[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3803 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 3803

 To amend the Internal Revenue Code of 1986 to allow certain surviving 
spouses to exclude up to $500,000 of gain from the sale of a principal 
                               residence.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 15, 2005

Mrs. McCarthy 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 allow certain surviving 
spouses to exclude up to $500,000 of gain from the sale of a principal 
                               residence.

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

SECTION 1. INCREASED EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE 
              FOR CERTAIN SURVIVING SPOUSES.

    (a) In General.--Subsection (b) of section 121 of the Internal 
Revenue Code of 1986 (relating to the exclusion of gain from the sale 
of a principal residence) is amended by redesignating paragraph (3) as 
paragraph (4) and by inserting after paragraph (2) the following new 
paragraph:
            ``(3) Special rules for surviving spouses.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (C) and (D), in the case of a sale or 
                exchange of property by an unmarried individual whose 
                spouse is deceased on the date of the sale or exchange, 
                paragraph (1) shall, at the election of such 
                individual, be applied by substituting `$500,000' for 
                `$250,000' if--
                            ``(i) such individual remains unmarried at 
                        all times after the date of death of such 
                        spouse and before the date of the sale or 
                        exchange,
                            ``(ii) the sale or exchange occurs before 
                        the close of the second calendar year ending 
                        after the date of death of such spouse, and
                            ``(iii) the requirements of paragraph 
                        (2)(A) would have been met if such property had 
                        been sold immediately before the death of such 
                        spouse.
                    ``(B) Other surviving spouses.--Except as provided 
                in subparagraphs (C) and (D), if the unmarried 
                individual would have met the requirements of 
                subparagraph (A) but for failure to meet the 
                requirements of subparagraph (A)(iii), then the 
                limitation under paragraph (1) shall be the the sum of 
                the limitations under paragraph (1) to which such 
                individual and such spouse would be entitled had they 
                not been married. For purposes of the preceding 
                sentence, such individual and spouse shall be treated 
                as owning the property during the period that either of 
                them owned the property, and subsection (d)(2) shall 
                not apply.
                    ``(C) Maximum exclusion limited to net unrealized 
                gain at death.--The limitations determined under 
                subparagraphs (A) and (B) shall not exceed the excess 
                of--
                            ``(i) the fair market value of the property 
                        on the date of the decedent's death, over
                            ``(ii) the adjusted basis of such property 
                        on such date (determined without regard to any 
                        adjustment under section 1014).
                    ``(D) Maximum exclusion reduced by basis step-up at 
                death.--The limitations determined under subparagraphs 
                (A) and (B), after the application of subparagraph (C), 
                shall be reduced (but not below $250,000) by any 
                increase in the adjusted basis of such property under 
                section 1014 on account of the decedent's death.''.
    (b) Conforming Amendments.--
            (1) Clause (iii) of section 121(b)(2)(A) of such Code is 
        amended by striking ``paragraph (3)'' and inserting ``paragraph 
        (4)''.
            (2) Paragraph (1) of Section 121(c) of such Code is amended 
        by striking ``subsection (b)(3)'' and inserting ``subsection 
        (b)(4)'' and by striking ``paragraph (1) or (2)'' and inserting 
        ``paragraph (1), (2), or (3)''.
            (3) Clause (ii) of section 121(c)(2)(A) by striking 
        ``subsection (b)(3)'' and inserting ``subsection (b)(4)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales and exchanges after December 31, 2005, in taxable years 
ending after such date.
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