A bill to amend the Internal Revenue Code of 1954 to permit the rollover of certain partial distributions from qualified plans, and for other purposes.

Amends the Internal Revenue Code to allow the rollover of certain partial distributions from employee benefit plans into individual retirement plans if: (1) the distribution is equal to at least 50 percent of the employee's balance; (2) the distribution is not one of a series of periodic payments; and (3) the employee elects such treatment. Denies ten year averaging and capital gains treatment for any subsequent distributions if such a rollover is made. Makes eligible for such a rollover any partial distributions paid to a spouse of an employee after the employee's death.

Revises related parties rules to require that a payor of expenses and interest be placed on the cash method of accounting for purposes of deducting business expenses and interest owed to a related party cash-basis taxpayer. Extends present rules relating to such payments by Subchapter S corporations to such payments by partnerships.

Allows an income tax deduction, as an ordinary loss, of losses incurred on the disposition of preferred stock of a domestic small business corporation. (Present law limits such treatment to losses incurred on the disposition of common stock in such a corporation.)

Makes technical corrections to reinstate provisions enacted by the Highway Revenue Act of 1982 concerning tax-exempt interest income of mutual funds.