PUBLIC LAW 9 5 - 6 0 0 — N O V. 6, 1978
9 2 STAT. 28()9
ing immediately thereafter the following new paragraph to read as follows: "(E) R A T E DIFFERENTIAL PORTION.—The ' r a t e differential
portion' of foreign source n e t capital gain, n e t capital gain, or the excess of n e t capital gain from sources within the United States over net capital gain, as the case may be, is the same proportion of such a m o u n t a s the excess of the highest rate of tax specified in section 11(b) over the alternative r a t e 26 USC 11. of tax under section 1201(a) bears to the highest rate of tax Ante, p. 2868 specified in section 11(b)." (d) EFFECTIVE DATES.—
(1) The amendments made by subsections (a) and (b) shall apply to taxable years ending after December 31, 1978. (2) The amendment made by paragraph (1) of subsection (c) shall apply to gifts made after December 31, 1978. (3) The amendments made by paragraphs (2), (3), and (4) of subsection (c) shall t a k e effect on the date of the enactment of this Act. SEC. 404. ONE-TIME EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE BY INDIVIDUAL WHO HAS ATTAINED AGE 55.
26 USC 1201 note. 26 USC 170 note. 26 USC 528 note.
(a) GENERAL RULE. — The section heading and subsections (a) and (b)
section 121 a r e amended to read as follows:
26 USC 121.
"SEC. 12L ONE-TIME EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE BY INDIVIDUAL WHO HAS ATTAINED AGE 55. "(a) GENERAL RULE.—At the election of the taxpayer, gross income does not include gain from the sale or exchange of property if— "(1) the taxpayer has attained the age of 55 before the date of such sale or exchange, and "(2) 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 his principal residence for periods aggregating 3 years or more. "(b) LIMITATIONS.— "(1) DOLLAR LIMITATION.—The a m o u n t of the gain excluded
from gross income under subsection (a) shall not exceed $100,000 ($50,000 in the case of a separate r e t u r n by a married individual). "(2) APPLICATION TO ONLY i SALE OR EXCHANGE.—Subsection (a)
shall not apply to any sale or exchange by the taxpayer if a n election by the taxpayer or his spouse under subsection (a) with respect to any other sale or exchange is in effect. "(3) ADDITIONAL ELECTION I F PRIOR SALE WAS MADE ON OR
BEFORE JULY 26, 1978.—In the case of any sale or exchange after July 26, 1978, this section shall be applied by not taking into account any election made with respect to a sale or exchange on or before such date." (b) TACKING OF HOLDING PERIOD I N CASE OF INVOLUNTARY CONVER-
SIONS.—Subsection (d) of section 121 (relating to special rules) is amended by adding a t the end thereof the following new paragraph: "(8) PROPERTY ACQUIRED AFTER INVOLUNTARY CONVERSION.—If
the basis of the property sold or exchanged is determined (in whole or in part) under subsection (b) of section 1033 (relating to 26 USC 1033. basis of property acquired through involuntary conversion), the n 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.' (c) TECHNICAL AND CONFORMING AMENDMENTS. —
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