To amend the Internal Revenue Code of 1986 to exempt from income tax the gain from the sale of a business closely held by an individual who has attained age 62, and for other purposes.

March 25, 2003

Mr. ANDREWS introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to exempt from income tax the gain from the sale of a business closely held by an individual who has attained age 62, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Seniors' Family Business Enhancement Act'.

SEC. 2. EXCLUSION FROM INCOME TAX OF GAIN FROM SALE OF CLOSELY HELD BUSINESS BY INDIVIDUALS WHO HAVE ATTAINED AGE 62.

(a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by inserting after section 139 the following new section:

`SEC. 139A. SALE OF CLOSELY HELD BUSINESS BY INDIVIDUALS WHO HAVE ATTAINED AGE 62.

`(a) IN GENERAL- In the case of an individual, gross income does not include the gain (whether received in single sum or otherwise) from the sale or exchange of a qualified interest in a closely held business if--

`(1) the individual has attained age 62 before the date of such sale or exchange,

`(2) the adjusted gross income of the individual for the tax year in which such sale or exchange occurs does not exceed $1,000,000 (determined without regard to such sale or exchange), and

`(3) the individual so elects.

`(b) ONE-TIME EXCLUSION- Subsection (a) shall not apply to any sale or exchange by the taxpayer if an election under subsection (a) with respect to any other sale or exchange is in effect.

`(c) QUALIFIED INTEREST IN A CLOSELY HELD BUSINESS-

`(1) IN GENERAL- For purposes of subsection (a), the term `qualified interest in a closely held business' means an interest in a closely held business (as defined by section 6166(b)(1)) if the fair market value of the assets of such business is $500,000 or less, determined at the time of such sale or exchange.

`(2) RULE FOR APPLYING SECTION 6166(b)(1)- For purposes of paragraph (1), rules similar to rules of paragraphs (2) and (9) of subsection (b) and subsection (c) of section 6166 shall apply.

`(3) AGGREGATION RULES- All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as one person for purposes of paragraph (1).

`(d) ELECTION- An election under subsection (a) may be made or revoked at any time before the expiration of the period for making a claim for credit or refund of the tax imposed by this chapter for the taxable year in which the sale or exchange occurred.'.

(b) CLERICAL AMENDMENT- The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139 the following new item:

`Sec. 139A. Sale of closely held business by individuals who have attained age 62.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to sales and exchanges made after December 31, 2002.

END