I
105TH CONGRESS
1ST SESSION
H. R. 1682
To amend the Internal Revenue Code of 1986 to provide for an exclusion
of capital gains upon the sale of a principal residence.
IN THE HOUSE OF REPRESENTATIVES
MAY 20, 1997
Mr. BLUMENAUER 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 provide
for an exclusion of capital gains upon 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 OF GAIN ON 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 ON 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
2 years or more.
‘‘(b) DOLLAR LIMITATION.—
‘‘(1) IN GENERAL.—The amount of the gain ex-
cluded from gross income under subsection (a) shall
not exceed $250,000 ($500,000 in the case of a joint
return where both spouses meet the holding and use
requirements of subsection (a)).
‘‘(2) INFLATION ADJUSTMENT.—
‘‘(A) IN GENERAL.—In the case of a tax-
able year beginning in a calendar year after
1997, the $250,000 and $500,000 amounts
contained in paragraph (1) shall each be in-
creased by an amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment
under section 1(f)(3) for the calendar year
in which the taxable year begins, deter-
mined by substituting ‘calendar year 1996’
for ‘calendar year 1992’ in subparagraph
(B) thereof.
‘‘(B) ROUNDING.—If any amount as ad-
justed under subparagraph (A) is not a multiple
of $100, such amount shall be rounded to the
nearest multiple of $100.
‘‘(c) 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 2 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
SECTIONS
1033
AND
1034.—–In applying sections 1033 (relating to invol-
untary conversions) and 1034 (relating to sale or ex-
change of residence), the amount realized from the
sale or exchange of property shall be treated as
being the amount determined without regard to this
section.
‘‘(8) PROPERTY
ACQUIRED
AFTER
INVOLUN-
TARY
CONVERSION.—If the basis of the property
sold or exchanged is determined (in whole or in
or exchange of a principal residence, this section shall not
apply to such sale or exchange.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (3) of section 1033(k) is amend-
ed to read as follows:
‘‘(3) For exclusion from gross income of gain
from involuntary conversion of principal residence,
see section 121.’’
(2) Subparagraph (A) of section 1038(e)(1) 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 the follow-
ing: ‘‘(relating to gain on sale of principal resi-
dence)’’.
(3) subparagraph (B) of section 1250(d)(7) is
amended to read as follows:
‘‘(B) property in respect of which the tax-
payer meets the ownership requirements of sec-
tion 121, but only to the extent that the tax-
payer meets the use requirements of such sec-
tion in respect of such property.’’
(4) Subsection (c) of section 6012 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)’’.
(5) The item relating to section 121 in the table
of sections for part III of subchapter B of chapter
1 is amended to read as follows:
‘‘Sec. 121. Exclusion of gain from sale of principal residence.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales and exchanges on or after
the date of the enactment of this Act.
Æ