PERSONAL PROPERTY USED PREDOMINANTLY IN THE UNITED STATES TREATED AS NOT PROPERTY OF A LIKE KIND WITH RESPECT TO PROPERTY USED PREDOMINANTLY OUTSIDE THE UNITED STATES.

SEC. 1052. PERSONAL PROPERTY USED PREDOMINANTLY IN THE UNITED STATES TREATED AS NOT PROPERTY OF A LIKE KIND WITH RESPECT TO PROPERTY USED PREDOMINANTLY OUTSIDE THE UNITED STATES. (a) In General.—Subsection (h) of section 1031 (relating to exchange of property held for productive use or investment) is amended to read as follows: “(h) Special Rules for Foreign Real and Personal Property.—For purposes of this section— “(1) Real property.—Real property located in the United States and real property located outside the United States are not property of a like kind. “(2) Personal property.— “(A) In general.—Personal property used predominantly within the United States and personal property 111 STAT. 941used predominantly outside the United States are not property of a like kind. “(B) Predominant use.—Except as provided in subparagraph (C) and (D), the predominant use of any property shall be determined based on— “(i) in the case of the property relinquished in the exchange, the 2-year period ending on the date of such relinquishment, and “(ii) in the case of the property acquired in the exchange, the 2-year period beginning on the date of such acquisition. “(C) Property held for less than 2 years.—Except in the case of an exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection— “(i) only the periods the property was held by the person relinquishing the property (or any related person) shall be taken into account under subparagraph (B)(i), and “(ii) only the periods the property was held by the person acquiring the property (or any related person) shall be taken into account under subparagraph (B)(ii). “(D) Special rule for certain property.—Property described in any subparagraph of section 168(g)(4) shall be treated as used predominantly in the United States.”. (b) Effective Date.— (1) In general.—The amendment made by this section shall apply to transfers after June 8, 1997, in taxable years ending after such date. (2) Binding contracts.—The amendment made by this section shall not apply to any transfer pursuant to a written binding contract in effect on June 8, 1997, and at all times thereafter before the disposition of property. A contract shall not fail to meet the requirements of the preceding sentence solely because— (A) it provides for a sale in lieu of an exchange, or (B) the property to be acquired as replacement property was not identified under such contract before June 9, 1997.