of companies issuing qualified accelerated death bene-
fit riders.
Subtitle D—Inclusion in Gross Income of Excess Long-term Care Benefits
Sec. 231. Inclusion in income of excess long-term care benefits.
Sec. 232. Reporting requirements.
TITLE III—JOB CREATION AND WAGE ENHANCEMENT
Subtitle A—Capital Gains Reform
PART I—CAPITAL GAINS REDUCTION FOR TAXPAYERS OTHER THAN
CORPORATIONS
Sec. 301. Capital gains deduction.
Sec. 302. Indexing of certain assets acquired after December 31, 1994, for pur-
poses of determining gain.
PART II—CAPITAL GAINS REDUCTION FOR CORPORATIONS
Sec. 311. Reduction of alternative capital gain tax for corporations.
PART III—CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO SALE
OR EXCHANGE OF PRINCIPAL RESIDENCE
Sec. 316. Capital loss deduction allowed with respect to sale or exchange of
principal residence.
Subtitle B—Cost Recovery Provisions
Sec. 321. Depreciation adjustment for certain property placed in service after
December 31, 1994.
Sec. 322. Treatment of abandonment of lessor improvements at termination of
lease.
Subtitle C—Alternative Minimum Tax Relief
Sec. 331. Phaseout of application of alternative minimum tax to corporations.
Subtitle D—Public Debt Reduction Checkoff and Trust Fund
Sec. 341. Designation of amounts for reduction of public debt.
Sec. 342. Public Debt Reduction Trust Fund.
Subtitle E—Small Business Incentives
Sec. 351. Cost-of-living adjustments relating to estate and gift tax provisions.
Sec. 352. Increase in expense treatment for small businesses.
Sec. 353. Clarification of treatment of home office use for administrative and
management activities.
Sec. 354. Treatment of storage of product samples.
TITLE IV—FAMILY REINFORCEMENT
Sec. 401. Credit for adoption expenses.
Sec. 402. Credit for taxpayers with certain persons requiring custodial care in
their households.
TITLE V—SOCIAL SECURITY EARNINGS TEST
Sec. 501. Adjustments in monthly exempt amount for purposes of the Social
Security earnings test.
TITLE VI—TECHNICAL CORRECTIONS
Sec. 601. Coordination with other titles.
Sec. 602. Amendments related to Revenue Reconciliation Act of 1990.
Sec. 603. Amendments related to Revenue Reconciliation Act of 1993.
Sec. 604. Miscellaneous provisions.
TITLE I—AMERICAN DREAM
RESTORATION
SEC. 101. FAMILY TAX CREDIT.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 22 the following new section:
‘‘SEC. 23. FAMILY TAX CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to $500 multiplied
by the number of qualifying children of the taxpayer.
‘‘(b) LIMITATION.—The amount of credit which
would (but for this subsection) be allowed by subsection
(a) shall be reduced (but not below zero) by an amount
which bears the same ratio to such amount of credit as—
‘‘(1) the excess (if any) of the taxpayer’s ad-
justed gross income (determined without regard to
sections 911, 931, and 933) over $200,000, bears to
‘‘(2) an amount equal to 100 times the dollar
amount in effect under subsection (a) for the taxable
year.
‘‘(c) QUALIFYING CHILD.—For purposes of this sec-
tion—
‘‘(1) IN GENERAL.—The term ‘qualifying child’
means any individual if—
‘‘(A) the taxpayer is allowed a deduction
under section 151 with respect to such individ-
ual for such taxable year,
‘‘(B) such individual has not attained the
age of 18 as of the close of the calendar year
in which the taxable year of the taxpayer be-
gins, and
‘‘(C) such individual bears a relationship to
the taxpayer described in section 32(c)(3)(B)
(determined without regard to clause (ii) there-
of).
‘‘(2) EXCEPTION FOR CERTAIN NONCITIZENS.—
The term ‘qualifying child’ shall not include any in-
dividual who would not be a dependent if the first
sentence of section 152(b)(3) were applied without
regard to all that follows ‘resident of the United
States’.
‘‘(d) INFLATION ADJUSTMENTS.—
‘‘(1) IN GENERAL.—In the case of a taxable
year beginning in a calendar year after 1996, the
$500 and $200,000 amounts contained in sub-
sections (a) and (b) shall each 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, deter-
mined by substituting ‘calendar year 1995’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
‘‘(2) ROUNDING.—If any amount as adjusted
under paragraph (1) is not a multiple of $50, such
amount shall be rounded to the nearest multiple of
$50.
‘‘(e) CERTAIN OTHER RULES APPLY.—Rules similar
to the rules of subsections (d) and (e) of section 32 shall
apply for purposes of this section.’’
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of chapter
1 is amended by inserting after the item relating to section
22 the following new item:
‘‘Sec. 23. Family tax credit.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 102. CREDIT TO REDUCE MARRIAGE PENALTY.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 23 the following new section:
‘‘SEC. 24. CREDIT TO REDUCE MARRIAGE PENALTY.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a joint
return for the taxable year, there shall be allowed as a
credit against the tax imposed by this chapter for such
taxable year an amount equal to the marriage penalty re-
duction credit.
‘‘(b) LIMITATIONS.—
‘‘(1) DOLLAR
LIMITATION.—The amount of
credit allowed by subsection (a) for the taxable year
shall not exceed $145.
‘‘(2) CREDIT
DISALLOWED
FOR
INDIVIDUALS
CLAIMING SECTION 911, ETC.—No credit shall be al-
lowed under this section for any taxable year if ei-
ther spouse claims the benefits of section 911, 931,
or 933 for such taxable year.
‘‘(c) MARRIAGE PENALTY REDUCTION CREDIT.—For
purposes of this section—
‘‘(1) IN GENERAL.—The marriage penalty re-
duction credit is an amount equal to the excess (if
any) of—
‘‘(A) the joint tax amount of the taxpayer,
over
‘‘(B) the sum of the unmarried tax
amounts for each spouse.
‘‘(2) UNMARRIED TAX AMOUNT.—For purposes
of paragraph (1), the unmarried tax amount, with
respect to an individual, is the amount of tax which
would be imposed by section 1(c) if such individual’s
taxable income were equal to the excess (if any) of—
‘‘(A) such individual’s qualified earned in-
come for the taxable year, over
‘‘(B) the sum of—
‘‘(i) an amount equal to the basic
standard 
deduction 
under 
section
63(c)(2)(C) for the taxable year, plus
‘‘(ii) the exemption amount (as de-
fined in section 151(d)) for such taxable
year.
‘‘(3) JOINT
TAX
AMOUNT.—For purposes of
paragraph (1), the joint tax amount is the amount
of tax which would be imposed by section 1(a) if the
taxpayer’s taxable income were equal to the excess
(if any) of—
‘‘(A) the taxpayer’s qualified earned in-
come for the taxable year, over
‘‘(B) the sum of—
‘‘(i) an amount equal to the basic
standard 
deduction 
under 
section
63(c)(2)(A) for the taxable year, plus
‘‘(ii) an amount equal to twice the ex-
emption amount (as so defined) for such
taxable year.
‘‘(d) QUALIFIED EARNED INCOME.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘qualified earned
income’ means an amount equal to the excess (if
any) of—
‘‘(A) the earned income for the taxable
year, over
‘‘(B) an amount equal to the sum of the
deductions described in paragraphs (1), (2),
(6), (7), and (12) of section 62(a) to the extent
that such deductions are properly allocable to
or chargeable against earned income for such
taxable year.
The amount of qualified earned income shall be de-
termined without regard to any community property
laws.
‘‘(2) EARNED INCOME.—For purposes of para-
graph (1)—
‘‘(A) IN GENERAL.—The term ‘earned in-
come’ means income which is earned income
within the meaning of section 401(c)(2)(C) or
911(d)(2) (determined without regard to the
phrase ‘not in excess of 30 percent of his share
of the net profits of such trade or business’ in
subparagraph (B) thereof).
‘‘(B) EXCEPTION.—Such term shall not in-
clude any amount—
‘‘(i) not includible in gross income,
‘‘(ii) received as a pension or annuity,
‘‘(iii) paid or distributed out of an in-
dividual retirement plan (within the mean-
ing of section 7701(a)(37)),
‘‘(iv) received as deferred compensa-
tion, or
‘‘(v) received for services performed
by an individual in the employ of the
spouse (within the meaning of section
3121(b)(3)(A)).
‘‘(e) AMOUNT
OF CREDIT TO BE DETERMINED
UNDER TABLES.—
‘‘(1) IN GENERAL.—The amount of the credit
allowed by this section shall be determined under ta-
bles prescribed by the Secretary.
‘‘(2) REQUIREMENTS FOR TABLES.—The tables
prescribed under paragraph (1) shall reflect the pro-
visions of subsection (c) and shall round to the near-
est $25 any amount of credit which is less than the
maximum credit under subsection (b)(1).’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
23 the following new item:
‘‘Sec. 24. Credit to reduce marriage penalty.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 103. ESTABLISHMENT OF AMERICAN DREAM SAVINGS
ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to pension, profit-sharing, stock
bonus plans, etc.) is amended by inserting after section
408 the following new section:
‘‘SEC. 408A. AMERICAN DREAM SAVINGS ACCOUNTS.
‘‘(a) GENERAL RULE.—Except as provided in this
section, an American Dream Savings Account shall be
treated for purposes of this title in the same manner as
an individual retirement plan.
‘‘(b) AMERICAN DREAM SAVINGS ACCOUNT.—For
purposes of this title, the term ‘American Dream Savings
Account’ or ‘ADS account’ means an individual retirement
plan which is designated at the time of the establishment
of the plan as an American Dream Savings Account. Such
designation shall be made in such manner as the Secretary
may prescribe.
‘‘(c) CONTRIBUTION RULES.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to an ADS account.
‘‘(2) CONTRIBUTION LIMIT.—
‘‘(A) 
IN
GENERAL.—The 
aggregate
amount of contributions (other than rollover
contributions) for any taxable year to all ADS
accounts maintained for the benefit of an indi-
vidual shall not exceed the lesser of—
‘‘(i) $2,000, or
‘‘(ii) an amount equal to the com-
pensation includible in the individual’s
gross income for such taxable year.
‘‘(B) $4,000 LIMITATION FOR CERTAIN AD-
DITIONAL MARRIED INDIVIDUALS.—
‘‘(i) IN GENERAL.—In the case of an
individual to whom this subparagraph ap-
plies for the taxable year, the limitation of
subparagraph (A)(ii) shall be equal to the
sum of—
‘‘(I) the compensation includible
in such individual’s gross income for
the taxable year, plus
‘‘(II) the compensation includible
in the gross income of such individ-
ual’s spouse for the taxable year re-
duced by the amount of the limitation
under subparagraph (A) applicable to
such spouse for such taxable year.
‘‘(ii) INDIVIDUALS TO WHOM CLAUSE
(i) APPLIES.—Clause (i) shall apply to any
individual if—
‘‘(I) such individual files a joint
return for the taxable year, and
‘‘(II) the amount of compensa-
tion (if any) includible in such individ-
ual’s gross income for the taxable year
is less than the compensation includ-
ible in the gross income of such indi-
vidual’s spouse for the taxable year.
‘‘(C) ADJUSTMENT FOR INFLATION.—
‘‘(i) IN GENERAL.—In the case of a
taxable year beginning in a calendar year
after 1996, the $2,000 amount contained
in subparagraph (A) shall be increased by
an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment under section 1(f)(3) for the cal-
endar year in which the taxable year
begins, determined by substituting
‘calendar year 1995’ for ‘calendar
year 1992’ in subparagraph (B) there-
of.
‘‘(ii) ROUNDING.—If any amount as
adjusted under clause (i) is not a multiple
of $50, such amount shall be rounded to
the nearest multiple of $50.
‘‘(D) TAX ON EXCESS CONTRIBUTIONS.—
Section 4973 shall be applied separately with
respect to individual retirement plans which are
ADS accounts and individual retirement plans
which are not ADS accounts; except that, for
purposes of applying such section with respect
to individual retirement plans which are ADS
accounts, excess contributions shall be consid-
ered to be any amounts in excess of the limita-
tion under subsection (c)(2)(A).
‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE
701⁄2.—Contributions to an ADS account may be
made even after the individual for whom the account
is maintained has attained age 701⁄2.
‘‘(4) MANDATORY
DISTRIBUTION
RULES
NOT
TO APPLY, ETC.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), subsections (a)(6) and (b)(3)
of section 408 (relating to required distribu-
tions) and section 4974 (relating to excise tax
on certain accumulations in qualified retirement
plans) shall not apply to any ADS account.
‘‘(B) POST-DEATH DISTRIBUTIONS.—Rules
similar to the rules of section 401(a)(9) (other
than subparagraph (A) thereof) shall apply for
purposes of this section.
‘‘(5) LIMITATIONS
ON
ROLLOVER
CONTRIBU-
TIONS.—No rollover contribution may be made to an
ADS account unless—
‘‘(A) such contribution is from another
ADS account, or
‘‘(B) such contribution is from an individ-
ual retirement plan (other than an ADS ac-
count) and is made before January 1, 1998.
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) GENERAL RULES.—
‘‘(A) EXCLUSION FROM GROSS INCOME.—
No portion of a qualified distribution from an
ADS account shall be includible in gross in-
come.
‘‘(B) EXCEPTION FROM PENALTY TAX.—
Section 72(t) shall not apply to—
‘‘(i) any qualified distribution from an
ADS account, and
‘‘(ii) any qualified special purpose dis-
tribution (whether or not a qualified dis-
tribution) from an ADS account.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ means any payment or distribu-
tion—
‘‘(i) made on or after the date on
which the individual attains age 591⁄2,
‘‘(ii) made to a beneficiary (or to the
estate of the individual) on or after the
death of the individual,
‘‘(iii) attributable to the individual’s
being disabled (within the meaning of sec-
tion 72(m)(7)), or
‘‘(iv) which is a qualified special pur-
pose distribution.
‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—
No payment or distribution shall be treated as
a qualified distribution if—
‘‘(i) it is made within the 5-taxable
year period beginning with the 1st taxable
year for which the individual made a con-
tribution to an ADS account (or such indi-
vidual’s spouse made a contribution to an
ADS account) established for such individ-
ual, or
‘‘(ii) in the case of a payment or dis-
tribution properly allocable to a rollover
contribution (or income allocable thereto),
it is made within 5 years after the date on
which such rollover contribution was made,
as determined under regulations prescribed
by the Secretary.
Clause (ii) shall not apply to a rollover con-
tribution from an ADS account.
‘‘(3) INCOME INCLUSION FOR ROLLOVERS FROM
NON-ADS ACCOUNTS.—In the case of any amount
paid or distributed out of an individual retirement
plan (other than an ADS account) which is paid into
an ADS account (established for the benefit of the
payee or distributee, as the case may be) before the
close of the 60th day after the day on which the
payment or distribution is received—
‘‘(A) sections 72(t) and 408(d)(3) shall not
apply, and
‘‘(B) any amount required to be included
in gross income by reason of this paragraph
shall be so included ratably over the 4-taxable
year period beginning with the taxable year in
which the payment or distribution is made.
‘‘(e) QUALIFIED
SPECIAL
PURPOSE
DISTRIBU-
TION.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified special purpose distribution’
means any payments or distributions from an ADS
account to the individual for whose benefit such ac-
count is established—
‘‘(A) if such payments or distributions are
qualified first-time homebuyer distributions, or
‘‘(B) to the extent such payments or dis-
tributions do not exceed—
‘‘(i) the qualified higher education ex-
penses of the taxpayer for the taxable year
in which received, and
‘‘(ii) the qualified medical expenses of
the taxpayer for the taxable year in which
received.
‘‘(2) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified first-time home-
buyer distribution’ means any payment or dis-
tribution received by an individual to the extent
such payment or distribution is used by the in-
dividual before the close of the 60th day after
the day on which such payment or distribution
is received to pay qualified acquisition costs
with respect to a principal residence for such
individual as a first-time homebuyer.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if such individual (and, if married,
such individual’s spouse) had no present
ownership interest in a principal residence
during the 3-year period ending on the
date of acquisition of the principal resi-
dence to which this paragraph applies.
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which a binding contract
to construct or reconstruct such a
principal residence is entered into.
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—If any payment or distribution out
of an ADS account fails to meet the require-
ments of subparagraph (A) solely by reason of
a delay or cancellation of the purchase, con-
struction, or reconstruction of the residence, the
amount of the payment or distribution may be
contributed to an ADS account as provided in
subsection (d)(3)(A)(i) of section 408 (deter-
mined by substituting ‘120th day’ for ‘60th
day’ in such subsection), except that—
‘‘(i) subsection (d)(3)(B) of such sec-
tion shall not be applied to such contribu-
tion, and
‘‘(ii) such amount shall not be taken
into account in determining whether sub-
section (d)(3)(A)(i) of such section applies
to any other amount.
‘‘(3) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition, fees,
books, supplies, and equipment required for the
enrollment or attendance of—
‘‘(i) the taxpayer,
‘‘(ii) the taxpayer’s spouse, or
‘‘(iii) the taxpayer’s child (as defined
in section 151(c)(3)) or grandchild,
at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.
‘‘(4) QUALIFIED MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified medical ex-
penses’ means any amounts paid during the
taxable year, not compensated for by insurance
or otherwise, for medical care (as defined in
section 213(d)) of the taxpayer, his spouse, or
a dependent (as defined in section 152).
‘‘(B) LONG-TERM CARE INSURANCE PRE-
MIUMS TREATED AS MEDICAL EXPENSES.—For
purposes 
of 
subparagraph 
(A), 
section
213(d)(1)(C) shall not apply but the term
‘qualified medical expenses’ shall include pre-
miums for long-term care insurance (as defined
in section 7702B(b)) for coverage of the tax-
payer or his spouse.
‘‘(f) OTHER DEFINITIONS.—For purposes of this sec-
tion—
‘‘(1) ROLLOVER
CONTRIBUTIONS.—The term
‘rollover contributions’ means contributions de-
scribed in sections 402(c), 403(a)(4), 403(b)(8), or
408(d)(3).
‘‘(2) COMPENSATION.—The term ‘compensa-
tion’ has the meaning given such term by section
219(f).’’
(b) TERMINATION OF NONDEDUCTIBLE IRA CON-
TRIBUTIONS.—
(1) Section 408(o) is amended by adding at the
end the following new paragraph:
‘‘(5) TERMINATION.—This subsection shall not
apply to any designated nondeductible contribution
for any taxable year beginning after December 31,
1995.’’
(2) Section 219(f) of is amended by striking
paragraph (7).
(c) EXCESS DISTRIBUTIONS TAX NOT TO APPLY.—
Subparagraph (B) of section 4980A(e)(1) is amended by
inserting ‘‘other than an ADS account (as defined in sec-
tion 408A(b))’’ after ‘‘retirement plan’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart A of part I of subchapter D of chapter 1 is
amended by inserting after the item relating to section
408 the following new item:
‘‘Sec. 408A. American Dream Savings Accounts.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 104. SPOUSAL IRA COMPUTED ON BASIS OF COM-
PENSATION OF BOTH SPOUSES.
(a) IN GENERAL.—Subsection (c) of section 219 (re-
lating to special rules for certain married individuals) is
amended to read as follows:
‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI-
VIDUALS.—
‘‘(1) IN GENERAL.—In the case of an individual
to whom this paragraph applies for the taxable year,
the limitation of subsection (b)(1) shall be equal to
the lesser of—
‘‘(A) $2,000, or
‘‘(B) the sum of—
‘‘(i) the compensation includible in
such individual’s gross income for the tax-
able year, plus
‘‘(ii) the compensation includible in
the gross income of such individual’s
spouse for the taxable year reduced by the
amount allowable as a deduction under
subsection (a) to such spouse for such tax-
able year.
‘‘(2) INDIVIDUALS
TO
WHOM
PARAGRAPH
(1)
APPLIES.—Paragraph (1) shall apply to any individ-
ual if—
109
inserting after subsection (b) the following new
subsection:
‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes
of this section—
‘‘(1) IN
GENERAL.—The applicable credit
amount is the amount of the tentative tax which
would be determined under the rate schedule set
forth in section 2001(c) if the amount with respect
to which such tentative tax is to be computed were
the applicable exclusion amount determined in ac-
cordance with the following table:
‘‘In the case of estates of decedents
The applicable
dying, and gifts made, during:
exclusion amount is:
1996 .......................................................................
$700,000 
1997 .......................................................................
$725,000 
1998 or thereafter .................................................
$750,000.
‘‘(2) COST-OF-LIVING
ADJUSTMENTS.—In the
case of any decedent dying, and gift made, in a cal-
endar year after 1998, the $750,000 amount set
forth in paragraph (1) shall be increased by an
amount equal to—
‘‘(A) $750,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 1997’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
116
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
SEC. 354. TREATMENT OF STORAGE OF PRODUCT SAMPLES.
(a) IN GENERAL.—Paragraph (2) of section 280A(c)
is amended by striking ‘‘inventory’’ and inserting ‘‘inven-
tory or product samples’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
TITLE IV—FAMILY
REINFORCEMENT
SEC. 401. CREDIT FOR ADOPTION EXPENSES.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by inserting after sec-
tion 25 the following new section:
‘‘SEC. 25A. ADOPTION EXPENSES.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this chapter for the taxable year the amount
of the qualified adoption expenses paid or incurred by the
taxpayer during such taxable year.
‘‘(b) LIMITATIONS.—
‘‘(1) DOLLAR
LIMITATION.—The aggregate
amount of qualified adoption expenses which may be