PUBLIC LAW 100-647—NOV. 10, 1988

102 STAT. 3673

(1) The amendments made by subsections (a) and (c) shall 26 use 2056
apply to estates of the decedents dying after the date of the note.
enactment of this Act.

(2) The amendments made by subsection (b) shall apply to 26 use 2523
gifts on or after July 14,1988. note.

Subtitle E—Long-Term Contract Provisions

SEC. 5041. LONG-TERM CONTRACT PROVISIONS.

(a) GENERAL RULE.—Subsection (a) of section 460 of the 1986 Code
is amended—

(1) by striking out "70 percent" each place it appears (includ-
ing in the heading of paragraph (2)) and inserting in lieu thereof
"90 percent", and

(2) by striking out "30 percent" in paragraph (1)(B) and
inserting in lieu thereof "10 percent".

(b) SPECIAL RULES FOR RESIDENTIAL CONSTRUCTION CONTRACTS.—-

(1) EXCEPTION FOR HOME CONSTRUCTION CONTRACTS.—Para-
graph (1) of section 460(e) of the 1986 Code is amended to read as
follows:

"(1) IN GENERAL.—Subsections (a), (b), and (c) (1) and (2) shall
not apply to—

"(A) any home construction contract, or
"(B) any other construction contract entered into by a
taxpayer—

"(i) who estimates (at the time such contract is en-
tered into) that such contract will be completed within
the 2-year period beginning on the contract commence-
ment date of such contract, and

"(ii) whose average annual gross receipts for the 3
taxable years preceding the taxable year in which such
contract is entered into do not exceed $10,000,000.
In the case of a home construction contract with respect to
which the requirements of clauses (i) and (ii) of subparagraph
(B) are not met, section 263A shall apply notwithstanding
subsection (c)(4) thereof."

(2) SPECIAL TREATMENT FOR OTHER RESIDENTIAL CONSTRUCTION
CONTRACTS.—Subsection (e) of section 460 of the 1986 Code
is amended by adding at the end thereof the following new
paragraph:

"(5) SPECIAL RULE FOR RESIDENTIAL CONSTRUCTION CONTRACTS

WHICH ARE NOT HOME CONSTRUCTION CONTRACTS.—In the Case of

any residential construction contract which is not a home
construction contract, subsection (a) shall be applied—

"(A) by substituting 70 percent' for '90 percent' each
place it appears, and

"(B) by substituting '30 percent' for 10 percent'."

(3) DEFINITIONS.—Subsection (e) of section 460 of the 1986
Code is amended by adding at the end thereof the following new
paragraph:

"(6) DEFINITIONS RELATING TO RESIDENTIAL CONSTRUCTION CON-
TRACTS.—For purposes of this subsection—

"(A) HOME CONSTRUCTION CONTRACT.—The term 'home
construction contract' means any construction contract if
80 percent or more of the estimated total contract costs (as
of the close of the taxable year in which the contract was