[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5063 Referred in Senate (RFS)]

  2d Session
                                H. R. 5063


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                   IN THE SENATE OF THE UNITED STATES

                July 11 (legislative day, July 10), 2002

     Received; read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 AN ACT


 
 To amend the Internal Revenue Code of 1986 to provide a special rule 
 for members of the uniformed services in determining the exclusion of 
  gain from the sale of a principal residence and to restore the tax 
 exempt status of death gratuity payments to members of the uniformed 
                               services.

    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 ``Armed Forces Tax Fairness Act of 
2002''.

SEC. 2. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES IN DETERMINING 
              EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE.

    (a) In General.--Subsection (d) of section 121 of the Internal 
Revenue Code of 1986 (relating to exclusion of gain from sale of 
principal residence) is amended by adding at the end the following new 
paragraph:
            ``(9) Members of uniformed services.--
                    ``(A) In general.--At the election of an individual 
                with respect to a property, the running of the 5-year 
                period described in subsection (a) with respect to such 
                property shall be suspended during any period that such 
                individual or such individual's spouse is serving on 
                qualified official extended duty as a member of the 
                uniformed services.
                    ``(B) Maximum period of suspension.--The 5-year 
                period described in subsection (a) shall not be 
                extended more than 5 years by reason of subparagraph 
                (A).
                    ``(C) Qualified official extended duty.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `qualified 
                        official extended duty' means any extended duty 
                        while serving at a duty station which is at 
                        least 250 miles from such property or while 
                        residing under Government orders in Government 
                        quarters.
                            ``(ii) Uniformed services.--The term 
                        `uniformed services' has the meaning given such 
                        term by section 101(a)(5) of title 10, United 
                        States Code, as in effect on the date of the 
                        enactment of this paragraph.
                            ``(iii) Extended duty.--The term `extended 
                        duty' means any period of active duty pursuant 
                        to a call or order to such duty for a period in 
                        excess of 180 days or for an indefinite period.
                    ``(D) Special rules relating to election.--
                            ``(i) Election limited to 1 property at a 
                        time.--An election under subparagraph (A) with 
                        respect to any property may not be made if such 
                        an election is in effect with respect to any 
                        other property.
                            ``(ii) Revocation of election.--An election 
                        under subparagraph (A) may be revoked at any 
                        time.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to elections made after the date of the enactment of this Act for 
suspended periods under section 121(d)(9) of the Internal Revenue Code 
of 1986 (as added by this section) beginning after such date.

SEC. 3. RESTORATION OF FULL EXCLUSION FROM GROSS INCOME OF DEATH 
              GRATUITY PAYMENT.

    (a) In General.--Subsection (b)(3) of section 134 of the Internal 
Revenue Code of 1986 (relating to certain military benefits) is amended 
by adding at the end the following new subparagraph:
                    ``(C) Exception for death gratuity adjustments made 
                by law.--Subparagraph (A) shall not apply to any 
                adjustment to the amount of death gratuity payable 
                under chapter 75 of title 10, United States Code, which 
                is pursuant to a provision of law enacted before 
                December 31, 1991.''.
    (b) Conforming Amendment.--Subparagraph (A) of section 134(b)(3) of 
such Code is amended by striking ``subparagraph (B)'' and inserting 
``subparagraphs (B) and (C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to deaths occurring after September 10, 2001.

            Passed the House of Representatives July 9, 2002.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.

                            By Martha C. Morrison,

                                                          Deputy Clerk.