holding period percentage
(4) Recapture amount For purposes of this subsection— (A) In general The recapture amount with respect to any indebtedness is the amount equal to the product of— (i) the federally-subsidized amount with respect to the indebtedness, (ii) the holding period percentage, and (iii) the income percentage. (B) Federally-subsidized amount The federally-subsidized amount with respect to any indebtedness is the amount equal to 6.25 percent of the highest principal amount of the indebtedness for which the taxpayer was liable. (C) Holding period percentage (i) In general The term “holding period percentage” means the percentage determined in accordance with the following table: If the disposition occurs during a year after the testing date which is: The holding period percentage is: The 1st such year 20 The 2d such year 40 The 3d such year 60 The 4th such year 80 The 5th such year 100 The 6th such year 80 The 7th such year 60 The 8th such year 40 The 9th such year 20. (ii) Retirements of indebtedness If the federally-subsidized indebtedness is completely repaid during any year of the 4-year period beginning on the testing date, the holding period percentage for succeeding years shall be determined by reducing ratably to zero over the succeeding 5 years the holding period percentage which would have been determined under this subparagraph had the taxpayer disposed of his interest in the residence on the date of the repayment. (D) Testing date The term “testing date” means the earliest date on which all of the following requirements are met: (i) The indebtedness is federally-subsidized indebtedness. (ii) The taxpayer is liable in whole or part for payment of the indebtedness. (E) Income percentage The term “income percentage” means the percentage (but not greater than 100 percent) which— (i) the excess of— (I) the modified adjusted gross income of the taxpayer for the taxable year in which the disposition occurs, over (II) the adjusted qualifying income for such taxable year, bears to (ii) $5,000. The percentage determined under the preceding sentence shall be rounded to the nearest whole percentage point (or, if it includes a half of a percentage point, shall be increased to the nearest whole percentage point).