26 U.S.C. § 1043 — Sale of property to comply with conflict-

Page 2291 TITLE 26—INTERNAL REVENUE CODE § 1043 Executive Documents LINE ITEM VETO Pub. L. 105–34, title IX, § 968, Aug. 5, 1997, 111 Stat. 895, amending this section and enacting provisions set out as a note above, was subject to line item veto by the President, Cancellation No. 97–2, signed Aug. 11, 1997, 62 F.R. 43267, Aug. 12, 1997. For decision holding line item veto unconstitutional, see Clinton v. City of New York, 524 U.S. 417, 118 S.Ct. 2091, 141 L.Ed.2d 393 (1998). § 1043. Sale of property to comply with conflict- of-interest requirements (a) Nonrecognition of gain If an eligible person sells any property pursu- ant to a certificate of divestiture, at the elec- tion of the taxpayer, gain from such sale shall be recognized only to the extent that the amount realized on such sale exceeds the cost (to the extent not previously taken into account under this subsection) of any permitted property purchased by the taxpayer during the 60-day pe- riod beginning on the date of such sale. (b) Definitions For purposes of this section— (1) Eligible person The term ‘‘eligible person’’ means— (A) an officer or employee of the executive branch, or a judicial officer, of the Federal Government, but does not mean a special Government employee as defined in section 202 of title 18, United States Code, and (B) any spouse or minor or dependent child whose ownership of any property is attrib- utable under any statute, regulation, rule, judicial canon, or executive order referred to in paragraph (2) to a person referred to in subparagraph (A). (2) Certificate of divestiture The term ‘‘certificate of divestiture’’ means any written determination— (A) that states that divestiture of specific property is reasonably necessary to comply with any Federal conflict of interest statute, regulation, rule, judicial canon, or executive order (including section 208 of title 18, United States Code), or requested by a con- gressional committee as a condition of con- firmation, (B) that has been issued by the President or the Director of the Office of Government Ethics, in the case of executive branch offi- cers or employees, or by the Judicial Con- ference of the United States (or its des- ignee), in the case of judicial officers, and (C) that identifies the specific property to be divested. (3) Permitted property The term ‘‘permitted property’’ means any obligation of the United States or any diversi- fied investment fund approved by regulations issued by the Office of Government Ethics. (4) Purchase The taxpayer shall be considered to have purchased any permitted property if, but for subsection (c), the unadjusted basis of such property would be its cost within the meaning of section 1012. (5) Special rule for trusts For purposes of this section, the trustee of a trust shall be treated as an eligible person with respect to property which is held in the trust if— (A) any person referred to in paragraph (1)(A) has a beneficial interest in the prin- cipal or income of the trust, or (B) any person referred to in paragraph (1)(B) has a beneficial interest in the prin- cipal or income of the trust and such inter- est is attributable under any statute, regula- tion, rule, judicial canon, or executive order referred to in paragraph (2) to a person re- ferred to in paragraph (1)(A). (6) Judicial officer The term ‘‘judicial officer’’ means the Chief Justice of the United States, the Associate Justices of the Supreme Court, and the judges of the United States courts of appeals, United States district courts, including the district courts in Guam, the Northern Mariana Is- lands, and the Virgin Islands, Court of Appeals for the Federal Circuit, Court of International Trade, Tax Court, Court of Federal Claims, Court of Appeals for Veterans Claims, United States Court of Appeals for the Armed Forces, and any court created by Act of Congress, the judges of which are entitled to hold office dur- ing good behavior. (c) Basis adjustments If gain from the sale of any property is not recognized by reason of subsection (a), such gain shall be applied to reduce (in the order acquired) the basis for determining gain or loss of any per- mitted property which is purchased by the tax- payer during the 60-day period described in sub- section (a). (Added Pub. L. 101–194, title V, § 502(a), Nov. 30, 1989, 103 Stat. 1754; amended Pub. L. 101–280, § 6(a)(1), May 4, 1990, 104 Stat. 160; Pub. L. 101–508, title XI, § 11703(a)(1), Nov. 5, 1990, 104 Stat. 1388–516; Pub. L. 109–432, div. A, title IV, § 418(a), (b), Dec. 20, 2006, 120 Stat. 2966.) Editorial Notes AMENDMENTS 2006—Subsec. (b)(1)(A). Pub. L. 109–432, § 418(a)(1)(A), inserted ‘‘, or a judicial officer,’’ after ‘‘executive branch’’. Subsec. (b)(1)(B), (2)(A). Pub. L. 109–432, § 418(a)(1)(B), (2)(A), inserted ‘‘judicial canon,’’ after ‘‘rule,’’. Subsec. (b)(2)(B). Pub. L. 109–432, § 418(a)(2)(B), in- serted ‘‘in the case of executive branch officers or em- ployees, or by the Judicial Conference of the United States (or its designee), in the case of judicial officers,’’ after ‘‘Ethics,’’. Subsec. (b)(5)(B). Pub. L. 109–432, § 418(a)(3), inserted ‘‘judicial canon,’’ after ‘‘rule,’’. Subsec. (b)(6). Pub. L. 109–432, § 418(b), added par. (6). 1990—Subsec. (a). Pub. L. 101–508 substituted ‘‘to the extent not previously taken into account under this subsection’’ for ‘‘reduced by any basis adjustment under subsection (c) attributable to a prior sale’’. Subsec. (b)(5). Pub. L. 101–280 added par. (5). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109–432, div. A, title IV, § 418(c), Dec. 20, 2006, 120 Stat. 2967, provided that: ‘‘The amendments made Page 2292 TITLE 26—INTERNAL REVENUE CODE [§ 1044 by this section [amending this section] shall apply to sales after the date of enactment of this Act [Dec. 20, 2006].’’ EFFECTIVE DATE OF 1990 AMENDMENT Pub. L. 101–508, title XI, § 11703(a)(2), Nov. 5, 1990, 104 Stat. 1388–517, provided that: ‘‘The amendment made by paragraph (1) [amending this section] shall apply to sales after November 30, 1989.’’ Pub. L. 101–280, § 6(a)(3), May 4, 1990, 104 Stat. 160, pro- vided that: ‘‘The amendment made by paragraph (1) [amending this section] and the provisions of paragraph (2) [set out below] shall apply to sales after November 30, 1989.’’ EFFECTIVE DATE Section applicable to sales after Nov. 30, 1989, see sec- tion 502(c) of Pub. L. 101–194, set out as an Effective Date of 1989 Amendment note under section 1016 of this title. PROPERTY SOLD BEFORE JUNE 19, 1990 Pub. L. 101–280, § 6(a)(2), May 4, 1990, 104 Stat. 160, pro- vided that: ‘‘(A) For purposes of section 1043 of such Code— ‘‘(i) any property sold before June 19, 1990, shall be treated as sold pursuant to a certificate of divestiture (as defined in subsection (b)(2) thereof) if such a cer- tificate is issued with respect to such sale before such date, and ‘‘(ii) in any such case, the 60-day period referred to in subsection (a) thereof shall not expire before the end of the 60-day period beginning on the date on which the certificate of divestiture was issued. ‘‘(B) Notwithstanding subparagraph (A), section 1043 of such Code shall not apply to any sale before April 19, 1990, unless— ‘‘(i) the sale was made in order to comply with an ethics agreement or pursuant to specific direction from the appropriate agency or confirming com- mittee, and ‘‘(ii) the justification for the sale meets the criteria set forth in subsection (b)(2)(A) thereof as imple- mented by the interim regulations implementing such section 1043, published on April 18, 1990.’’ [§ 1044. Repealed. Pub. L. 115–97, title I, § 13313(a), Dec. 22, 2017, 131 Stat. 2133] Section, added Pub. L. 103–66, title XIII, § 13114(a), Aug. 10, 1993, 107 Stat. 430; amended Pub. L. 104–188, title I, § 1703(a), Aug. 20, 1996, 110 Stat. 1875, related to rollover of publicly traded securities gain into special- ized small business investment companies. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable to sales after Dec. 31, 2017, see sec- tion 13313(c) of Pub. L. 115–97, set out as an Effective Date of 2017 Amendment note under section 1016 of this title. § 1045. Rollover of gain from qualified small busi- ness stock to another qualified small busi- ness stock (a) Nonrecognition of gain In the case of any sale of qualified small busi- ness stock held by a taxpayer other than a cor- poration for more than 6 months and with re- spect to which such taxpayer elects the applica- tion of this section, gain from such sale shall be recognized only to the extent that the amount realized on such sale exceeds— (1) the cost of any qualified small business stock purchased by the taxpayer during the 60- day period beginning on the date of such sale, reduced by (2) any portion of such cost previously taken into account under this section. This section shall not apply to any gain which is treated as ordinary income for purposes of this title. (b) Definitions and special rules For purposes of this section— (1) Qualified small business stock The term ‘‘qualified small business stock’’ has the meaning given such term by section 1202(c). (2) Purchase A taxpayer shall be treated as having pur- chased any property if, but for paragraph (3), the unadjusted basis of such property in the hands of the taxpayer would be its cost (within the meaning of section 1012). (3) Basis adjustments If gain from any sale is not recognized by reason of subsection (a), such gain shall be ap- plied to reduce (in the order acquired) the basis for determining gain or loss of any quali- fied small business stock which is purchased by the taxpayer during the 60-day period de- scribed in subsection (a). (4) Holding period For purposes of determining whether the nonrecognition of gain under subsection (a) applies to stock which is sold— (A) the taxpayer’s holding period for such stock and the stock referred to in subsection (a)(1) shall be determined without regard to section 1223, and (B) only the first 6 months of the tax- payer’s holding period for the stock referred to in subsection (a)(1) shall be taken into ac- count for purposes of applying section 1202(c)(2). (5) Certain rules to apply Rules similar to the rules of subsections (f), (g), (h), (i), (j), and (k) of section 1202 shall apply. (Added Pub. L. 105–34, title III, § 313(a), Aug. 5, 1997, 111 Stat. 841; amended Pub. L. 105–206, title VI, § 6005(f), July 22, 1998, 112 Stat. 806.) Editorial Notes AMENDMENTS 1998—Subsec. (a). Pub. L. 105–206, § 6005(f)(1), in intro- ductory provisions, substituted ‘‘a taxpayer other than a corporation’’ for ‘‘an individual’’ and ‘‘such tax- payer’’ for ‘‘such individual’’. Subsec. (b)(5). Pub. L. 105–206, § 6005(f)(2), added par. (5). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title. EFFECTIVE DATE Section applicable to sales after Aug. 5, 1997, see sec- tion 313(c) of Pub. L. 105–34, set out as an Effective Date of 1997 Amendment note under section 1016 of this title.