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Title 26 — Internal Revenue CodeRelease 119-73

§1043 Sale of property to comply with conflict-of-interest requirements

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter O— - Gain or Loss on Disposition of Property › Part PART III— - COMMON NONTAXABLE EXCHANGES › § 1043

Last updated Apr 6, 2026|Official source

Summary

When a covered federal official (or their family) is ordered in writing to sell property to avoid a conflict of interest, they can choose a special tax rule. Under that rule, they only have to count as taxable gain the amount by which the money from the sale is more than the cost of any allowed investments they buy within 60 days after the sale. If they don’t count some or all of the gain because of this rule, that unused gain reduces the tax cost basis of the allowed investments they bought, in the order those investments were bought. Eligible person: a federal executive or judicial officer or employee (not a “special Government employee”), and their spouse or minor/dependent child if law attributes the property to them. Certificate of divestiture: a written order saying the sale is needed to follow conflict rules (including 18 U.S.C. 208) or requested by a confirmation committee; issued by the President or the Office of Government Ethics for executive branch, or by the Judicial Conference for judges, and it names the property. Permitted property: U.S. obligations or diversified funds approved by the Office of Government Ethics. Trustee rule: a trust’s trustee is treated as eligible if an eligible person or their family has a beneficial interest. Judicial officer: the Chief Justice, Supreme Court Justices, and the judges of the federal courts named in the law who serve during good behavior.

Full Legal Text

Title 26, §1043

Internal Revenue Code — Source: USLM XML via OLRC

(a)If an eligible person sells any property pursuant to a certificate of divestiture, at the election 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 period beginning on the date of such sale.
(b)For purposes of this section—
(1)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 attributable under any statute, regulation, rule, judicial canon, or executive order referred to in paragraph (2) to a person referred to in subparagraph (A).
(2)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 congressional committee as a condition of confirmation,
(B)that has been issued by the President or the Director of the Office of Government Ethics, in the case of executive branch officers or employees, or by the Judicial Conference of the United States (or its designee), in the case of judicial officers, and
(C)that identifies the specific property to be divested.
(3)The term “permitted property” means any obligation of the United States or any diversified investment fund approved by regulations issued by the Office of Government Ethics.
(4)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)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 principal or income of the trust, or
(B)any person referred to in paragraph (1)(B) has a beneficial interest in the principal or income of the trust and such interest is attributable under any statute, regulation, rule, judicial canon, or executive order referred to in paragraph (2) to a person referred to in paragraph (1)(A).
(6)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 Islands, 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 during good behavior.
(c)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 permitted property which is purchased by the taxpayer during the 60-day period described in subsection (a).

Legislative History

Notes & Related Subsidiaries

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), inserted “in the case of executive branch officers or employees, 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 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, provided 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 section 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, provided 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 certificate 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 committee, and “(ii) the justification for the sale meets the criteria set forth in subsection (b)(2)(A) thereof as implemented by the interim

Regulations

implementing such section 1043, published on April 18, 1990.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 1043

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73