To amend the Internal Revenue Code of 1986 to allow individuals to defer recognition of reinvested capital gains distributions from regulated investment companies.

Amends the Internal Revenue Code to provide that, in the case of an electing individual, no gain shall be recognized on the receipt of a capital gain dividend distributed by a regulated investment company if such capital gain dividend is automatically reinvested in additional shares of the company pursuant to a dividend reinvestment plan.

[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 496 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 496

  To amend the Internal Revenue Code of 1986 to allow individuals to 
   defer recognition of reinvested capital gains distributions from 
                    regulated investment companies.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 29, 2003

 Mr. Saxton (for himself, Mr. Abercrombie, Mr. Akin, Mr. Andrews, Mrs. 
Cubin, Ms. Dunn, Mr. English, Mr. Ferguson, Mr. Fossella, Mrs. Johnson 
    of Connecticut, Mr. Kolbe, Mr. Lucas of Kentucky, Mr. Paul, Mr. 
 Rohrabacher, Mr. Shays, and Mr. Wilson of South Carolina) introduced 
  the following bill; which was referred to the Committee on Ways and 
                                 Means

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to allow individuals to 
   defer recognition of reinvested capital gains distributions from 
                    regulated investment companies.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. DEFERRAL OF CERTAIN REINVESTED CAPITAL GAIN DIVIDENDS OF 
              REGULATED INVESTMENT COMPANIES.

    (a) In General.--Part III of subchapter O of chapter 1 of the 
Internal Revenue Code of 1986 (relating to common nontaxable exchanges) 
is amended by inserting after section 1045 the following new section:

``SEC. 1046. CERTAIN REINVESTED CAPITAL GAIN DIVIDENDS OF REGULATED 
              INVESTMENT COMPANIES.

    ``(a) Nonrecognition of Gain.--In the case of an individual 
electing the application of this section, no gain shall be recognized 
on the receipt of a capital gain dividend distributed by a regulated 
investment company to which part I of subchapter M applies if such 
capital gain dividend is automatically reinvested in additional shares 
of the company pursuant to a dividend reinvestment plan.
    ``(b) Limitation.--
            ``(1) In general.--The amount of gain that may be deferred 
        under subsection (a) for any taxable year shall not exceed--
                    ``(A) $3,000, or
                    ``(B) in the case of a joint return, twice the 
                amount in subparagraph (A).
            ``(2) Inflation adjustment of maximum exclusion.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2003, the amount in 
                paragraph (1)(A) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2002' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                    ``(B) Rounding rules.--The amount in paragraph 
                (1)(A), after adjustment under paragraph (2)(A), shall 
                be rounded to the nearest multiple of $100.
    ``(c) Capital Gain Dividend.--For purposes of this section, the 
term `capital gain dividend' has the meaning given to such term by 
section 852(b)(3)(C).
    ``(d) Recapture of Previously Deferred Capital Gain Dividends.--
Amounts deferred pursuant to subsection (a) (and not previously 
recognized under this subsection) shall be recognized upon the 
subsequent sale or redemption of shares in the distributing company to 
the extent of the taxpayer's adjusted basis in the shares so sold or 
redeemed.
    ``(e) 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, or
            ``(2) an estate or trust.
    ``(f) Election.--An election under this section shall be made at 
such time and in such manner as the Secretary may prescribe.''.
    (b) Conforming amendments.--
            (1) Section 852(b)(3)(B) is amended by adding at the end 
        the following new sentence: ``For rules regarding 
        nonrecognition of gain with respect to certain reinvested 
        capital gain dividends received by individuals, see section 
        1046.''.
            (2) The table of sections for part III of subchapter O of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 1045 the following new item:

``Sec. 1046. Certain Reinvested Capital Gain Dividends of Regulated 
                            Investment Companies.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.
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