NONRECOGNITION FOR CERTAIN SALES TO COMPLY WITH CONFLICT-OF-INTEREST REQUIREMENTS.

SEC. 602. NONRECOGNITION FOR CERTAIN SALES TO COMPLY WITH CONFLICT-OF-INTEREST REQUIREMENTS. (a) General Rule.—Part III of subchapter O of chapter 1 of the Internal Revenue Code of 1986 (relating to common nontaxable exchanges) is amended by adding at the end thereof the following new section: “SEC. 1043. SALE OF PROPERTY TO COMPLY WITH CONFLICT-OF-INTEREST REQUIREMENTS. “(a) Nonrecognition of Gain.—If an eligible person sells any property pursuant to a certificate of divestiture, at the election of the taxpayer, gain from such sale shall be recognized only to the extent that the amount realized on such sale exceeds the cost (reduced by any basis adjustment under subsection (c) attributable to a prior sale) of any permitted property purchased by the taxpayer during the 60-day period beginning on the date of such sale. “(b) Definitions.—For purposes of this section— “(1) Eligible person.— The term ‘eligible person’ means— “(A) an officer or employee of the executive branch of the Federal Government, but does not mean a special Government employee as defined in section 202 of title 18, United States Code, and “(B) any spouse or minor or dependent child whose ownership of any property is attributable under any statute, regulation, rule, or executive order referred to in paragraph (2) to a person referred to in subparagraph (A). “(2) Certificate of divestiture.— The term ‘certificate of divestiture’ means any written determination— “(A) that states that divestiture of specific property is reasonably necessary to comply with any Federal conflict of interest statute, regulation, rule, or executive order (including section 208 of title 18, United States Code), or requested by a congressional committee as a condition of confirmation, “(B) that has been issued by the President or the Director of the Office of Government Ethics, and “(C) that identifies the specific property to be divested. “(3) Permitted property.—The term ‘permitted property’ means any obligation of the United States or any diversified investment fund approved by regulations issued by the Office of Government Ethics. “(4) Purchase.—The taxpayer shall be considered to have purchased any permitted property if, but for subsection (c), the unadjusted basis of such property would be its cost within the meaning of section 1012. “(c) Basis Adjustments.—If gain from the sale of any property is not recognized by reason of subsection (a), such gain shall be applied to reduce (in the order acquired) the basis for determining gain or loss of any permitted property which is purchased by the taxpayer during the 60-day period described in subsection (a).”. (b) Technical Amendments.— (1) Section 1223 of such Code (relating to holding period of property) is amended by redesignating paragraph (14) as para-103 STAT. 1755graph (15) and by inserting after paragraph (13) the following new paragraph: “(14) In determining the period for which the taxpayer has held property the acquisition of which resulted under section 1043 in the nonrecognition of any part of the gain realized on the sale of other property, there shall be included the period for which such other property had been held as of the date of such sale.”. (2) Subsection (a) of section 1016 of such Code (relating to adjustments to basis) is amended by striking “and” at the end of paragraph (23), by striking the period at the end of paragraph (24) and inserting “, and”, and by adding at the end thereof the following new paragraph; “(25) in the case of property the acquisition of which resulted under section 1043 in the non recognition of any part of the gain realized on the sale of other property, to the extent provided in section 1043(c).”. (3) The table of sections for part III of subchapter O of chapter 1 of such Code is amended by adding at the end thereof the following new item: “Sec. 1043. Sale of property to comply with conflict-of-interest requirements.”. (c) Effective Date.—The amendments made by this section shall apply to sales after the date of the enactment of this Act.