Page:United States Statutes at Large Volume 102 Part 4.djvu/679

 PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3649

"(ii) the product of— "(I) the highest family income which (as of the date the financing was provided) would have met the requirement of subsection (f) with respect to the residence, and "(II) the percentage equal to the sum of 100 percent plus 5 percent for each full year during the period beginning on such date and ending on the date of the disposition. For purposes of clause (iiXD, highest family income shall be determined without regard to subsection (f)(3)(A) and on the basis of the number of members of the taxpayer's family as of the date of the disposition. "(C) MODIFIED ADJUSTED GROSS INCOME.—For purposes of

this paragraph, the term 'modified acijusted gross income' means adjusted gross income— "(i) increased by the amount of interest received or accrued by the taxpayer during the taxable year which is excluded from gross income under section 103, and "(ii) decreased by the amount of gain (if any) included in gross income of the taxpayer by reason of the disposition to which this subsection applies. "(6) LIMITATION ON RECAPTURE AMOUNT BASED ON GAIN REALIZED.—

"(A) IN GENERAL.—In no event shall the recapture amount of the taxpayer with respect to any indebtedness exceed 50 percent of the gain (if any) on the disposition of the taxpayer's interest in the residence. For purposes of the preceding sentence, gain shall be taken into account whether or not recognized, and the adjusted basis of the taxpayer's interest in the residence shall be determined without regard to sections 1033(b) and 1034(e) for purposes of determining gain. "(B)

DISPOSITIONS OTHER THAN SALES, EXCHANGES, AND

INVOLUNTARY CONVERSIONS.—In the casc of a disposition other than a sale, exchange, or involuntary conversion, gain shall be determined as if the interest had been sold for its fair market value. "(C) INVOLUNTARY CONVERSIONS RESULTING FROM CASUAL-

TIES.—In the case of property which (as a result of its destruction in whole or in part by fire, storm, or other casualty) is compulsorily or involuntarily converted, paragraph (1) shall not apply to such conversion if the taxpayer purchases (during the period specified in section 1033(a)(2)(B)) property for use as his principal residence on the site of the converted property. For purposes of subparagraph (A), the adjusted basis of the taxpayer in the residence shall not be adjusted for any gain or loss on a conversion to which this subparagraph applies. "(7) ISSUER TO INFORM MORTGAGOR OF FEDERALLY-SUBSIDIZED

AMOUNT AND FAMILY INCOME UMiTS.—The issuer of the issue which provided the federally-subsidized indebtedness to the mortgagor shall— "(A) at the time of settlement, provide a written statement informing the mortgagor of the potential recapture under this subsection, and

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