Rep. Benjamin S. Rosenthal (D-N.Y.) plans to introduce legislation to make sweeping tax law changes aimed at curbing conversions of rental property to condominiums.

Rosenthal's proposal would discourage landlords from selling rental properties to condominium developers by taxing profits on these sales at ordinary income tax rates, rather than at the far lower rates for capital gains. Income from sales to tenant associations, on the other hand, would be taxed at the capital gains rate in an effort to encourage such transactions.

Rosenthal's proposal came as hearings opened yesterday in his House commerce, consumer and monetary affairs subcommitte, which has been investigating the conversion trend and the operation of the nation's largest converter, Chicago-based American Invsco (pronounced Invesco).

In a packed hearing room yesterday, a panel of seven elderly men and women from the Washington area and around the country told of being forced from their homes by conversions that put price tags on their apartments that were far out of their reach.

Invsco Chairman Nicholas Gouletas, who last December narrowly avoided a contempt-of-Congress citation in a showdown with Rosenthal over business records the subcommittee sought, will testify Wednesday.

Yesterday, a spokesman said that the first day's testimony was "unbalanced," presenting only the views of those opposed to conversion and ignoring the "overwhelming number of home buyers who have benefited."

Martin Merson, a 75-year-old Naval Academy graduate suffering from a progressive disease that attacks the central nervous system, told the subcommittee of learning that his $495-a-month rent would rise to a $1,400-a-month payment to buy his converted apartment at the Promenade in Bethesda.

"I don't have that kind of money," Merson told the panel of congressmen. "The meager savings I have are used to supplement my income."

That conversion, begun last July, sparked out of the most ferocious tenant battles in the area and set off the congressional investigation by Rosenthal. He believes that conversions are displacing low- and moderate-income tenants, causing speculative buying that may be fueling inflation and using huge chunks of the already scarce pool of mortgage money available to home buyers.

The tax legislation, which he says he will introduce within the next two weeks, would reverse the current tax situation that encourages landlords to sell their buildings to converters rather than tenant associations. Rosenthal also is studying tax changes to discourage individual speculators who buy the newly converted units and rent them out to tenants.