CREDIT FOR PURCHASE OF NEW PRINCIPAL RESIDENCE.

SEC. 208. CREDIT FOR PURCHASE OF NEW PRINCIPAL RESIDENCE. (a) Allowance of Credit.— Subpart A of part IV of subchapter A of chapter 1 (relating to credits allowed) is amended by redesignating section 44 as section 45 and by inserting after section 43 the following new section: “SEC. 44. PURCHASE OF NEW PRINCIPAL RESIDENCE. “(a) General Rule.— In the ease of an individual there is allowed, as a credit against the tax imposed by this chapter for the taxable year, an amount equal to 5 percent of the purchase price of a new principal residence purchased or constructed by the taxpayer. 89 STAT. 33 “(b) Limitations.— “(1) Maximum credit.— The credit allowed under subsection (a) may not exceed $2,000. “(2) Limitation to one residence.— The credit under this section shall be allowed with respect to only one residence of the taxpayer. “(3) Married individuals.— In the case of a husband and wife who file a joint return under section 6013, the amount specified under paragraph (1) shall apply to the joint return. In the case of a married individual filing a separate return, paragraph (1) shall be applied by substituting ‘$1,000’ for ‘$2,000’. “(4) Certain other taxpayers.— In the case of individuals to whom paragraph (3) does not apply who together purchase the same new principal residence for use as their principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals as prescribed by the Secretary or his delegate, but the sum of the amounts allowed to such individuals shall not exceed $2,000 with respect to that residence. “(5) Application with other credits.— The credit allowed by subsection (a) shall not exceed the amount of the tax imposed by this chapter for the taxable year, reduced by the sum of the credits allowable under sections 33, 37, 38, 40, 41, and 42. “(c) Definitions.— For purposes of this section— “(1) New principal residence.— The term ‘new principal residence’ means a principal residence (within the meaning of section 1034), the original use of which commences with the taxpayer, and includes, without being limited to a single family structure, a residential unit, in a condominium or cooperative housing project, and a mobile home. “(2) Purchase price.— The term ‘purchase price’ means the adjusted basis of the new principal residence on the date of the acquisition thereof. “(3) Purchase.— The term ‘purchase’ means any acquisition of property, but only if— “(A) the property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under section 267 or 707(b) (but, in applying section 267 (b) and (c) for purposes of this section, paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants), and “(B) the basis of the property in the hands of the person acquiring it is not determined— “(i) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or “(ii) under section 1014(a) (relating to property acquired from a decedent). “(d) Recapture for Certain Dispositions.— “(1) In general.— Except as provided in paragraphs (2) and (3), if the taxpayer disposes of property with respect to the purchase of which a credit was allowed under subsection (a) at any time within 36 months after the date on which he acquired it (or, in the case of construction by the taxpayer, on the day on which he first occupied it) as his principal residence, then the tax imposed under this chapter for the taxable year in which termi-89 STAT. 34nates the replacement period under paragraph (2) with respect to the disposition is increased by an amount equal to the amount allowed as a credit for the purchase of such property. “(2) Acquisition of new residence.— If, in connection with a disposition described in paragraph (1) and within the applicable period prescribed in section 1034, the taxpayer purchases or constructs a new principal residence, then the provisions of paragraph (1) shall not apply and the tax imposed by this chapter for the taxable year following the taxable year during which disposition occurs is increased by an amount which bears the same ratio to the amount allowed as a credit for the purchase of the old residence as (A) the adjusted sales price of the old residence (within the meaning of section 1034), reduced (but not below zero) by the taxpayer’s cost of purchasing the new residence (within the meaning of such section) bears to (B) the adjusted sales price of the old residence. “(3) Death of owner; casualty loss; involuntary conversion; etc.— The provisions of paragraph (1) do not apply to— “(A) a disposition of a residence made on account of the death of any individual having a legal or equitable interest therein occurring during the 36 month period to which reference is made under such paragraph, “(B) a disposition of the old residence if it is substantially or completely destroyed by a casualty described hi section 165(c)(3) or compulsorily and involuntarily converted (within the meaning of section 1033(a)), or “(C) a disposition pursuant to a settlement in a divorce or legal separation proceeding where the other spouse retains the residence as principal residence. “(e) Property to Which Section Applies.— “(1) In general.— The provisions of this section apply to a new principal residence— “(A) the construction of which began before March 26, 1975, “(B) which is acquired and occupied by the taxpayer after March 12, 1975, and before January 1, 1977, and “(C) if not constructed by the taxpayer, which was acquired by the taxpayer under a binding contract entered into by the taxpayer before January 1, 1976. “(2) Self-constructed property begun before march 13, 1975.— In the case of property the construction of which was begun by the taxpayer before March 13, 1975, only that portion of the basis of such property properly allocable to construction after March 12, 1975, shall be taken into account in determining the amount of the credit allowable under subsection (a). “(3) Binding contract.— For purposes of this subsection, a contract for the purchase of a residence which is conditioned upon the purchaser’s obtaining a loan for the purchase of the residence (including conditions as to the amount or interest rate of such loan) is not considered non-binding on account of that condition. “(4) Certification must be attached to return.— This section shall not apply to any residence (other than a residence constructed by the taxpayer) unless there is attached to the return of tax on which the credit is claimed a certification by the seller, in accordance with regulations prescribed by the Secretary or his delegate, that the purchase price is the lowest price at which the residence was ever offered for sale.” 89 STAT. 35 (b) Suits To Recover Amounts of Price Increases.— If— (1) any person certifies under section 44(e)(4) of the Internal Revenue Code of 1954 that the price for which a residence was sold is the lowest price at which the residence was ever offered for sale, and (2) the price for which the residence was sold exceeded the lowest price at which the residence was ever offered for sale, such person shall be liable to the purchaser of such residence in an amount equal to three times the amount of such excess. The United States district courts shall have jurisdiction of suits to recover such amounts without regard to any other provision of Jaw. In any suit brought under this subsection in which judgment is entered for the purchaser, he shall also be entitled to recover a reasonable attorney’s fee. (c) Denial of Deduction.— Notwithstanding the provisions of section 162 or 212 of the Internal Revenue Code of 1954, no deduction shall be allowed in computing taxable income for two-thirds of any amount paid or incurred on a judgment entered against, any person in a suit brought under subsection (b). (d) Technical and Clerical Amendments.— (1) The table of sections for such subpart is amended by striking out the last item and inserting in lieu thereof the following: “Sec. 44. Credit for purchase of new principal residence. “Sec. 45. Overpayments of tax.” (2) Section 56(a)(2) (relating to imposition of minimum tax) is amended by striking out “and” at the end of clause (v), by striking out “; and” at the end of clause (vi) and inserting in lieu thereof “, and”, and by inserting after clause (vi) the following new clause: “(vii) section 44 (relating to credit for purchase of new principal residence); and”, (3) Section 56(c)(1) (relating to tax carryovers) is amended by striking out “and” at the end of subparagraph (E), by striking out “exceed” at the end of subparagraph (F) and inserting in lieu thereof “and”, and by inserting after subparagraph (F) the following new subparagraph: “(G) section 44 (relating to credit for purchase of new principal residence), exceed”, (4) Section 6096 (b) (relating to designation of income tax payments to Presidential Election Campaign Fund) is amended by striking out “and 42” and inserting in lieu thereof “42, and 44”.