[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3394 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 3394

To amend the Internal Revenue Code of 1986 to provide individuals with 
an election to reduce the basis of depreciable real property in lieu of 
                   gain recognition on such property.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 16, 1999

 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 provide individuals with 
an election to reduce the basis of depreciable real property in lieu of 
                   gain recognition on such property.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Real Estate Flexibility Act of 
1999''.

SEC. 2. ELECTION TO REDUCE BASIS IN LIEU OF GAIN RECOGNITION ON 
              DISPOSITION BY INDIVIDUALS OF DEPRECIABLE REAL PROPERTY.

    (a) In General.--Section 1001 of the Internal Revenue Code of 1986 
(relating to the determination of amount of and recognition of gain or 
loss) is amended by adding the following new subsection:
    ``(f) Election To Reduce Basis and Exclude Portion of Debt 
Assumption.--
            ``(1) In general.--In the case of an individual, if--
                    ``(A) there is a disposition of real property 
                located in the United States and held by the taxpayer 
                for investment or used in a trade or business of the 
                taxpayer,
                    ``(B) such disposition is to an unrelated person, 
                and
                    ``(C) as part of such disposition, any amount of 
                qualified debt is discharged or is assumed by an 
                unrelated person,
        the taxpayer may elect to reduce the amount realized on such 
        disposition by the amount described in subparagraph (C).
            ``(2) Limitation.--The amount of the reduction under 
        paragraph (1) shall not exceed the amount which would result in 
        the tax imposed by section 1 on the disposition being below the 
        aggregate amount of money and marketable securities (and other 
        property that is readily convertible into, or exchangeable, for 
        money or marketable securities) received by the taxpayer as 
        consideration for such disposition.
            ``(3) Basis reduction.--
                    ``(A) In general.--The amount of the reduction 
                under this subsection with respect to any disposition 
                during a taxable year shall be applied to reduce the 
                basis of depreciable real property located in the 
                United States and held by the taxpayer at the beginning 
                of the succeeding taxable year.
                    ``(B) Depreciable real property.--For purposes of 
                this paragraph, the term `depreciable real property' 
                means--
                            ``(i) any real property of a character 
                        subject to the allowance for depreciation, but 
                        only if the basis reduction will reduce the 
                        amount of depreciation or amortization that 
                        otherwise would be allowable for the period 
                        immediately following such reduction, and
                            ``(ii) any interest in a partnership to the 
                        extent such interest would be described in 
                        section 1017(a)(3)(C) if such section only 
                        referred to property described in clause (i) of 
                        this subparagraph.
                    ``(C) Manner of reduction.--The manner in which 
                basis is reduced under this subsection shall be the 
                same as under section 1017.
            ``(4) Qualified debt.--For purposes of paragraph (1), the 
        term `qualified debt' means, with respect to any property, 
        indebtedness secured by such property throughout the 2-year 
        period ending on the date of the disposition of such property 
        but only if such indebtedness is taken into account in 
        determining the amount realized on the disposition. 
        Indebtedness secured by such property which results from the 
        refinancing of indebtedness securing such property shall be 
        treated as a continuation of the prior indebtedness but only to 
        the extent that the amount of the indebtedness resulting from 
        such refinancing does not exceed the amount of the refinanced 
        indebtedness.
            ``(5) Unrelated person.--For purposes of this subsection, 
        persons are unrelated unless their relationship is described in 
        section 267(b) or 707(b).
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations as are necessary to apply this subsection to 
        dispositions made by partnerships and S corporations.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to dispositions occurring on or after the date of the enactment of this 
Act.
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