Individual Investment Account Act of 1997

Individual Investment Account Act of 1997 - Amends the Internal Revenue Code to allow a deduction for amounts contributed to individual investment accounts. Allows tax-free distributions, limited to $15,000 for all taxable years, from such accounts for use in the purchase of a principal residence by a first-time homebuyer. Makes such accounts tax-exempt unless the individual engages in prohibited transactions. Adjusts dollar limitations under this Act for inflation. Allows such deduction in determining adjusted gross income.

Exempts such accounts from estate tax.

Excludes from gross income gain from the sale or exchange of property if, during the five-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as a principal residence for periods aggregating three years or more. Limits such exclusion to the amount paid to an individual investment account during the one-year period beginning on the date of the sale or exchange.

Provides for adjusting the basis of a residence acquired through the use of an individual investment account.