[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4993 Introduced in House (IH)]

  2d Session
                                H. R. 4993

To amend the Internal Revenue Code of 1986 to exclude from gross income 
   gain from the sale of securities which are used to pay for higher 
                          education expenses.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 27, 2000

   Mr. Knollenberg (for himself, Mr. Horn, Mr. McHugh, and Mr. Camp) 
 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 gross income 
   gain from the sale of securities which are used to pay for higher 
                          education expenses.

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

SECTION 1. EXCLUSION FROM GROSS INCOME FOR GAIN FROM SALE OF SECURITIES 
              USED TO PAY HIGHER EDUCATION EXPENSES.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 139 as section 
139A and by inserting after section 138 the following new section:

``SEC. 139. EXCLUSION FROM GROSS INCOME FOR GAIN FROM SALE OF 
              SECURITIES USED TO PAY HIGHER EDUCATION EXPENSES.

    ``(a) General Rule.--In the case of an individual who elects the 
application of this section and who pays qualified higher education 
expenses during the taxable year, no amount shall be includible in 
gross income by reason of the sale during such year of any qualified 
security.
    ``(b) Limitation Where Gain on Sale or Exchange Exceeds Higher 
Education Expenses.--
            ``(1) In general.--If--
                    ``(A) the aggregate gain on the sale of any 
                qualified securities by the taxpayer during the taxable 
                year exceeds
                    ``(B) the qualified higher education expenses paid 
                by the taxpayer during such taxable year,
        the amount excludable from gross income under subsection (a) 
        shall not exceed the applicable fraction of the amount 
        excludable from gross income under subsection (a) without 
        regard to this subsection.
            ``(2) Applicable fraction.--For purposes of subparagraph 
        (A), the term `applicable fraction' means the fraction the 
        numerator of which is the amount described in paragraph (1)(B) 
        and the denominator of which is the amount described in 
        paragraph (1)(A).
    ``(c) Definitions and Special Rule.--For purposes of this section--
            ``(1) Qualified security.--
                    ``(A) In general.--The term `qualified security' 
                means any security (as defined in section 1236(c)) 
                which is traded on an established securities market.
                    ``(B) Exception.--Such term shall not include any 
                security held in a qualified retirement plan (as 
                defined in section 4974(c)) or in an account or under 
                an arrangement which is exempt from tax under this 
                title.
            ``(2) Qualified higher education expenses.--The term 
        `qualified higher education expenses' has the meaning given 
        such term by section 530(b)(2), reduced by the amount of such 
        expenses taken into account for purposes of any other provision 
        of this chapter.
            ``(3) Exclusion not applicable to gain treated as ordinary 
        income.--This section shall not apply to any gain which is 
        treated as ordinary income for purposes of this subtitle.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by striking the item 
relating to section 139 and inserting the following new items:

                              ``Sec. 139. Exclusion from gross income 
                                        for gain from sale of 
                                        securities used to pay higher 
                                        education expenses.
                              ``Sec. 139A. Cross references to other 
                                        Acts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenses paid after December 31, 2000 (in taxable years 
beginning after such date), for education furnished in academic periods 
beginning after such date.
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