[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 3174 Introduced in Senate (IS)]
106th CONGRESS
2d Session
S. 3174
To amend the Internal Revenue Code of 1986 to allow a long-term capital
gains deduction for individuals.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
October 5 (legislative day, September 22), 2000
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 allow a long-term capital
gains deduction for individuals.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. LONG-TERM CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.
(a) General Rule.--Part I of subchapter P of chapter 1 of the
Internal Revenue Code of 1986 (relating to treatment of capital gains)
is amended by redesignating section 1202 as section 1203 and by
inserting after section 1201 the following new section:
``SEC. 1202. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.
``(a) In General.--In the case of an individual, there shall be
allowed as a deduction for the taxable year an amount equal to the
lesser of--
``(1) the net capital gain of the taxpayer for the taxable
year, or
``(2) $5,000.
``(b) Sales Between Related Parties.--Gains from sales and
exchanges to any related person (within the meaning of section 267(b)
or 707(b)(1)) shall not be taken into account in determining net
capital gain.
``(c) Special Rule for Section 1250 Property.--Solely for purposes
of this section, in applying section 1250 to any disposition of section
1250 property, all depreciation adjustments in respect of the property
shall be treated as additional depreciation.
``(d) Section Not To Apply to Certain Taxpayers.--No deduction
shall be allowed under this section to--
``(1) an individual with respect to whom a deduction under
section 151 is allowable to another taxpayer for a taxable year
beginning in the calendar year in which such individual's
taxable year begins,
``(2) a married individual (within the meaning of section
7703) filing a separate return for the taxable year, or
``(3) an estate or trust.
``(e) Special Rule for Pass-Thru Entities.--
``(1) In general.--In applying this section with respect to
any pass-thru entity, the determination of when the sale or
exchange occurs shall be made at the entity level.
``(2) Pass-thru entity defined.--For purposes of paragraph
(1), the term `pass-thru entity' means--
``(A) a regulated investment company,
``(B) a real estate investment trust,
``(C) an S corporation,
``(D) a partnership, and
``(E) a common trust fund.''.
(b) Coordination With Maximum Capital Gains Rate.--Paragraph (3) of
section 1(h) of the Internal Revenue Code of 1986 (relating to maximum
capital gains rate) is amended to read as follows:
``(3) Coordination with other provisions.--For purposes of
this subsection, the amount of the net capital gain shall be
reduced (but not below zero) by the sum of--
``(A) the amount of the net capital gain taken into
account under section 1202(a) for the taxable year,
plus
``(B) the amount which the taxpayer elects to take
into account as investment income for the taxable year
under section 163(d)(4)(B)(iii).''.
(c) Deduction Allowable in Computing Adjusted Gross Income.--
Subsection (a) of section 62 of the Internal Revenue Code of 1986
(defining adjusted gross income) is amended by inserting after
paragraph (17) the following new paragraph:
``(18) Long-term capital gains.--The deduction allowed by
section 1202.''.
(d) Treatment of Collectibles.--
(1) In general.--Section 1222 of the Internal Revenue Code
of 1986 (relating to other terms relating to capital gains and
losses) is amended by inserting after paragraph (11) the
following new paragraph:
``(12) Special rule for collectibles.--
``(A) In general.--Any gain or loss from the sale
or exchange of a collectible shall be treated as a
short-term capital gain or loss (as the case may be),
without regard to the period such asset was held. The
preceding sentence shall apply only to the extent the gain or loss is
taken into account in computing taxable income.
``(B) Treatment of certain sales of interest in
partnership, etc.--For purposes of subparagraph (A),
any gain from the sale or exchange of an interest in a
partnership, S corporation, or trust which is
attributable to unrealized appreciation in the value of
collectibles held by such entity shall be treated as
gain from the sale or exchange of a collectible. Rules
similar to the rules of section 751(f) shall apply for
purposes of the preceding sentence.
``(C) Collectible.--For purposes of this paragraph,
the term `collectible' means any capital asset which is
a collectible (as defined in section 408(m) without
regard to paragraph (3) thereof).''.
(2) Charitable deduction not affected.--
(A) Paragraph (1) of section 170(e) of such Code is
amended by adding at the end the following new
sentence: ``For purposes of this paragraph, section
1222 shall be applied without regard to paragraph (12)
thereof (relating to special rule for collectibles).''.
(B) Clause (iv) of section 170(b)(1)(C) of such
Code is amended by inserting before the period at the
end the following: ``and section 1222 shall be applied
without regard to paragraph (12) thereof (relating to
special rule for collectibles)''.
(e) Conforming Amendments.--
(1) Section 57(a)(7) of the Internal Revenue Code of 1986
is amended by striking ``1202'' and inserting ``1203''.
(2) Clause (iii) of section 163(d)(4)(B) of such Code is
amended to read as follows:
``(iii) the sum of--
``(I) the portion of the net
capital gain referred to in clause
(ii)(II) (or, if lesser, the net
capital gain referred to in clause
(ii)(I)) taken into account under
section 1202, reduced by the amount of
the deduction allowed with respect to
such gain under section 1202, plus
``(II) so much of the gain
described in subclause (I) which is not
taken into account under section 1202
and which the taxpayer elects to take
into account under this clause.''.
(3) Subparagraph (B) of section 172(d)(2) of such Code is
amended to read as follows:
``(B) the deduction under section 1202 and the
exclusion under section 1203 shall not be allowed.''.
(4) Section 642(c)(4) of such Code is amended by striking
``1202'' and inserting ``1203''.
(5) Section 643(a)(3) of such Code is amended by striking
``1202'' and inserting ``1203''.
(6) Paragraph (4) of section 691(c) of such Code is amended
inserting ``1203,'' after ``1202,''.
(7) The second sentence of section 871(a)(2) of such Code
is amended by inserting ``or 1203'' after ``section 1202''.
(8) The last sentence of section 1044(d) of such Code is
amended by striking ``1202'' and inserting ``1203''.
(9) Paragraph (1) of section 1402(i) of such Code is
amended by inserting ``, and the deduction provided by section
1202 and the exclusion provided by section 1203 shall not
apply'' before the period at the end.
(10) Section 121 of such Code is amended by adding at the
end the following new subsection:
``(h) Cross Reference.--
``For treatment of eligible gain not
excluded under subsection (a), see section 1202.''.
(11) Section 1203 of such Code, as redesignated by
subsection (a), is amended by adding at the end the following
new subsection:
``(l) Cross Reference.--
``For treatment of eligible gain not
excluded under subsection (a), see section 1202.''.
(12) The table of sections for part I of subchapter P of
chapter 1 of such Code is amended by striking the item relating
to section 1202 and by inserting after the item relating to
section 1201 the following new items:
``Sec. 1202. Capital gains deduction for
individuals.
``Sec. 1203. 50-percent exclusion for
gain from certain small
business stock.''.
(f) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2000.
(2) Collectibles.--The amendments made by subsection (d)
shall apply to sales and exchanges after December 31, 2000.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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