[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1952 Introduced in Senate (IS)]
106th CONGRESS
1st Session
S. 1952
To amend the Internal Revenue Code of 1986 to provide a simplified
method for determining a partner's share of items of a partnership
which is a qualified investment club.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 17, 1999
Mr. Abraham introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide a simplified
method for determining a partner's share of items of a partnership
which is a qualified investment club.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Investors Tax Simplification
Act of 1999''.
SEC. 2. ELECTION TO USE SIMPLIFIED METHOD FOR QUALIFIED INVESTMENT
CLUBS.
(a) In General.--Part I of subchapter K of chapter 1 of the
Internal Revenue Code of 1986 (relating to determination of tax
liability of partners and partnerships) is amended by inserting after
section 704 the following new section:
``SEC. 704A. ELECTION TO USE SIMPLIFIED METHOD FOR QUALIFIED INVESTMENT
CLUBS.
``(a) In General.--Notwithstanding any other provision of this
subchapter, a partner's distributive share of all items of income,
gain, loss, deduction, or credit of a qualified investment club shall
be determined under the simplified method.
``(b) Simplified Method.--For purposes of this section--
``(1) In general.--The term `simplified method' means a
method pursuant to which a partnership allocates each of the
items of income, gain, loss, deduction, and credit for its
taxable year to its partners based on their proportionate
interests on the last day of such taxable year in partnership
profits.
``(2) Exception for distributions during year.--The
partnership may take into account the partners' varying
interests in partnership profits resulting from distributions
during the taxable year in determining the partners' interests
in partnership profits for purposes of paragraph (1).
``(c) Definitions.--For purposes of this section--
``(1) Qualified investment club.--The term `qualified
investment club' means, with respect to any taxable year, any
partnership--
``(A) which is not required to be registered under
the Investment Company Act of 1940,
``(B) for which no person who is registered as an
investment adviser under the Investment Advisers Act of
1940 substantially participates in the management or
investment decisions thereof,
``(C) all of the partners of which are qualified
partners for the calendar year in which the taxable
year of the partnership ends,
``(D) at least 90 percent of the gross income of
which is derived from items described in section
851(b)(2),
``(E) at least 90 percent of the value of the total
assets of which, at the end of each quarter of such
year, consists of cash, cash items (including
receivables), and securities,
``(F) the taxable year of which is the calendar
year, and
``(G) for which an election under subsection (e) is
in effect.
``(2) Qualified partner.--
``(A) In general.--The term `qualified partner'
means--
``(i) any individual other than a
nonresident alien,
``(ii) any individual retirement plan, and
``(iii) any education individual retirement
account (as defined in section 530).
``(B) Limitation on contributions by individuals.--
An individual shall not be a qualified partner for any
calendar year if the aggregate contributions by such
individual to qualified investment clubs (determined
without regard to paragraph (1)(C)) during such
calendar year exceeds $3,000 or exceeds $3,000 during
any of the 5 preceding calendar years.
``(C) Limitation on contributions by trusts.--
``(i) In general.--A plan or account
referred to in subparagraph (A) (hereafter in
this subparagraph referred to as a `trust')
shall not be a qualified partner for any
calendar year if the aggregate contributions to qualified investment
clubs (determined without regard to paragraph (1)(C)) during such
calendar year by such trust exceeds the excess of--
``(I) the product of $3,000 and the
number of years before such calendar
year that such trust held any asset,
over
``(II) the aggregate contributions
made to qualified investment clubs (as
so determined) by such trust during all
prior calendar years.
``(ii) Aggregation of related trusts.--For
purposes of this subparagraph--
``(I) all trusts having the same
beneficiary shall be treated as 1
trust, and
``(II) only the trust having the
longest period described in clause
(i)(I) shall be taken into account
thereunder.
``(iii) Fractions of a year.--For purposes
of clause (i)(I), a fraction of a year shall be
counted as a whole year.
``(D) No attribution between individuals and
trusts.--Notwithstanding any other provision of this
title, there shall be no attribution of contributions
between a trust and an individual.
``(3) Securities.--
``(A) Definition.--The term `security' has the
meaning given to such term by section 475(c)(2)
(determined without regard to subparagraph (F)
thereof).
``(B) Certain rules to apply.--For purposes of
paragraph (1)(E), rules similar to the rules of
paragraphs (4) and (5) of section 851(c), shall apply.
``(d) Inflation Adjustment.--In the case of calendar years after
1999, the $3,000 amounts contained in subsection (c)(2) shall each be
increased for any calendar year after 2000 by an amount equal to--
``(1) $3,000, multiplied by
``(2) the cost-of-living adjustment under section 1(f)(3)
for such calendar year, determined by substituting `calendar
year 1999' for `calendar year 1992' in subparagraph (B)
thereof.
Any increase under this subsection which is not a multiple of $50 shall
be rounded to the nearest multiple of $50.
``(e) Election.--An election under this subsection shall be made on
the return for the taxable year for which it is made and shall apply to
such taxable year and all subsequent taxable years for which the
partnership is a qualified investment club, unless the election is
revoked with the consent of the Secretary.
``(f) Termination of Qualified Investment Club Status.--An election
under subsection (e) shall terminate as of the 1st day of any taxable
year during which the partnership ceases to be a qualified investment
club and, solely for purposes of section 704(c), each partner shall be
treated as contributing on such first day such partner's pro rata share
of the partnership's assets and liabilities on such first day to a new
partnership.
``(g) Inadvertent Invalid Elections or Terminations.--The Secretary
shall provide a relief mechanism for treating a partnership as a
qualified investment club in circumstances where--
``(1) an election under subsection (e) was not effective
for the taxable year for which made by reason of an inadvertent
failure to satisfy any requirement of subsection (c), or
``(2) there is an inadvertent termination under subsection
(f) of such an election.
``(h) Election After Termination.--If an election under subsection
(e) by a partnership is terminated or revoked, such partnership shall
not be eligible to make an election under subsection (e) for any
taxable year before its 5th taxable year which begins after the 1st
taxable year for which such termination or revocation is effective,
unless the Secretary consents to such election.
``(i) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to carry out the purposes of this section,
including regulations regarding the status of an individual or trust as
a qualified partner.''.
(b) Clerical Amendment.--The table of sections for part I of
subchapter K of chapter 1 of such Code is amended by inserting after
the item relating to section 704 the following new item:
``Sec. 704A. Election to use simplified
method for qualified investment
clubs.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment of this
Act.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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