109 HR 3803 IH: 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. U.S. House of Representatives 2005-09-15 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 1st Session H. R. 3803 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.

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.