Home Ownership Opportunity Act of 1986

Home Ownership Opportunity Act of 1986 - Amends the Internal Revenue Code to allow distributions from an individual retirement account or annuity to be used for the purchase of a home by a first-time homebuyer. Limits the amounts of such a distribution to a $10,000 aggregate maximum.

Reduces the basis of any principal residence by the amount of distribution used for the purchase. Treats as ordinary income any gain realized on the sale of a principal residence to the extent of any amount of such distribution used for the purchase.

Defines a "first-time homebuyer" as any individual who has had no present ownership interest in a principal residence during the three-year prior to the purchase of the principal residence for which such distributions are used.