Internal Revenue Code:Sec. 121. Exclusion of gain from sale of principal residence
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART III - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
Statute
Sec. 121. Exclusion of gain from sale of principal residence
(a) Exclusion
Gross income shall not include gain from the sale or exchange of
property if, during the 5-year period ending on the date of the
sale or exchange, such property has been owned and used by the
taxpayer as the taxpayer's principal residence for periods
aggregating 2 years or more.
(b) Limitations
(1) In general
The amount of gain excluded from gross income under subsection
(a) with respect to any sale or exchange shall not exceed
$250,000.
(2) Special rules for joint returns
In the case of a husband and wife who make a joint return for
the taxable year of the sale or exchange of the property -
(A) $500,000 Limitation for certain joint returns
Paragraph (1) shall be applied by substituting ''$500,000''
for ''$250,000'' if -
(i) either spouse meets the ownership requirements of
subsection (a) with respect to such property;
(ii) both spouses meet the use requirements of subsection
(a) with respect to such property; and
(iii) neither spouse is ineligible for the benefits of
subsection (a) with respect to such property by reason of
paragraph (3).
(B) Other joint returns
If such spouses do not meet the requirements of subparagraph
(A), the limitation under paragraph (1) shall be the sum of the
limitations under paragraph (1) to which each spouse would be
entitled if such spouses had not been married. For purposes of
the preceding sentence, each spouse shall be treated as owning
the property during the period that either spouse owned the
property.
(3) Application to only 1 sale or exchange every 2 years
(A) In general
Subsection (a) shall not apply to any sale or exchange by the
taxpayer if, during the 2-year period ending on the date of
such sale or exchange, there was any other sale or exchange by
the taxpayer to which subsection (a) applied.
(B) Pre-May 7, 1997, sales not taken into account
Subparagraph (A) shall be applied without regard to any sale
or exchange before May 7, 1997.
(4) Special rule for certain sales by surviving spouses.--
In the case of a sale or exchange of property by an unmarried
individual whose spouse is deceased on the date of such sale,
paragraph (1) shall be applied by substituting `$500,000' for
`$250,000' if such sale occurs not later than 2 years after the
date of death of such spouse and the requirements of paragraph
(2)(A) were met immediately before such date of death.
(c) Exclusion for taxpayers failing to meet certain requirements
(1) In general
In the case of a sale or exchange to which this subsection
applies, the ownership and use requirements of subsection (a),
and subsection (b)(3), shall not apply; but the dollar limitation
under paragraph (1) or (2) of subsection (b), whichever is
applicable, shall be equal to -
(A) the amount which bears the same ratio to such limitation
(determined without regard to this paragraph) as
(B)(i) the shorter of -
(I) the aggregate periods, during the 5-year period ending
on the date of such sale or exchange, such property has been
owned and used by the taxpayer as the taxpayer's principal
residence; or
(II) the period after the date of the most recent prior
sale or exchange by the taxpayer to which subsection (a)
applied and before the date of such sale or exchange, bears
to
(ii) 2 years.
(2) Sales and exchanges to which subsection applies
This subsection shall apply to any sale or exchange if -
(A) subsection (a) would not (but for this subsection) apply
to such sale or exchange by reason of -
(i) a failure to meet the ownership and use requirements of
subsection (a), or
(ii) subsection (b)(3), and
(B) such sale or exchange is by reason of a change in place
of employment, health, or, to the extent provided in
regulations, unforeseen circumstances.
(d) Special rules
(1) Joint returns
If a husband and wife make a joint return for the taxable year
of the sale or exchange of the property, subsections (a) and (c)
shall apply if either spouse meets the ownership and use
requirements of subsection (a) with respect to such property.
(2) Property of deceased spouse
For purposes of this section, in the case of an unmarried
individual whose spouse is deceased on the date of the sale or
exchange of property, the period such unmarried individual owned
and used such property shall include the period such deceased
spouse owned and used such property before death.
(3) Property owned by spouse or former spouse
For purposes of this section -
(A) Property transferred to individual from spouse or former
spouse
In the case of an individual holding property transferred to
such individual in a transaction described in section 1041(a),
the period such individual owns such property shall include the
period the transferor owned the property.
(B) Property used by former spouse pursuant to divorce decree,
etc.
Solely for purposes of this section, an individual shall be
treated as using property as such individual's principal
residence during any period of ownership while such
individual's spouse or former spouse is granted use of the
property under a divorce or separation instrument (as defined
in section 71(b)(2)).
(4) Tenant-stockholder in cooperative housing corporation
For purposes of this section, if the taxpayer holds stock as a
tenant-stockholder (as defined in section 216) in a cooperative
housing corporation (as defined in such section), then -
(A) the holding requirements of subsection (a) shall be
applied to the holding of such stock, and
(B) the use requirements of subsection (a) shall be applied
to the house or apartment which the taxpayer was entitled to
occupy as such stockholder.
(5) Involuntary conversions
(A) In general
For purposes of this section, the destruction, theft,
seizure, requisition, or condemnation of property shall be
treated as the sale of such property.
(B) Application of section 1033
In applying section 1033 (relating to involuntary
conversions), the amount realized from the sale or exchange of
property shall be treated as being the amount determined
without regard to this section, reduced by the amount of gain
not included in gross income pursuant to this section.
(C) Property acquired after involuntary conversion
If the basis of the property sold or exchanged is determined
(in whole or in part) under section 1033(b) (relating to basis
of property acquired through involuntary conversion), then the
holding and use by the taxpayer of the converted property shall
be treated as holding and use by the taxpayer of the property
sold or exchanged.
(6) Recognition of gain attributable to depreciation
Subsection (a) shall not apply to so much of the gain from the
sale of any property as does not exceed the portion of the
depreciation adjustments (as defined in section 1250(b)(3))
attributable to periods after May 6, 1997, in respect of such
property.
(7) Determination of use during periods of out-of-residence care
In the case of a taxpayer who -
(A) becomes physically or mentally incapable of self-care,
and
(B) owns property and uses such property as the taxpayer's
principal residence during the 5-year period described in
subsection (a) for periods aggregating at least 1 year,
then the taxpayer shall be treated as using such property as the
taxpayer's principal residence during any time during such 5-year
period in which the taxpayer owns the property and resides in any
facility (including a nursing home) licensed by a State or
political subdivision to care for an individual in the taxpayer's
condition.
(8) Sales of remainder interests
For purposes of this section -
(A) In general
At the election of the taxpayer, this section shall not fail
to apply to the sale or exchange of an interest in a principal
residence by reason of such interest being a remainder interest
in such residence, but this section shall not apply to any
other interest in such residence which is sold or exchanged
separately.
(B) Exception for sales to related parties
Subparagraph (A) shall not apply to any sale to, or exchange
with, any person who bears a relationship to the taxpayer which
is described in section 267(b) or 707(b).
(9) Uniformed services, foreign service, and intelligence community
(A) In general.--At the election of an individual
with respect to a property, the running of the 5-year
period described in subsections (a) and (c)(1)(B) and
paragraph (7) of this subsection 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--
(i) as a member of the uniformed services,
(ii) as a member of the Foreign Service of the United States, or
(iii) as an employee of the intelligence community.
(B) Maximum period of suspension.--The 5-year
period described in subsection (a) shall not be extended
more than 10 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
50 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) Foreign service of the united
states.--The term `member of the Foreign Service
of the United States' has the meaning given the
term `member of the Service' by paragraph (1),
(2), (3), (4), or (5) of section 103 of the
Foreign Service Act of 1980, as in effect on the
date of the enactment of this paragraph.
(iv) Employee of intelligence community.--
The term `employee of the intelligence community'
means an employee (as defined by section 2105 of
title 5, United States Code) of--
(I) the Office of the Director of National Intelligence,
(II) the Central Intelligence Agency,
(III) the National Security Agency,
(IV) the Defense Intelligence Agency,
(V) the National Geospatial- Intelligence Agency,
(VI) the National Reconnaissance Office,
(VII) any other office within the Department of Defense
for the collection of specialized national intelligence
through reconnaissance programs,
(VIII) any of the intelligence elements of the Army, the Navy,
the Air Force, the Marine Corps, the Federal Bureau of
Investigation, the Department of Treasury, the Department of
Energy, and the Coast Guard,
(IX) the Bureau of Intelligence and Research of the Department
of State, or
(X) any of the elements of the Department of Homeland Security
concerned with the analyses of foreign intelligence information.
(v) 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 90 days or for an indefinite period.
(vi) Special rule relating to intelligence
community.--An employee of the intelligence
community shall not be treated as serving on
qualified extended duty unless such duty is at a
duty station located outside the United States.
(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.
(10) Property acquired in like-kind exchange.--If a
taxpayer acquires property in an exchange with respect to which
gain is not recognized (in whole or in part) to the taxpayer
under subsection (a) or (b) of section 1031, subsection (a)
shall not apply to the sale or exchange of such property by such
taxpayer (or by any person whose basis in such property is
determined, in whole or in part, by reference to the basis in
the hands of such taxpayer) during the 5-year period beginning
with the date of such acquisition.
(11) Property acquired from a decedent.--The exclusion
under this section shall apply to property sold by--
(A) the estate of a decedent,
(B) any individual who acquired such property from
the decedent (within the meaning of section 1022), and
(C) a trust which, immediately before the death of
the decedent, was a qualified revocable trust (as
defined in section 645(b)(1)) established by the
decedent, determined by taking into account the ownership
and use by the decedent.
(e) Denial of exclusion for expatriates
This section shall not apply to any sale or exchange by an
individual if the treatment provided by section 877(a)(1) applies
to such individual.
(f) Election to have section not apply
This section shall not apply to any sale or exchange with respect
to which the taxpayer elects not to have this section apply.
(g) Residences acquired in rollovers under section 1034
For purposes of this section, in the case of property the
acquisition of which by the taxpayer resulted under section 1034
(FOOTNOTE 1) (as in effect on the day before the date of the
enactment of this section) in the nonrecognition of any part of the
gain realized on the sale or exchange of another residence, in
determining the period for which the taxpayer has owned and used
such property as the taxpayer's principal residence, there shall be
included the aggregate periods for which such other residence (and
each prior residence taken into account under section 1223(6) in
determining the holding period of such property) had been so owned
and used.
(FOOTNOTE 1) See References in Text note below.
Sources
(Added Pub. L. 88-272, title II, Sec. 206(a), Feb. 26, 1964, 78
Stat. 38; amended Pub. L. 94-455, title XIV, Sec. 1404(a), title
XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1733, 1834; Pub.
L. 95-600, title IV, Sec. 404(a)-(c)(2), Nov. 6, 1978, 92 Stat.
2869, 2870; Pub. L. 97-34, title I, Sec. 123(a), Aug. 13, 1981, 95
Stat. 197; Pub. L. 100-647, title VI, Sec. 6011(a), Nov. 10, 1988,
102 Stat. 3691; Pub. L. 105-34, title III, Sec. 312(a), Aug. 5,
1997, 111 Stat. 836; Pub. L. 105-206, title VI, Sec. 6005(e)(1),
(2), July 22, 1998, 112 Stat. 805; Pub. L. 107-16, title V, Sec.
542(c), June 7, 2001, 115 Stat. 84.)
Amendment of Section
AMENDMENTS
2003 - Pub/ L. 108-121, Sec. 101, amends subsection (d) by
redesignating paragraph (9) and paragraphp (10) and inserting
new paragraph (9).
<<Effective date>>--The amendments made by this section
shall take effect as if included in the amendments made by
section 312 of the Taxpayer Relief Act of 1997.
<<Special Rule>> - Waiver of limitations.--If refund or credit of any
overpayment of tax resulting from the amendments made by this
section is prevented at any time before the close of the 1-year
period beginning on the date of the enactment of this Act by the
operation of any law or rule of law (including res judicata),
such refund or credit may nevertheless be made or allowed if
claim therefor is filed before the close of such period.
AMENDMENT OF SUBSECTION (D)
Pub. L. 107-16, title V, Sec. 542(c), (f)(1), title IX, Sec.
901, June 7, 2001, 115 Stat. 84, 86, 150, provided that,
applicable to estates of decedents dying after Dec. 31, 2009,
subsection (d) of this section is temporarily amended by adding
paragraph (9) at end to read as follows:
(9) Property acquired from a decedent
The exclusion under this section shall apply to property sold
by -
(A) the estate of a decedent,
(B) any individual who acquired such property from the
decedent (within the meaning of section 1022), and
(C) a trust which, immediately before the death of the
decedent, was a qualified revocable trust (as defined in
section 645(b)(1)) established by the decedent,
determined by taking into account the ownership and use by the
decedent.
See Effective and Termination Dates of 2001 Amendment note
below.
References in Text
REFERENCES IN TEXT
Section 1034 (as in effect on the day before the date of the
enactment of this section), referred to in subsec. (g), probably
means section 1034 of this title as in effect on the day before the
date of enactment of Pub. L. 105-34 which amended this section
generally and was approved Aug. 5, 1997. Section 1034 was repealed
by Pub. L. 105-34, title III, Sec. 312(b), Aug. 5, 1997, 111 Stat.
839.
Miscellaneous
PRIOR PROVISIONS
A prior section 121 was renumbered section 140 of this title.
AMENDMENTS
2007 - PL 110-142
SEC. 7. APPLICATION OF JOINT RETURN LIMITATION FOR CAPITAL GAINS
EXCLUSION TO CERTAIN POST-MARRIAGE SALES OF PRINCIPAL
RESIDENCES BY SURVIVING SPOUSES.
(a) Sale Within 2 Years of Spouse's Death.--Section 121(b) of the
Internal Revenue Code of 1986 (relating to limitations) is amended by
adding at the end the following new paragraph:
``(4) Special rule for certain sales by surviving spouses.--
In the case of a sale or exchange of property by an unmarried
individual whose spouse is deceased on the date of such sale,
paragraph (1) shall be applied by substituting `$500,000' for
`$250,000' if such sale occurs not later than 2 years after the
date of death of such spouse and the requirements of paragraph
(2)(A) were met immediately before such date of death.''.
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 417. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESIDENCE BY
CERTAIN EMPLOYEES OF THE INTELLIGENCE COMMUNITY.
(a) In General.--Subparagraph (A) of section 121(d)(9) (relating to
exclusion of gain from sale of principal residence) is amended by
striking ``duty'' and all that follows and inserting the following:
``duty--
``(i) as a member of the uniformed services,
``(ii) as a member of the Foreign Service of
the United States, or
``(iii) as an employee of the intelligence
community.''.
(b) Employee of Intelligence Community Defined.--Subparagraph (C) of
section 121(d)(9) is amended by redesignating clause (iv) as clause (v)
and by inserting after clause (iii) the following new clause:
``(iv) Employee of intelligence community.--
The term `employee of the intelligence community'
means an employee (as defined by section 2105 of
title 5, United States Code) of--
``(I) the Office of the Director of
National Intelligence,
``(II) the Central Intelligence
Agency,
``(III) the National Security
Agency,
``(IV) the Defense Intelligence
Agency,
``(V) the National Geospatial-
Intelligence Agency,
``(VI) the National Reconnaissance
Office,
``(VII) any other office within the
Department of Defense for the collection
of specialized national intelligence
through reconnaissance programs,
``(VIII) any of the intelligence
elements of the Army, the Navy, the Air
Force, the Marine Corps, the Federal
Bureau of Investigation, the Department
of Treasury, the Department of Energy,
and the Coast Guard,
``(IX) the Bureau of Intelligence
and Research of the Department of State,
or
``(X) any of the elements of the
Department of Homeland Security
concerned with the analyses of foreign
intelligence information.''.
(c) Special Rule.--Subparagraph (C) of section <<NOTE: 26 USC
121.>> 121(d)(9), as amended by subsection (b), is amended by adding at
the end the following new clause:
``(vi) Special rule relating to intelligence
community.--An employee of the intelligence
community shall not be treated as serving on
qualified extended duty unless such duty is at a
duty station located outside the United States.''.
(d) Conforming Amendment.--The heading for section 121(d)(9) is
amended to read as follows: ``Uniformed services, foreign service, and
intelligence community''.
2005 - P.L. 109-135
(ee) Amendment Related to Section 840 of the Act.--Subsection (d) of
section 121 is amended--
(1) by redesignating the paragraph (10) relating to property
acquired from a decedent as paragraph (11) and by moving such
paragraph to the end of such subsection, and
(2) by amending the paragraph (10) relating to property
acquired in like-kind exchange to read as follows:
``(10) Property acquired in like-kind exchange.--If a
taxpayer acquires property in an exchange with respect to which
gain is not recognized (in whole or in part) to the taxpayer
under subsection (a) or (b) of section 1031, subsection (a)
shall not apply to the sale or exchange of such property by such
taxpayer (or by any person whose basis in such property is
determined, in whole or in part, by reference to the basis in
the hands of such taxpayer) during the 5-year period beginning
with the date of such acquisition.''.
2004 - Subsec.840(a),Pub.L.108-357, amended Sec.121(d)
by adding at the end the following new paragraph:
"(10) Property acquired in like-kind exchange.--If a
taxpayer acquired property in an exchange to which section 1031
applied, subsection (a) shall not apply to the sale or exchange
of such property if it occurs during the 5-year period
beginning with the date of the acquisition of such property".
1998 - Subsec. (b)(2). Pub. L. 105-206, Sec. 6005(e)(1),
substituted ''Special rules for joint returns'' for ''$500,000
limitation for certain joint returns'' in heading and amended text
generally. Prior to amendment, text read as follows: ''Paragraph
(1) shall be applied by substituting '$500,000' for '$250,000' if -
''(A) a husband and wife make a joint return for the taxable
year of the sale or exchange of the property,
''(B) either spouse meets the ownership requirements of
subsection (a) with respect to such property,
''(C) both spouses meet the use requirements of subsection (a)
with respect to such property, and
''(D) neither spouse is ineligible for the benefits of
subsection (a) with respect to such property by reason of
paragraph (3).''
Subsec. (c)(1). Pub. L. 105-206, Sec. 6005(e)(2), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: ''In the case of a sale or
exchange to which this subsection applies, the ownership and use
requirements of subsection (a) shall not apply and subsection
(b)(3) shall not apply; but the amount of gain excluded from gross
income under subsection (a) with respect to such sale or exchange
shall not exceed -
''(A) the amount which bears the same ratio to the amount which
would be so excluded under this section if such requirements had
been met, as
''(B) the shorter of -
''(i) the aggregate periods, during the 5-year period ending
on the date of such sale or exchange, such property has been
owned and used by the taxpayer as the taxpayer's principal
residence, or
''(ii) the period after the date of the most recent prior
sale or exchange by the taxpayer to which subsection (a)
applied and before the date of such sale or exchange,
bears to 2 years.''
1997 - Pub. L. 105-34 amended section catchline and text
generally. Prior to amendment, section related to one-time
exclusion of gain from sale of principal residence by individual
who had attained age 55.
1988 - Subsec. (d)(9). Pub. L. 100-647 added par. (9).
1981 - Subsec. (b)(1). Pub. L. 97-34 substituted ''$125,000
($62,500'' for ''$100,000 ($50,000''.
1978 - Pub. L. 95-600, Sec. 404(a), substituted ''One-time
exclusion of gain from sale of principal residence by individual
who has attained age 55'' for ''Gain from sale or exchange of
residence of individual who has attained age 65'' in section
catchline.
Subsec. (a). Pub. L. 95-600, Sec. 404(a), substituted ''55'' for
''65'', ''5-year'' for ''8-year'', and ''3 years'' for ''5 years''.
Subsec. (b). Pub. L. 95-600, Sec. 404(a), in par. (1) substituted
provisions respecting dollar limitations for amount of gain for
provisions setting forth applicable limitations where the adjusted
sales price exceeds $35,000 and added par. (3).
Subsec. (d)(2). Pub. L. 95-600, Sec. 404(c)(1), substituted
''5-year period'' for ''8-year period''.
Subsec. (d)(5). Pub. L. 95-600, Sec. 404(c)(2), substituted
''5-year period'' for ''8-year period'' and ''3 years'' for ''5
years''.
Subsec. (d)(8). Pub. L. 95-600, Sec. 404(b), added par. (8).
1976 - Subsec. (b)(1). Pub. L. 94-455, Sec. 1404(a), substituted
''$35,000'' for ''$20,000'' in three places.
Subsecs. (c), (d)(5). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out ''or his delegate'' after ''Secretary''.
EFFECTIVE DATE OF 2007 AMENDMENT
2007 - PL 110-142
SEC. 7. APPLICATION OF JOINT RETURN LIMITATION FOR CAPITAL GAINS
EXCLUSION TO CERTAIN POST-MARRIAGE SALES OF PRINCIPAL
RESIDENCES BY SURVIVING SPOUSES.
(b) Effective Date.--The <<NOTE: 26 USC 121 note.>> amendment made
by this section shall apply to sales or exchanges after December 31,
2007.
EFFECTIVE DATES OF 2006 AMENDMENT
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 417(e) Effective Date.--The <<NOTE: 26 USC 121 note.>> amendments made
by this section shall apply to sales or exchanges after the date of the
enactment of this Act and before January 1, 2011.
EFFECTIVE DATES OF 2004 AMENDMENT
Pub.L.108-357, Sec.840(a), amended Sec.121(d); Effective
date:--The amendment made by this section shall apply to sales or
exchanges after the date of the enactment of this Act.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Pub. L. 107-16, title V, Sec. 542(f), June 7, 2001, 115 Stat. 86,
provided that:
''(1) In general. - Except as provided in paragraph (2), the
amendments made by this section (enacting sections 1022 and 6716 of
this title and amending this section and sections 170, 684, 1040,
1221, 1246, 1291, 1296, 4947, 6018, 6019, 6075, and 7701 of this
title) shall apply to estates of decedents dying after December 31,
2009.
''(2) Transfers to nonresidents. - The amendments made by
subsection (e)(1) (amending section 684 of this title) shall apply
to transfers after December 31, 2009.
''(3) Section 4947. - The amendment made by subsection (e)(4)
(amending section 4947 of this title) shall apply to deductions for
taxable years beginning after December 31, 2009.''
Amendment by Pub. L. 107-16 inapplicable to estates of decedents
dying, gifts made, or generation skipping transfers, after Dec. 31,
2010, and the Internal Revenue Code of 1986 to be applied and
administered to such estates, gifts, and transfers as if such
amendment had never been enacted, see section 901 of Pub. L.
107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 312(d) of Pub. L. 105-34, as amended by Pub. L. 105-206,
title VI, Sec. 6005(e)(3), July 22, 1998, 112 Stat. 806, provided
that:
''(1) In general. - The amendments made by this section (amending
this section and sections 25, 32, 56, 143, 163, 215, 280A, 464,
512, 1016, 1033, 1038, 1223, 1250, 1274, 6012, 6045, 6212, 6334,
6504, and 7872 of this title and repealing section 1034 of this
title) shall apply to sales and exchanges after May 6, 1997.
''(2) Sales on or before date of enactment. - At the election of
the taxpayer, the amendments made by this section shall not apply
to any sale or exchange on or before the date of the enactment of
this Act (Aug. 5, 1997).
''(3) Certain sales within 2 years after date of enactment. -
Section 121 of the Internal Revenue Code of 1986 (as amended by
this section) shall be applied without regard to subsection
(c)(2)(B) thereof in the case of any sale or exchange of property
during the 2-year period beginning on the date of the enactment of
this Act if the taxpayer held such property on the date of the
enactment of this Act and fails to meet the ownership and use
requirements of subsection (a) thereof with respect to such
property.
''(4) Binding contracts. - At the election of the taxpayer, the
amendments made by this section shall not apply to a sale or
exchange after the date of the enactment of this Act, if -
''(A) such sale or exchange is pursuant to a contract which was
binding on such date, or
''(B) without regard to such amendments, gain would not be
recognized under section 1034 of the Internal Revenue Code of
1986 (as in effect on the day before the date of the enactment of
this Act) on such sale or exchange by reason of a new residence
acquired on or before such date or with respect to the
acquisition of which by the taxpayer a binding contract was in
effect on such date.
This paragraph shall not apply to any sale or exchange by an
individual if the treatment provided by section 877(a)(1) of the
Internal Revenue Code of 1986 applies to such individual.''
EFFECTIVE DATE OF 1988 AMENDMENT
Section 6011(b) of Pub. L. 100-647 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply with
respect to any sale or exchange after September 30, 1988, in
taxable years ending after such date.''
EFFECTIVE DATE OF 1981 AMENDMENT
Section 123(b) of Pub. L. 97-34 provided that: ''The amendment
made by this section (amending this section) shall apply to
residences sold or exchanged after July 20, 1981.''
EFFECTIVE DATE OF 1978 AMENDMENT
Section 404(d)(1) of Pub. L. 95-600 provided that: ''The
amendments made by this section (amending this section and sections
1033, 1034, 1038, 1250, and 6012 of this title) shall apply to
sales or exchanges after July 26, 1978, in taxable years ending
after such date.''
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1404(b) of Pub. L. 94-455 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years beginning after December 31, 1976.''
EFFECTIVE DATE
Section 206(c) of Pub. L. 88-272 provided that: ''The amendments
made by this section (enacting this section, redesignating former
section 121 as 122, and amending sections 1033, 1034, and 6012 of
this title) shall apply to dispositions after Dec. 31, 1963, in
taxable years ending after such date.''
SENSE OF CONGRESS CONCERNING TAX TREATMENT OF PRINCIPAL RESIDENCE
OF MEMBERS OF ARMED FORCES WHILE AWAY FROM HOME ON ACTIVE DUTY
Pub. L. 105-261, div. A, title X, Sec. 1074, Oct. 17, 1998, 112
Stat. 2138, provided that: ''It is the sense of Congress that a
member of the Armed Forces should be treated for purposes of
section 121 of the Internal Revenue Code of 1986 as using property
as a principal residence during any continuous period that the
member is serving on active duty for 180 days or more with the
Armed Forces, but only if the member used the property as a
principal residence for any period during or immediately before
that period of active duty.''
TRANSITIONAL RULE IN CASE OF SALE OR EXCHANGE OF RESIDENCE BEFORE
JULY 26, 1981
Section 404(d)(2) of Pub. L. 95-600, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ''In
the case of a sale or exchange of a residence before July 26, 1981,
a taxpayer who has attained age 65 on the date of such sale or
exchange may elect to have section 121 of the Internal Revenue Code
of 1986 (formerly I.R.C. 1954) applied by substituting '8-year
period' for '5-year period' and '5 years' for '3 years' in
subsections (a), (d)(2), and (d)(5) of such section.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 25, 45F, 56, 72, 143,
163, 216, 280A, 464, 1033, 1038, 1274, 1400C, 6012, 6045, 6334,
7872 of this title.
