EXCLUSIONS OF CERTAIN CANCELLATIONS OF INDEBTEDNESS BY REASON OF HURRICANE KATRINA.

SEC. 401. EXCLUSIONS OF CERTAIN CANCELLATIONS OF INDEBTEDNESS BY REASON OF HURRICANE KATRINA.(a) In General.—For purposes of the Internal Revenue Code of 1986, gross income shall not include any amount which (but for this section) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of a natural person described in subsection (b) by an applicable entity (as defined in section 6050P(c)(1) of such Code).(b) Persons Described.—A natural person is described in this subsection if the principal place of abode of such person on August 25, 2005, was located—(1) in the core disaster area, or(2) in the Hurricane Katrina disaster area (but outside the core disaster area) and such person suffered economic loss by reason of Hurricane Katrina.(c) Exceptions.—(1) Business indebtedness.—Subsection (a) shall not apply to any indebtedness incurred in connection with a trade or business.(2) Real property outside core disaster area.—Subsection (a) shall not apply to any discharge of indebtedness to the extent that real property constituting security for such indebtedness is located outside of the Hurricane Katrina disaster area.(d) Denial of Double Benefit.—For purposes of the Internal Revenue Code of 1986, the amount excluded from gross income under subsection (a) shall be treated in the same manner as an amount excluded under section 108(a) of such Code.119 STAT. 2027(e) Effective Date.—This section shall apply to discharges made on or after August 25, 2005, and before January 1, 2007.