EXTENSION OF SPECIAL RULES FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.

SEC. 7107. EXTENSION OF SPECIAL RULES FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS. (a) Extension.— (1) General rule.—Paragraph (5) of section 162(1) (relating to special rules for health insurance costs of self-employed individuals) is amended by striking “December 31, 1989” and inserting “September 30, 1990”. (2) Special rule.—In the case of any taxable year beginning in 1990— (A) only amounts paid before October 1, 1990, by the individual for insurance coverage for periods before October 1, 1990, shall be taken into account in determining the amount deductible under section 162(1) of the Internal Revenue Code of 1986 with respect to such individual for such taxable year, and (B) for purposes of section 162(l)(2)(A) of such Code, the amount of the earned income described in such paragraph taken into account for such taxable year shall be the amount which bears the same ratio to the total amount of such earned income as the number of months in such taxable year ending before October 1, 1990, bears to the number of months in such taxable year. (b) Special Rule for Certain S Corporation Shareholders.—Subsection (1) of section 162 (as amended by subsection (a)) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph: “(5) Treatment of certain 8 corporation shareholders.—This subsection shall apply in the case of any individual treated as a partner under section 1372(a), except that— “(A) for purposes of this subsection, such individual’s wages (as defined in section 3121) from the S corporation shall be treated as such individual’s earned income (within the meaning of section 401(c)(1)), and “(B) there shall be such adjustments in the application of this subsection as the Secretary may by regulations prescribe.” (c) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 1989.