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Sec. 1400B. Zero Percent Capital Gains Rate [Repealed]

Editor's Note: Pub. L. 115-141, Div. U, Sec. 401(d)(4)(A), struck Sec. 1400B, effective March 23, 2018.
I.R.C. § 1400B(a) Exclusion
Gross income shall not include qualified capital gain from the sale or exchange of any DC Zone asset held for more than 5 years.
I.R.C. § 1400B(b) DC Zone Asset
For purposes of this section—
I.R.C. § 1400B(b)(1) In General
The term “DC Zone asset” means—
I.R.C. § 1400B(b)(1)(A)
any DC Zone business stock,
I.R.C. § 1400B(b)(1)(B)
any DC Zone partnership interest, and
I.R.C. § 1400B(b)(1)(C)
any DC Zone business property.
I.R.C. § 1400B(b)(2) DC Zone Business Stock
I.R.C. § 1400B(b)(2)(A) In General
The term “DC Zone business stock” means any stock in a domestic corporation which is originally issued after December 31, 1997, if—
I.R.C. § 1400B(b)(2)(A)(i)
such stock is acquired by the taxpayer, before January 1, 2012, at its original issue (directly or through an underwriter) solely in exchange for cash,
I.R.C. § 1400B(b)(2)(A)(ii)
as of the time such stock was issued, such corporation was a DC Zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being a DC Zone business), and
I.R.C. § 1400B(b)(2)(A)(iii)
during substantially all of the taxpayer's holding period for such stock, such corporation qualified as a DC Zone business.
I.R.C. § 1400B(b)(2)(B) Redemptions
A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph.
I.R.C. § 1400B(b)(3) DC Zone Partnership Interest
The term “DC Zone partnership interest” means any capital or profits interest in a domestic partnership which is originally issued after December 31, 1997, if—
I.R.C. § 1400B(b)(3)(A)
such interest is acquired by the taxpayer, before January 1, 2012, from the partnership solely in exchange for cash,
I.R.C. § 1400B(b)(3)(B)
as of the time such interest was acquired, such partnership was a DC Zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a DC Zone business), and
I.R.C. § 1400B(b)(3)(C)
during substantially all of the taxpayer's holding period for such interest, such partnership qualified as a DC Zone business.
A rule similar to the rule of paragraph (2)(B) shall apply for purposes of this paragraph.
I.R.C. § 1400B(b)(4) DC Zone Business Property
I.R.C. § 1400B(b)(4)(A) In General
The term “DC Zone business property” means tangible property if—
I.R.C. § 1400B(b)(4)(A)(i)
such property was acquired by the taxpayer by purchase (as defined in section 179(d)(2)) after December 31, 1997, and before January 1, 2012,
I.R.C. § 1400B(b)(4)(A)(ii)
the original use of such property in the DC Zone commences with the taxpayer, and
I.R.C. § 1400B(b)(4)(A)(iii)
during substantially all of the taxpayer's holding period for such property, substantially all of the use of such property was in a DC Zone business of the taxpayer.
I.R.C. § 1400B(b)(4)(B) Special Rule For Buildings Which Are Substantially Improved
I.R.C. § 1400B(b)(4)(B)(i) In General
The requirements of clauses (i) and (ii) of subparagraph (A) shall be treated as met with respect to—
I.R.C. § 1400B(b)(4)(B)(i)(I)
property which is substantially improved by the taxpayer before January 1, 2012, and
I.R.C. § 1400B(b)(4)(B)(i)(II)
any land on which such property is located.
I.R.C. § 1400B(b)(4)(B)(ii) Substantial Improvement
For purposes of clause (i), property shall be treated as substantially improved by the taxpayer only if, during any 24-month period beginning after December 31, 1997, additions to basis with respect to such property in the hands of the taxpayer exceed the greater of—
I.R.C. § 1400B(b)(4)(B)(ii)(I)
an amount equal to the adjusted basis of such property at the beginning of such 24-month period in the hands of the taxpayer, or
I.R.C. § 1400B(b)(5) Treatment Of DC Zone Termination
The termination of the designation of the DC Zone shall be disregarded for purposes of determining whether any property is a DC Zone asset.
I.R.C. § 1400B(b)(6) Treatment Of Subsequent Purchasers, Etc.
The term “DC Zone asset” includes any property which would be a DC Zone asset but for paragraph (2)(A)(i), (3)(A), or (4)(A)(i) or (ii) in the hands of the taxpayer if such property was a DC Zone asset in the hands of a prior holder.
I.R.C. § 1400B(b)(7) 5-Year Safe Harbor
If any property ceases to be a DC Zone asset by reason of paragraph (2)(A)(iii), (3)(C), or (4)(A)(iii) after the 5-year period beginning on the date the taxpayer acquired such property, such property shall continue to be treated as meeting the requirements of such paragraph; except that the amount of gain to which subsection (a) applies on any sale or exchange of such property shall not exceed the amount which would be qualified capital gain had such property been sold on the date of such cessation.
I.R.C. § 1400B(c) DC Zone Business
For purposes of this section, the term “DC Zone business” means any enterprise zone business (as defined in section 1397C), determined—
I.R.C. § 1400B(c)(1)
after the application of section 1400(e),
I.R.C. § 1400B(c)(2)
by substituting “80 percent” for “50 percent” in subsections (b)(2) and (c)(1) of section 1397C, and
I.R.C. § 1400B(c)(3)
by treating no area other than the DC Zone as an empowerment zone or enterprise community.
I.R.C. § 1400B(d) Treatment Of Zone As Including Census Tracts With 10 Percent Poverty Rate
For purposes of applying this section (and for purposes of applying this subchapter and subchapter U with respect to this section), the DC Zone shall be treated as including all census tracts—
I.R.C. § 1400B(d)(1)
which are located in the District of Columbia, and
I.R.C. § 1400B(d)(2)
for which the poverty rate is not less than 10 percent as determined on the basis of the 1990 census.
I.R.C. § 1400B(e) Other Definitions And Special Rules
For purposes of this section—
I.R.C. § 1400B(e)(1) Qualified Capital Gain
Except as otherwise provided in this subsection, the term “qualified capital gain” means any gain recognized on the sale or exchange of—
I.R.C. § 1400B(e)(1)(A)
a capital asset, or
I.R.C. § 1400B(e)(1)(B)
property used in the trade or business (as defined in section 1231(b)).
I.R.C. § 1400B(e)(2) Gain Before 1998 Or After 2016 Not Qualified
The term “qualified capital gain” shall not include any gain attributable to periods before January 1, 1998, or after December 31, 2016.
I.R.C. § 1400B(e)(3) Certain Gain Not Qualified
The term “qualified capital gain” shall not include any gain which would be treated as ordinary income under section 1245 or under section 1250 if section 1250 applied to all depreciation rather than the additional depreciation.
I.R.C. § 1400B(e)(4) Intangibles And Land Not Integral Part Of DC Zone Business
The term “qualified capital gain” shall not include any gain which is attributable to real property, or an intangible asset, which is not an integral part of a DC Zone business.
I.R.C. § 1400B(e)(5) Related Party Transactions
The term “qualified capital gain” shall not include any gain attributable, directly or indirectly, in whole or in part, to a transaction with a related person. For purposes of this paragraph, persons are related to each other if such persons are described in section 267(b) or 707(b)(1).
I.R.C. § 1400B(f) Certain Other Rules To Apply
Rules similar to the rules of subsections (g), (h), (i)(2), and (j) of section 1202 shall apply for purposes of this section.
I.R.C. § 1400B(g) Sales And Exchanges Of Interests In Partnerships And S Corporations Which Are DC Zone Businesses
In the case of the sale or exchange of an interest in a partnership, or of stock in an S corporation, which was a DC Zone business during substantially all of the period the taxpayer held such interest or stock, the amount of qualified capital gain shall be determined without regard to—
I.R.C. § 1400B(g)(1)
any gain which is attributable to real property, or an intangible asset, which is not an integral part of a DC Zone business, and
I.R.C. § 1400B(g)(2)
any gain attributable to periods before January 1, 1998, or after December 31, 2016.
(Added Pub. L. 105-34, title VII, Sec. 701(a), Aug. 5, 1997, 111 Stat. 788; amended Pub. L. 105-206, title VI, Sec. 6008(c), July 22, 1998, 112 Stat. 685; Pub. L. 106-554, Sec. 116, 164, Dec. 21, 2000, 114 Stat. 2763; Pub. L. 108-311, title III, Sec. 310(c), Oct. 4, 2004, 118 Stat. 1166; Pub. L. 109-432, div. A, title I, Sec. 110(c), Dec. 20, 2006, 120 Stat. 2922; Pub. L. 110-343, div. C, title III, Sec. 322(c), Oct. 3, 2008, 122 Stat. 3765; Pub. L. 111-312, title VII, Sec. 754(c), Dec. 17, 2010, 124 Stat. 3296; repealed by Pub. L. 115-141, Div. U, title IV, Sec. 401(d)(4)(A), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018 - Sec. 1400B. Pub. L. 115-141, Div. U, Sec. 401(d)(4)(A), struck Sec. 1400B. Before being struck, it read as follows:
“Sec. 1400B. Zero Percent Capital Gains Rate
“(a) Exclusion.—Gross income shall not include qualified capital gain from the sale or exchange of any DC Zone asset held for more than 5 years.
“(b) DC Zone Asset.—For purposes of this section—
“(1) In General The term “DC Zone asset” means—
“(A) any DC Zone business stock,
“(B) any DC Zone partnership interest, and
“(C) any DC Zone business property.
“(2) DC Zone Business Stock
“(A) In General.—The term “DC Zone business stock” means any stock in a domestic corporation which is originally issued after December 31, 1997, if—
“(i) such stock is acquired by the taxpayer, before January 1, 2012, at its original issue (directly or through an underwriter) solely in exchange for cash,
“(ii) as of the time such stock was issued, such corporation was a DC Zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being a DC Zone business), and
“(iii) during substantially all of the taxpayer's holding period for such stock, such corporation qualified as a DC Zone business.
“(B) Redemptions.—A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph.
“(3) DC Zone Partnership Interest.—The term “DC Zone partnership interest” means any capital or profits interest in a domestic partnership which is originally issued after December 31, 1997, if—
“(A) such interest is acquired by the taxpayer, before January 1, 2012, from the partnership solely in exchange for cash,
“(B) as of the time such interest was acquired, such partnership was a DC Zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a DC Zone business), and
“(C) during substantially all of the taxpayer's holding period for such interest, such partnership qualified as a DC Zone business.
“A rule similar to the rule of paragraph (2)(B) shall apply for purposes of this paragraph.
“(4) DC Zone Business Property
“(A) In General.—The term ‘DC Zone business property' means tangible property if—
“(i) such property was acquired by the taxpayer by purchase (as defined in section 179(d)(2)) after December 31, 1997, and before January 1, 2012,
“(ii) the original use of such property in the DC Zone commences with the taxpayer, and
“(iii) during substantially all of the taxpayer's holding period for such property, substantially all of the use of such property was in a DC Zone business of the taxpayer.
“(B) Special Rule For Buildings Which Are Substantially Improved
“(i) In General.—The requirements of clauses (i) and (ii) of subparagraph (A) shall be treated as met with respect to—
“(I) property which is substantially improved by the taxpayer before January 1, 2012, and
“(II) any land on which such property is located.
“(ii) Substantial Improvement.—For purposes of clause (i), property shall be treated as substantially improved by the taxpayer only if, during any 24-month period beginning after December 31, 1997, additions to basis with respect to such property in the hands of the taxpayer exceed the greater of—
“(I) an amount equal to the adjusted basis of such property at the beginning of such 24-month period in the hands of the taxpayer, or
“(II) $5,000.
“(5) Treatment Of DC Zone Termination.—The termination of the designation of the DC Zone shall be disregarded for purposes of determining whether any property is a DC Zone asset.
“(6) Treatment Of Subsequent Purchasers, Etc.—The term “DC Zone asset” includes any property which would be a DC Zone asset but for paragraph (2)(A)(i), (3)(A), or (4)(A)(i) or (ii) in the hands of the taxpayer if such property was a DC Zone asset in the hands of a prior holder.
“(7) 5-Year Safe Harbor.—If any property ceases to be a DC Zone asset by reason of paragraph (2)(A)(iii), (3)(C), or (4)(A)(iii) after the 5-year period beginning on the date the taxpayer acquired such property, such property shall continue to be treated as meeting the requirements of such paragraph; except that the amount of gain to which subsection (a) applies on any sale or exchange of such property shall not exceed the amount which would be qualified capital gain had such property been sold on the date of such cessation.
“(c) DC Zone Business.—For purposes of this section, the term ‘DC Zone business' means any enterprise zone business (as defined in section 1397C), determined—
“(1) after the application of section 1400(e),
“(2) by substituting “80 percent” for “50 percent” in subsections (b)(2) and (c)(1) of section 1397C, and
“(3) by treating no area other than the DC Zone as an empowerment zone or enterprise community.
“(d) Treatment Of Zone As Including Census Tracts With 10 Percent Poverty Rate.—For purposes of applying this section (and for purposes of applying this subchapter and subchapter U with respect to this section), the DC Zone shall be treated as including all census tracts—
“(1) which are located in the District of Columbia, and
“(2) for which the poverty rate is not less than 10 percent as determined on the basis of the 1990 census.
“(e) Other Definitions And Special Rules.—For purposes of this section—
”(1) Qualified Capital Gain.—Except as otherwise provided in this subsection, the term ‘qualified capital gain' means any gain recognized on the sale or exchange of—
“(A) a capital asset, or
“(B) property used in the trade or business (as defined in section 1231(b)).
“(2) Gain Before 1998 Or After 2016 Not Qualified.—The term ‘qualified capital gain' shall not include any gain attributable to periods before January 1, 1998, or after December 31, 2016.
“(3) Certain Gain Not Qualified.—The term ‘qualified capital gain' shall not include any gain which would be treated as ordinary income under section 1245 or under section 1250 if section 1250 applied to all depreciation rather than the additional depreciation.
“(4) Intangibles And Land Not Integral Part Of DC Zone Business.—The term ‘qualified capital gain' shall not include any gain which is attributable to real property, or an intangible asset, which is not an integral part of a DC Zone business.
“(5) Related Party Transactions.—The term ‘qualified capital gain' shall not include any gain attributable, directly or indirectly, in whole or in part, to a transaction with a related person. For purposes of this paragraph, persons are related to each other if such persons are described in section 267(b) or 707(b)(1).
“(f) Certain Other Rules To Apply.—Rules similar to the rules of subsections (g), (h), (i)(2), and (j) of section 1202 shall apply for purposes of this section.
“(g) Sales And Exchanges Of Interests In Partnerships And S Corporations Which Are DC Zone Businesses.—In the case of the sale or exchange of an interest in a partnership, or of stock in an S corporation, which was a DC Zone business during substantially all of the period the taxpayer held such interest or stock, the amount of qualified capital gain shall be determined without regard to—
“(1) any gain which is attributable to real property, or an intangible asset, which is not an integral part of a DC Zone business, and
“(2) any gain attributable to periods before January 1, 1998, or after December 31, 2016.”
2010 - Subsec. (b)(2)(A)(i). Pub. L. 111-312, Sec. 754(c)(1), amended clause (i) by substituting “January 1, 2012” for “January 1, 2010”.
Subsec. (b)(3)(A). Pub. L. 111-312, Sec. 754(c)(1), amended subpar. (A) by substituting “January 1, 2012” for “January 1, 2010”.
Subsec. (b)(4)(A)(i). Pub. L. 111-312, Sec. 754(c)(1), amended clause (i) by substituting “January 1, 2012” for “January 1, 2010”.
Subsec. (b)(4)(B)(i)(I). Pub. L. 111-312, Sec. 754(c)(1), amended subclause (I) by substituting “January 1, 2012” for “January 1, 2010”.
Subsec. (e)(2). Pub. L. 111-312, Sec. 754(c)(2)(A), amended par. (2) by substituting “2016” for “2014” in the heading and “December 31, 2016” for “December 31, 2014” in the text.
Subsec. (g)(2). Pub. L. 111-312, Sec. 754(c)(2)(B), amended par. (2) by substituting “December 31, 2016” for “December 31, 2014”.
2008 - Subsec. (b). Pub. L. 110-343, Div. C, Sec. 322(c)(1), amended subsec. (b) by substituting “2010” for “2008” each place it appeared.
Subsec. (e)(2). Pub. L. 110-343, Div. C, Sec. 322(c)(2)(A), amended par. (2) by substituting “2014” for “2012” in the heading and text.
Subsec. (g)(2). Pub. L. 110-343, Div. C, Sec. 322(c)(2)(B), amended par. (2) by substituting “2014” for “2012”.
2006 - Subsec. (b). Pub. L. 109-432, Sec. 110(c)(1), amended subsec. (b) by substituting “2008” for “2006" each place it appeared.
Subsec. (e)(2). Pub. L. 109-432, Sec. 110(c)(2)(A), amended par. (2) by substituting “2012” for “2010” in the heading and text.
Subsec. (g)(2). Pub. L. 109-432, Sec. 110(c)(2)(B), amended par. (2) by substituting “2012” for “2010”.
2004 - Subsec. (b). Pub. L. 108-311, Sec. 310(c)(1), amended subsec. (b) by substituting “January 1, 2006” for “January 1, 2004” each place it appeared.
Subsec. (e)(2). Pub. L. 108-311, Sec. 310(c)(2)(A), amended par. (2) by substituting “December 31, 2010” for “December 31, 2008” and amended the heading by substituting “2010” for “2008”.
Subsec. (g)(2). Pub. L. 108-311, Sec. 310(c)(2)(B), amended par. (2) by substituting “December 31, 2010” for “December 31, 2008”.
2000 - Section 1400B. Pub. L. 106-554, Sec. 164(b), substituted “2004” for “2003”, and “2008” for “2007” every place they appeared.
Subsec. (c). Pub. L. 106-554, Sec. 116, substituted “section 1397C” for “section 1397B” each place it appears.
1998 - Subsec. (b)(5). Pub. L. 105-206, Sec. 6008(c)(1), added par. (5).
Subsec. (b)(6). Pub. L. 105-206, Sec. 6008(c)(2), amended par. (6) by substituting “(4)(A)(i) or (ii)” for “(4)(A)(ii)”.
Subsec. (c). Pub. L. 105-206, Sec. 6008(c)(3), amended subsec. (c) by striking “entity which is an” before “enterprise zone”
Subsec. (d)(2). Pub. L. 105-206, Sec. 6008(c)(4), amended par. (2) by inserting “as determined on the basis of the 1990 census” after “percent”.
EFFECTIVE DATE OF REPEAL
Repeal by Pub. L. 115-141, Div. U, Sec. 401(d)(4)(A), effective March 23, 2018.
Section 401(d)(4)(C) of Pub. L. 115-141, Div. U, provided the following savings provision:
“(C) SAVINGS PROVISIONS.—The amendments made by this paragraph shall not apply to—
“(i) in the case of the repeal of section 1400A of the Internal Revenue Code of 1986, obligations described in section 1394 of such Code (as in effect before its repeal) which were issued before January 1, 2012,
“(ii) in the case of the repeal of section 1400B of such Code, DC Zone assets (as defined in such section, as in effect before its repeal) which were acquired by the taxpayer before January 1, 2012, and
“(iii) in the case of the repeal of section 1400C of such Code, principal residences acquired before January 1, 2012.”
Section 401(e) of Pub. L. 115-141, Div. U, provided the following savings provision:
“(e) GENERAL SAVINGS PROVISION WITH RESPECT TO DEADWOOD PROVISIONS.—If—
“(1) any provision amended or repealed by the amendments made by subsection (b) or (d) applied to—
“(A) any transaction occurring before the date of the enactment of this Act,
“(B) any property acquired before such date of enactment, or
“(C) any item of income, loss, deduction, or credit taken into account before such date of enactment, and
“(2) the treatment of such transaction, property, or item under such provision would (without regard to the amendments or repeals made by such subsection) affect the liability for tax for periods ending after such date of enactment,
“nothing in the amendments or repeals made by this section shall be construed to affect the treatment of such transaction, property, or item for purposes of determining liability for tax for periods ending after such date of enactment.”
EFFECTIVE DATE OF 2008 AMENDMENTS
Amendments by Sec. 754(c) of Pub. L. 111-312 effective for property acquired or substantially improved after December 31, 2009.
EFFECTIVE DATE OF 2008 AMENDMENTS
Amendments by Div. C, Sec. 322(c) of Pub. L. 110-343 effective for acquisitions after December 31, 2007.
EFFECTIVE DATE OF 2006 AMENDMENTS
Amendment by Sec. 110(c)(1) of Pub. L. 109-432 effective for acquisitions after December 31, 2005.
Amendments by Sec. 110(c)(2) of Pub. L. 109-432 effective on the date of the enactment of this Act [Enacted: Dec. 20, 2006].
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by Sec. 310(c) of Pub. L. 108-311 effective on January 1, 2004.
EFFECTIVE DATE OF 2000 AMENDMENTS
Amendment by Sec. 116 of Pub. L. 106-554 effective for qualified empowerment zone assets acquired after the date of the enactment of this Act [Enactment Date: Dec. 21, 2000].
EFFECTIVE DATE OF 1998 AMENDMENTS
Amendments by Sec. 6008(c) of Pub. L. 105-206 effective as if included in the Taxpayer Relief Act of 1997 to which they relate [Effective Date of Pub. L. 105-34, Title VII: Aug. 5, 1997].
EFFECTIVE DATE
Section 701(d) of Pub. L. 105-34 provided that: “except as provided in subsection (c), the amendments made by this section shall take effect on the date of the enactment of this Act [Enacted: Aug. 5, 1997].”