Page:United States Statutes at Large Volume 98 Part 3.djvu/812

 98 STAT. 3184

PUBLIC LAW 98-612—OCT. 31, 1984 such exemption is not likely to significantly reduce the tax liability of the purchaser by reason of the overstatement of the adjusted basis of the acquired asset. "(7) EXCEPTION FOR ASSUMPTIONS OF LOANS WITH RESPECT TO CERTAIN PROPERTY.—

"(A) IN GENERAL.—If any person— "(i) assumes, in connection with the sale or exchange of property described in subparagraph (B), any debt obligation, or "(ii) acquires any such property subject to any such debt obligation, sections 1274 and 483 of the Internal Revenue Code of 1954 shall not be applied to such debt obligation by reason of such assumption (or such acquisition) unless the terms and conditions of such debt obligation are modified in connection with the assumption (or acquisition). "(B) SALES OR EXCHANGES TO WHICH THIS PARAGRAPH

APPLIES.—This paragraph shall apply to any of the following sales or exchanges: "(i) RESIDENCES.—Any sale or exchange of a residence by an individual, an estate, or a testamentary trust, but only if— "(I) either— "(aa) such residence on the date of such sale or exchange (or in the case of an estate or testamentary trust, on the date of death of the decedent) was the principal residence (within the meaning of section 1034) of the individual or decedent, or "(bb) during the 2-year period ending on such date, no substantial portion of such residence was of a character subject to an allowance under this title for depreciation (or amortization in lieu thereof) in the hands of such individual or decedent, and "(II) such residence was not at any time, in the hands of such individual, estate, testamentary trust, or decedent, described in section 1221(1) (relating to inventory, etc.). "(ii) FARMS.—Any sale or exchange by a qualified person of— "(I) real property which was used as a farm (within the meaning of section 6420(c)(2)) at all times during the 3-year period ending on the date of such sale or exchange, or "(II) tangible personal property which was used in the active conduct of the trade or business of farming on such farm and is sold in connection with the sale of such farm, but only if such property is sold or exchanged for use in the active conduct of the trade or business of farming by the transferee of such property, "(iii) TRADES OR BUSINESSES.—

"(I) IN GENERAL.—Any sale or exchange by a qualified person of any trade or business. "(II)

APPLICATION WITH SUBPARAGRAPH

(B).—

This subparagraph shall not apply to any sale or

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