[Federal Register Volume 67, Number 247 (Tuesday, December 24, 2002)]
[Proposed Rules]
[Pages 78398-78399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32279]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-138882-02]
RIN 1545-BB01


Reduced Maximum Exclusion of Gain From Sale or Exchange of 
Principal Residence

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations relating to 
the reduced maximum exclusion available to certain taxpayers who sell 
or exchange their principal residence but who have not owned and used 
the property as their principal residence for two years of the 
preceding five years or who have excluded gain on a previous sale or 
exchange within the last two years. The text of those regulations also 
serves as the text of these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by March 24, 2003.

ADDRESSES: Send submissions to: CC:ITA:RU (REG-138882-02), room 5226, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand delivered Monday through Friday 
between the hours of 8 a.m. and 4 p.m. to: CC:ITA:RU (REG-138882-02), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Ave., NW., 
Washington, DC. Alternatively, taxpayers may submit electronic comments 
directly to the IRS Internet site at www.irs.gov/regs.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Sara Paige 
Shepherd, (202) 622-4960; concerning submissions of comments and/or 
requests for a hearing, LaNita Van Dyke, (202) 622-7180 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    Temporary regulations in the Rules and Regulation section of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
part 1) under section 121(c) of the Internal Revenue Code (Code). The 
temporary regulations provide rules for a reduced maximum exclusion of 
gain from the sale or exchange of the principal residence of a taxpayer 
who is not entitled to the full maximum exclusion under section 121(a) 
because the taxpayer has not owned and used the property as the 
taxpayer's principal residence for two years of the preceding five 
years or has excluded gain under section 121 on a previous sale or 
exchange within the last two years. The text of those temporary 
regulations also serves as the text of these proposed regulations. The 
preamble to the temporary regulations explains the amendments.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It also has 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based upon the fact that the regulations do not impose a collection of 
information and apply only to individuals. Therefore, a Regulatory 
Flexibility Analysis under the Regulatory Flexibility Act (5 U. S. C. 
chapter 6) is not required. Pursuant to section 7508(f) of the Code, 
this notice of proposed rulemaking will be submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and Treasury Department specifically request 
comments on the clarity of the proposed rules and how they may be made 
easier to understand.

[[Page 78399]]

All comments will be available for public inspection and copying. A 
public hearing may be scheduled if requested by any person that timely 
submits written comments. If a public hearing is scheduled, notice of 
the date, time, and place for the public hearing will be published in 
the Federal Register.

Drafting Information

    The principal author of these regulations is Sara Paige Shepherd, 
Office of Associate Chief Counsel (Income Tax and Accounting). However, 
other personnel from the IRS and the Treasury Department participated 
in the development of the regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read as 
follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. In Sec.  1.121-3, paragraphs (b) through (f), (h), (k), and 
(l) are revised to read as follows:


Sec.  1.121-3  Reduced maximum exclusion for taxpayers failing to meet 
certain requirements.

    [The text of proposed paragraphs (b) through (f), (h), (k), and (l) 
of Sec.  1.121-3 is the same as the text of paragraphs (b) through (f), 
(h), (k), and (l) of Sec.  1.121-3T published elsewhere in this issue 
of the Federal Register.]

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
[FR Doc. 02-32279 Filed 12-23-02; 8:45 am]
BILLING CODE 4830-01-P