Internal Revenue Code:Sec. 121. Exclusion of gain from sale of principal residence

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Contents


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.
 

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