| 1 | 1 | | I |
|---|
| 2 | 2 | | 119THCONGRESS |
|---|
| 3 | 3 | | 1 |
|---|
| 4 | 4 | | STSESSION H. R. 1857 |
|---|
| 5 | 5 | | To amend the Internal Revenue Code of 1986 to provide for the indexing |
|---|
| 6 | 6 | | of certain assets for purposes of determining gain or loss. |
|---|
| 7 | 7 | | IN THE HOUSE OF REPRESENTATIVES |
|---|
| 8 | 8 | | MARCH5, 2025 |
|---|
| 9 | 9 | | Mr. D |
|---|
| 10 | 10 | | AVIDSONintroduced the following bill; which was referred to the |
|---|
| 11 | 11 | | Committee on Ways and Means |
|---|
| 12 | 12 | | A BILL |
|---|
| 13 | 13 | | To amend the Internal Revenue Code of 1986 to provide |
|---|
| 14 | 14 | | for the indexing of certain assets for purposes of deter- |
|---|
| 15 | 15 | | mining gain or loss. |
|---|
| 16 | 16 | | Be it enacted by the Senate and House of Representa-1 |
|---|
| 17 | 17 | | tives of the United States of America in Congress assembled, 2 |
|---|
| 18 | 18 | | SECTION 1. SHORT TITLE. 3 |
|---|
| 19 | 19 | | This Act may be cited as the ‘‘Capital Gains Inflation 4 |
|---|
| 20 | 20 | | Relief Act of 2025’’. 5 |
|---|
| 21 | 21 | | SEC. 2. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF 6 |
|---|
| 22 | 22 | | DETERMINING GAIN OR LOSS. 7 |
|---|
| 23 | 23 | | (a) I |
|---|
| 24 | 24 | | NGENERAL.—Part II of subchapter O of chap-8 |
|---|
| 25 | 25 | | ter 1 of the Internal Revenue Code of 1986 (relating to 9 |
|---|
| 26 | 26 | | basis rules of general application) is amended by redesig-10 |
|---|
| 27 | 27 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 28 | 28 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 2 |
|---|
| 29 | 29 | | •HR 1857 IH |
|---|
| 30 | 30 | | nating section 1023 as section 1024 and by inserting after 1 |
|---|
| 31 | 31 | | section 1022 the following new section: 2 |
|---|
| 32 | 32 | | ‘‘SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES 3 |
|---|
| 33 | 33 | | OF DETERMINING GAIN OR LOSS. 4 |
|---|
| 34 | 34 | | ‘‘(a) G |
|---|
| 35 | 35 | | ENERALRULE.— 5 |
|---|
| 36 | 36 | | ‘‘(1) I |
|---|
| 37 | 37 | | NDEXED BASIS SUBSTITUTED FOR AD -6 |
|---|
| 38 | 38 | | JUSTED BASIS.—Solely for purposes of determining 7 |
|---|
| 39 | 39 | | gain or loss on the sale or other disposition by a tax-8 |
|---|
| 40 | 40 | | payer (other than a corporation) of an indexed asset 9 |
|---|
| 41 | 41 | | which has been held for more than 3 years, the in-10 |
|---|
| 42 | 42 | | dexed basis of the asset shall be substituted for its 11 |
|---|
| 43 | 43 | | adjusted basis. 12 |
|---|
| 44 | 44 | | ‘‘(2) E |
|---|
| 45 | 45 | | XCEPTION FOR DEPRECIATION , ETC.— 13 |
|---|
| 46 | 46 | | The deductions for depreciation, depletion, and am-14 |
|---|
| 47 | 47 | | ortization shall be determined without regard to the 15 |
|---|
| 48 | 48 | | application of paragraph (1) to the taxpayer or any 16 |
|---|
| 49 | 49 | | other person. 17 |
|---|
| 50 | 50 | | ‘‘(3) W |
|---|
| 51 | 51 | | RITTEN DOCUMENTATION REQUIRE -18 |
|---|
| 52 | 52 | | MENT.—Paragraph (1) shall apply only with respect 19 |
|---|
| 53 | 53 | | to indexed assets for which the taxpayer has written 20 |
|---|
| 54 | 54 | | documentation of the original purchase price paid or 21 |
|---|
| 55 | 55 | | incurred by the taxpayer to acquire such asset. 22 |
|---|
| 56 | 56 | | ‘‘(b) I |
|---|
| 57 | 57 | | NDEXEDASSET.— 23 |
|---|
| 58 | 58 | | ‘‘(1) I |
|---|
| 59 | 59 | | N GENERAL.—For purposes of this sec-24 |
|---|
| 60 | 60 | | tion, the term ‘indexed asset’ means— 25 |
|---|
| 61 | 61 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 62 | 62 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 3 |
|---|
| 63 | 63 | | •HR 1857 IH |
|---|
| 64 | 64 | | ‘‘(A) any common stock in a C corporation 1 |
|---|
| 65 | 65 | | (other than a foreign corporation), 2 |
|---|
| 66 | 66 | | ‘‘(B) any digital asset, or 3 |
|---|
| 67 | 67 | | ‘‘(C) any tangible property, 4 |
|---|
| 68 | 68 | | which is a capital asset or property used in the trade 5 |
|---|
| 69 | 69 | | or business (as defined in section 1231(b)). 6 |
|---|
| 70 | 70 | | ‘‘(2) S |
|---|
| 71 | 71 | | TOCK IN CERTAIN FOREIGN CORPORA -7 |
|---|
| 72 | 72 | | TIONS INCLUDED.—For purposes of this section— 8 |
|---|
| 73 | 73 | | ‘‘(A) I |
|---|
| 74 | 74 | | N GENERAL.—The term ‘indexed 9 |
|---|
| 75 | 75 | | asset’ includes common stock in a foreign cor-10 |
|---|
| 76 | 76 | | poration which is regularly traded on an estab-11 |
|---|
| 77 | 77 | | lished securities market. 12 |
|---|
| 78 | 78 | | ‘‘(B) E |
|---|
| 79 | 79 | | XCEPTION.—Subparagraph (A) 13 |
|---|
| 80 | 80 | | shall not apply to— 14 |
|---|
| 81 | 81 | | ‘‘(i) stock of a foreign investment 15 |
|---|
| 82 | 82 | | company, 16 |
|---|
| 83 | 83 | | ‘‘(ii) stock in a passive foreign invest-17 |
|---|
| 84 | 84 | | ment company (as defined in section 18 |
|---|
| 85 | 85 | | 1297), 19 |
|---|
| 86 | 86 | | ‘‘(iii) stock in a foreign corporation 20 |
|---|
| 87 | 87 | | held by a United States person who meets 21 |
|---|
| 88 | 88 | | the requirements of section 1248(a)(2), 22 |
|---|
| 89 | 89 | | and 23 |
|---|
| 90 | 90 | | ‘‘(iv) stock in a foreign personal hold-24 |
|---|
| 91 | 91 | | ing company. 25 |
|---|
| 92 | 92 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 93 | 93 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 4 |
|---|
| 94 | 94 | | •HR 1857 IH |
|---|
| 95 | 95 | | ‘‘(C) TREATMENT OF AMERICAN DEPOSI -1 |
|---|
| 96 | 96 | | TORY RECEIPTS.—An American depository re-2 |
|---|
| 97 | 97 | | ceipt for common stock in a foreign corporation 3 |
|---|
| 98 | 98 | | shall be treated as common stock in such cor-4 |
|---|
| 99 | 99 | | poration. 5 |
|---|
| 100 | 100 | | ‘‘(3) D |
|---|
| 101 | 101 | | IGITAL ASSET.—For purposes of this sec-6 |
|---|
| 102 | 102 | | tion, the term ‘digital asset’ means any natively elec-7 |
|---|
| 103 | 103 | | tronic asset which— 8 |
|---|
| 104 | 104 | | ‘‘(A) is recorded on a cryptographically se-9 |
|---|
| 105 | 105 | | cured distributed ledger, and 10 |
|---|
| 106 | 106 | | ‘‘(B) is designed to confer only economic 11 |
|---|
| 107 | 107 | | or access rights. 12 |
|---|
| 108 | 108 | | ‘‘(c) I |
|---|
| 109 | 109 | | NDEXEDBASIS.—For purposes of this sec-13 |
|---|
| 110 | 110 | | tion— 14 |
|---|
| 111 | 111 | | ‘‘(1) G |
|---|
| 112 | 112 | | ENERAL RULE.—The indexed basis for 15 |
|---|
| 113 | 113 | | any asset is— 16 |
|---|
| 114 | 114 | | ‘‘(A) the adjusted basis of the asset, in-17 |
|---|
| 115 | 115 | | creased by 18 |
|---|
| 116 | 116 | | ‘‘(B) the applicable inflation adjustment. 19 |
|---|
| 117 | 117 | | ‘‘(2) A |
|---|
| 118 | 118 | | PPLICABLE INFLATION ADJUSTMENT .— 20 |
|---|
| 119 | 119 | | The applicable inflation adjustment for any asset is 21 |
|---|
| 120 | 120 | | an amount equal to— 22 |
|---|
| 121 | 121 | | ‘‘(A) the adjusted basis of the asset, multi-23 |
|---|
| 122 | 122 | | plied by 24 |
|---|
| 123 | 123 | | ‘‘(B) the percentage (if any) by which— 25 |
|---|
| 124 | 124 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 125 | 125 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 5 |
|---|
| 126 | 126 | | •HR 1857 IH |
|---|
| 127 | 127 | | ‘‘(i) the gross domestic product 1 |
|---|
| 128 | 128 | | deflator for the last calendar quarter end-2 |
|---|
| 129 | 129 | | ing before the asset is disposed of, exceeds 3 |
|---|
| 130 | 130 | | ‘‘(ii) the gross domestic product 4 |
|---|
| 131 | 131 | | deflator for the last calendar quarter end-5 |
|---|
| 132 | 132 | | ing before the asset was acquired by the 6 |
|---|
| 133 | 133 | | taxpayer. 7 |
|---|
| 134 | 134 | | The percentage under subparagraph (B) shall be 8 |
|---|
| 135 | 135 | | rounded to the nearest |
|---|
| 136 | 136 | | 1 |
|---|
| 137 | 137 | | ⁄10of 1 percentage point. 9 |
|---|
| 138 | 138 | | ‘‘(3) G |
|---|
| 139 | 139 | | ROSS DOMESTIC PRODUCT DEFLATOR .— 10 |
|---|
| 140 | 140 | | The gross domestic product deflator for any cal-11 |
|---|
| 141 | 141 | | endar quarter is the implicit price deflator for the 12 |
|---|
| 142 | 142 | | gross domestic product for such quarter (as shown 13 |
|---|
| 143 | 143 | | in the last revision thereof released by the Secretary 14 |
|---|
| 144 | 144 | | of Commerce before the close of the following cal-15 |
|---|
| 145 | 145 | | endar quarter). 16 |
|---|
| 146 | 146 | | ‘‘(d) S |
|---|
| 147 | 147 | | USPENSION OFHOLDINGPERIODWHEREDI-17 |
|---|
| 148 | 148 | | MINISHEDRISK OFLOSS; TREATMENT OF SHORT 18 |
|---|
| 149 | 149 | | S |
|---|
| 150 | 150 | | ALES.— 19 |
|---|
| 151 | 151 | | ‘‘(1) I |
|---|
| 152 | 152 | | N GENERAL.—If the taxpayer (or a re-20 |
|---|
| 153 | 153 | | lated person) enters into any transaction which sub-21 |
|---|
| 154 | 154 | | stantially reduces the risk of loss from holding any 22 |
|---|
| 155 | 155 | | asset, such asset shall not be treated as an indexed 23 |
|---|
| 156 | 156 | | asset for the period of such reduced risk. 24 |
|---|
| 157 | 157 | | ‘‘(2) S |
|---|
| 158 | 158 | | HORT SALES.— 25 |
|---|
| 159 | 159 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 160 | 160 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 6 |
|---|
| 161 | 161 | | •HR 1857 IH |
|---|
| 162 | 162 | | ‘‘(A) IN GENERAL.—In the case of a short 1 |
|---|
| 163 | 163 | | sale of an indexed asset with a short sale period 2 |
|---|
| 164 | 164 | | in excess of 3 years, for purposes of this title, 3 |
|---|
| 165 | 165 | | the amount realized shall be an amount equal 4 |
|---|
| 166 | 166 | | to the amount realized (determined without re-5 |
|---|
| 167 | 167 | | gard to this paragraph) increased by the appli-6 |
|---|
| 168 | 168 | | cable inflation adjustment. In applying sub-7 |
|---|
| 169 | 169 | | section (c)(2) for purposes of the preceding sen-8 |
|---|
| 170 | 170 | | tence, the date on which the property is sold 9 |
|---|
| 171 | 171 | | short shall be treated as the date of acquisition 10 |
|---|
| 172 | 172 | | and the closing date for the sale shall be treat-11 |
|---|
| 173 | 173 | | ed as the date of disposition. 12 |
|---|
| 174 | 174 | | ‘‘(B) S |
|---|
| 175 | 175 | | HORT SALE PERIOD.—For purposes 13 |
|---|
| 176 | 176 | | of subparagraph (A), the short sale period be-14 |
|---|
| 177 | 177 | | gins on the day that the property is sold and 15 |
|---|
| 178 | 178 | | ends on the closing date for the sale. 16 |
|---|
| 179 | 179 | | ‘‘(e) T |
|---|
| 180 | 180 | | REATMENT OF REGULATED INVESTMENT 17 |
|---|
| 181 | 181 | | C |
|---|
| 182 | 182 | | OMPANIES ANDREALESTATEINVESTMENTTRUSTS.— 18 |
|---|
| 183 | 183 | | ‘‘(1) A |
|---|
| 184 | 184 | | DJUSTMENTS AT ENTITY LEVEL .— 19 |
|---|
| 185 | 185 | | ‘‘(A) I |
|---|
| 186 | 186 | | N GENERAL.—Except as otherwise 20 |
|---|
| 187 | 187 | | provided in this paragraph, the adjustment 21 |
|---|
| 188 | 188 | | under subsection (a) shall be allowed to any 22 |
|---|
| 189 | 189 | | qualified investment entity (including for pur-23 |
|---|
| 190 | 190 | | poses of determining the earnings and profits of 24 |
|---|
| 191 | 191 | | such entity). 25 |
|---|
| 192 | 192 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 193 | 193 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 7 |
|---|
| 194 | 194 | | •HR 1857 IH |
|---|
| 195 | 195 | | ‘‘(B) EXCEPTION FOR CORPORATE SHARE -1 |
|---|
| 196 | 196 | | HOLDERS.—Under regulations— 2 |
|---|
| 197 | 197 | | ‘‘(i) in the case of a distribution by a 3 |
|---|
| 198 | 198 | | qualified investment entity (directly or in-4 |
|---|
| 199 | 199 | | directly) to a corporation— 5 |
|---|
| 200 | 200 | | ‘‘(I) the determination of whether 6 |
|---|
| 201 | 201 | | such distribution is a dividend shall be 7 |
|---|
| 202 | 202 | | made without regard to this section, 8 |
|---|
| 203 | 203 | | and 9 |
|---|
| 204 | 204 | | ‘‘(II) the amount treated as gain 10 |
|---|
| 205 | 205 | | by reason of the receipt of any capital 11 |
|---|
| 206 | 206 | | gain dividend shall be increased by the 12 |
|---|
| 207 | 207 | | percentage by which the entity’s net 13 |
|---|
| 208 | 208 | | capital gain for the taxable year (de-14 |
|---|
| 209 | 209 | | termined without regard to this sec-15 |
|---|
| 210 | 210 | | tion) exceeds the entity’s net capital 16 |
|---|
| 211 | 211 | | gain for such year determined with re-17 |
|---|
| 212 | 212 | | gard to this section, and 18 |
|---|
| 213 | 213 | | ‘‘(ii) there shall be other appropriate 19 |
|---|
| 214 | 214 | | adjustments (including deemed distribu-20 |
|---|
| 215 | 215 | | tions) so as to ensure that the benefits of 21 |
|---|
| 216 | 216 | | this section are not allowed (directly or in-22 |
|---|
| 217 | 217 | | directly) to corporate shareholders of quali-23 |
|---|
| 218 | 218 | | fied investment entities. 24 |
|---|
| 219 | 219 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 220 | 220 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 8 |
|---|
| 221 | 221 | | •HR 1857 IH |
|---|
| 222 | 222 | | For purposes of the preceding sentence, any 1 |
|---|
| 223 | 223 | | amount includible in gross income under section 2 |
|---|
| 224 | 224 | | 852(b)(3)(D) shall be treated as a capital gain 3 |
|---|
| 225 | 225 | | dividend and an S corporation shall not be 4 |
|---|
| 226 | 226 | | treated as a corporation. 5 |
|---|
| 227 | 227 | | ‘‘(C) E |
|---|
| 228 | 228 | | XCEPTION FOR QUALIFICATION 6 |
|---|
| 229 | 229 | | PURPOSES.—This section shall not apply for 7 |
|---|
| 230 | 230 | | purposes of sections 851(b) and 856(c). 8 |
|---|
| 231 | 231 | | ‘‘(D) E |
|---|
| 232 | 232 | | XCEPTION FOR CERTAIN TAXES IM -9 |
|---|
| 233 | 233 | | POSED AT ENTITY LEVEL .— 10 |
|---|
| 234 | 234 | | ‘‘(i) T |
|---|
| 235 | 235 | | AX ON FAILURE TO DISTRIBUTE 11 |
|---|
| 236 | 236 | | ENTIRE GAIN.—If any amount is subject to 12 |
|---|
| 237 | 237 | | tax under section 852(b)(3)(A) for any 13 |
|---|
| 238 | 238 | | taxable year, the amount on which tax is 14 |
|---|
| 239 | 239 | | imposed under such section shall be in-15 |
|---|
| 240 | 240 | | creased by the percentage determined 16 |
|---|
| 241 | 241 | | under subparagraph (B)(i)(II). A similar 17 |
|---|
| 242 | 242 | | rule shall apply in the case of any amount 18 |
|---|
| 243 | 243 | | subject to tax under paragraph (2) or (3) 19 |
|---|
| 244 | 244 | | of section 857(b) to the extent attributable 20 |
|---|
| 245 | 245 | | to the excess of the net capital gain over 21 |
|---|
| 246 | 246 | | the deduction for dividends paid deter-22 |
|---|
| 247 | 247 | | mined with reference to capital gain divi-23 |
|---|
| 248 | 248 | | dends only. The first sentence of this 24 |
|---|
| 249 | 249 | | clause shall not apply to so much of the 25 |
|---|
| 250 | 250 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 251 | 251 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 9 |
|---|
| 252 | 252 | | •HR 1857 IH |
|---|
| 253 | 253 | | amount subject to tax under section 1 |
|---|
| 254 | 254 | | 852(b)(3)(A) as is designated by the com-2 |
|---|
| 255 | 255 | | pany under section 852(b)(3)(D). 3 |
|---|
| 256 | 256 | | ‘‘(ii) O |
|---|
| 257 | 257 | | THER TAXES.—This section 4 |
|---|
| 258 | 258 | | shall not apply for purposes of determining 5 |
|---|
| 259 | 259 | | the amount of any tax imposed by para-6 |
|---|
| 260 | 260 | | graph (4), (5), or (6) of section 857(b). 7 |
|---|
| 261 | 261 | | ‘‘(2) A |
|---|
| 262 | 262 | | DJUSTMENTS TO INTERESTS HELD IN 8 |
|---|
| 263 | 263 | | ENTITY.— 9 |
|---|
| 264 | 264 | | ‘‘(A) R |
|---|
| 265 | 265 | | EGULATED INVESTMENT COMPA -10 |
|---|
| 266 | 266 | | NIES.—Stock in a regulated investment com-11 |
|---|
| 267 | 267 | | pany (within the meaning of section 851) shall 12 |
|---|
| 268 | 268 | | be an indexed asset for any calendar quarter in 13 |
|---|
| 269 | 269 | | the same ratio as— 14 |
|---|
| 270 | 270 | | ‘‘(i) the average of the fair market 15 |
|---|
| 271 | 271 | | values of the indexed assets held by such 16 |
|---|
| 272 | 272 | | company at the close of each month during 17 |
|---|
| 273 | 273 | | such quarter, bears to 18 |
|---|
| 274 | 274 | | ‘‘(ii) the average of the fair market 19 |
|---|
| 275 | 275 | | values of all assets held by such company 20 |
|---|
| 276 | 276 | | at the close of each such month. 21 |
|---|
| 277 | 277 | | ‘‘(B) R |
|---|
| 278 | 278 | | EAL ESTATE INVESTMENT 22 |
|---|
| 279 | 279 | | TRUSTS.—Stock in a real estate investment 23 |
|---|
| 280 | 280 | | trust (within the meaning of section 856) shall 24 |
|---|
| 281 | 281 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 282 | 282 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 10 |
|---|
| 283 | 283 | | •HR 1857 IH |
|---|
| 284 | 284 | | be an indexed asset for any calendar quarter in 1 |
|---|
| 285 | 285 | | the same ratio as— 2 |
|---|
| 286 | 286 | | ‘‘(i) the fair market value of the in-3 |
|---|
| 287 | 287 | | dexed assets held by such trust at the close 4 |
|---|
| 288 | 288 | | of such quarter, bears to 5 |
|---|
| 289 | 289 | | ‘‘(ii) the fair market value of all as-6 |
|---|
| 290 | 290 | | sets held by such trust at the close of such 7 |
|---|
| 291 | 291 | | quarter. 8 |
|---|
| 292 | 292 | | ‘‘(C) R |
|---|
| 293 | 293 | | ATIO OF 80 PERCENT OR MORE .—If 9 |
|---|
| 294 | 294 | | the ratio for any calendar quarter determined 10 |
|---|
| 295 | 295 | | under subparagraph (A) or (B) would (but for 11 |
|---|
| 296 | 296 | | this subparagraph) be 80 percent or more, such 12 |
|---|
| 297 | 297 | | ratio for such quarter shall be 100 percent. 13 |
|---|
| 298 | 298 | | ‘‘(D) R |
|---|
| 299 | 299 | | ATIO OF 20 PERCENT OR LESS .—If 14 |
|---|
| 300 | 300 | | the ratio for any calendar quarter determined 15 |
|---|
| 301 | 301 | | under subparagraph (A) or (B) would (but for 16 |
|---|
| 302 | 302 | | this subparagraph) be 20 percent or less, such 17 |
|---|
| 303 | 303 | | ratio for such quarter shall be zero. 18 |
|---|
| 304 | 304 | | ‘‘(E) L |
|---|
| 305 | 305 | | OOK-THRU OF PARTNERSHIPS .—For 19 |
|---|
| 306 | 306 | | purposes of this paragraph, a qualified invest-20 |
|---|
| 307 | 307 | | ment entity which holds a partnership interest 21 |
|---|
| 308 | 308 | | shall be treated (in lieu of holding a partnership 22 |
|---|
| 309 | 309 | | interest) as holding its proportionate share of 23 |
|---|
| 310 | 310 | | the assets held by the partnership. 24 |
|---|
| 311 | 311 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 312 | 312 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 11 |
|---|
| 313 | 313 | | •HR 1857 IH |
|---|
| 314 | 314 | | ‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS -1 |
|---|
| 315 | 315 | | TRIBUTIONS.—Except as otherwise provided by the 2 |
|---|
| 316 | 316 | | Secretary, a distribution with respect to stock in a 3 |
|---|
| 317 | 317 | | qualified investment entity which is not a dividend 4 |
|---|
| 318 | 318 | | and which results in a reduction in the adjusted 5 |
|---|
| 319 | 319 | | basis of such stock shall be treated as allocable to 6 |
|---|
| 320 | 320 | | stock acquired by the taxpayer in the order in which 7 |
|---|
| 321 | 321 | | such stock was acquired. 8 |
|---|
| 322 | 322 | | ‘‘(4) Q |
|---|
| 323 | 323 | | UALIFIED INVESTMENT ENTITY .—For 9 |
|---|
| 324 | 324 | | purposes of this subsection, the term ‘qualified in-10 |
|---|
| 325 | 325 | | vestment entity’ means— 11 |
|---|
| 326 | 326 | | ‘‘(A) a regulated investment company 12 |
|---|
| 327 | 327 | | (within the meaning of section 851), and 13 |
|---|
| 328 | 328 | | ‘‘(B) a real estate investment trust (within 14 |
|---|
| 329 | 329 | | the meaning of section 856). 15 |
|---|
| 330 | 330 | | ‘‘(f) O |
|---|
| 331 | 331 | | THERPASS-THRUENTITIES.— 16 |
|---|
| 332 | 332 | | ‘‘(1) P |
|---|
| 333 | 333 | | ARTNERSHIPS.— 17 |
|---|
| 334 | 334 | | ‘‘(A) I |
|---|
| 335 | 335 | | N GENERAL.—In the case of a part-18 |
|---|
| 336 | 336 | | nership, the adjustment made under subsection 19 |
|---|
| 337 | 337 | | (a) at the partnership level shall be passed 20 |
|---|
| 338 | 338 | | through to the partners. 21 |
|---|
| 339 | 339 | | ‘‘(B) S |
|---|
| 340 | 340 | | PECIAL RULE IN THE CASE OF SEC -22 |
|---|
| 341 | 341 | | TION 754 ELECTIONS.—In the case of a transfer 23 |
|---|
| 342 | 342 | | of an interest in a partnership with respect to 24 |
|---|
| 343 | 343 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 344 | 344 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 12 |
|---|
| 345 | 345 | | •HR 1857 IH |
|---|
| 346 | 346 | | which the election provided in section 754 is in 1 |
|---|
| 347 | 347 | | effect— 2 |
|---|
| 348 | 348 | | ‘‘(i) the adjustment under section 3 |
|---|
| 349 | 349 | | 743(b)(1) shall, with respect to the trans-4 |
|---|
| 350 | 350 | | feror partner, be treated as a sale of the 5 |
|---|
| 351 | 351 | | partnership assets for purposes of applying 6 |
|---|
| 352 | 352 | | this section, and 7 |
|---|
| 353 | 353 | | ‘‘(ii) with respect to the transferee 8 |
|---|
| 354 | 354 | | partner, the partnership’s holding period 9 |
|---|
| 355 | 355 | | for purposes of this section in such assets 10 |
|---|
| 356 | 356 | | shall be treated as beginning on the date 11 |
|---|
| 357 | 357 | | of such adjustment. 12 |
|---|
| 358 | 358 | | ‘‘(2) S |
|---|
| 359 | 359 | | CORPORATIONS.—In the case of an S 13 |
|---|
| 360 | 360 | | corporation, the adjustment made under subsection 14 |
|---|
| 361 | 361 | | (a) at the corporate level shall be passed through to 15 |
|---|
| 362 | 362 | | the shareholders. This section shall not apply for 16 |
|---|
| 363 | 363 | | purposes of determining the amount of any tax im-17 |
|---|
| 364 | 364 | | posed by section 1374 or 1375. 18 |
|---|
| 365 | 365 | | ‘‘(3) C |
|---|
| 366 | 366 | | OMMON TRUST FUNDS .—In the case of a 19 |
|---|
| 367 | 367 | | common trust fund, the adjustment made under sub-20 |
|---|
| 368 | 368 | | section (a) at the trust level shall be passed through 21 |
|---|
| 369 | 369 | | to the participants. 22 |
|---|
| 370 | 370 | | ‘‘(4) I |
|---|
| 371 | 371 | | NDEXING ADJUSTMENT DISREGARDED IN 23 |
|---|
| 372 | 372 | | DETERMINING LOSS ON SALE OF INTEREST IN ENTI -24 |
|---|
| 373 | 373 | | TY.—Notwithstanding the preceding provisions of 25 |
|---|
| 374 | 374 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 375 | 375 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 13 |
|---|
| 376 | 376 | | •HR 1857 IH |
|---|
| 377 | 377 | | this subsection, for purposes of determining the 1 |
|---|
| 378 | 378 | | amount of any loss on a sale or exchange of an in-2 |
|---|
| 379 | 379 | | terest in a partnership, S corporation, or common 3 |
|---|
| 380 | 380 | | trust fund, the adjustment made under subsection 4 |
|---|
| 381 | 381 | | (a) shall not be taken into account in determining 5 |
|---|
| 382 | 382 | | the adjusted basis of such interest. 6 |
|---|
| 383 | 383 | | ‘‘(g) D |
|---|
| 384 | 384 | | ISPOSITIONSBETWEENRELATEDPERSONS.— 7 |
|---|
| 385 | 385 | | ‘‘(1) I |
|---|
| 386 | 386 | | N GENERAL.—This section shall not apply 8 |
|---|
| 387 | 387 | | to any sale or other disposition of property between 9 |
|---|
| 388 | 388 | | related persons except to the extent that the basis 10 |
|---|
| 389 | 389 | | of such property in the hands of the transferee is a 11 |
|---|
| 390 | 390 | | substituted basis. 12 |
|---|
| 391 | 391 | | ‘‘(2) R |
|---|
| 392 | 392 | | ELATED PERSONS DEFINED .—For pur-13 |
|---|
| 393 | 393 | | poses of this section, the term ‘related persons’ 14 |
|---|
| 394 | 394 | | means— 15 |
|---|
| 395 | 395 | | ‘‘(A) persons bearing a relationship set 16 |
|---|
| 396 | 396 | | forth in section 267(b), and 17 |
|---|
| 397 | 397 | | ‘‘(B) persons treated as single employer 18 |
|---|
| 398 | 398 | | under subsection (b) or (c) of section 414. 19 |
|---|
| 399 | 399 | | ‘‘(h) T |
|---|
| 400 | 400 | | RANSFERSTOINCREASEINDEXINGADJUST-20 |
|---|
| 401 | 401 | | MENT.—If any person transfers cash, debt, or any other 21 |
|---|
| 402 | 402 | | property to another person and the principal purpose of 22 |
|---|
| 403 | 403 | | such transfer is to secure or increase an adjustment under 23 |
|---|
| 404 | 404 | | subsection (a), the Secretary may disallow part or all of 24 |
|---|
| 405 | 405 | | such adjustment or increase. 25 |
|---|
| 406 | 406 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 407 | 407 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 14 |
|---|
| 408 | 408 | | •HR 1857 IH |
|---|
| 409 | 409 | | ‘‘(i) SPECIALRULES.—For purposes of this section— 1 |
|---|
| 410 | 410 | | ‘‘(1) T |
|---|
| 411 | 411 | | REATMENT OF IMPROVEMENTS , ETC.—If 2 |
|---|
| 412 | 412 | | there is an addition to the adjusted basis of any tan-3 |
|---|
| 413 | 413 | | gible property or of any stock in a corporation dur-4 |
|---|
| 414 | 414 | | ing the taxable year by reason of an improvement to 5 |
|---|
| 415 | 415 | | such property or a contribution to capital of such 6 |
|---|
| 416 | 416 | | corporation— 7 |
|---|
| 417 | 417 | | ‘‘(A) such addition shall never be taken 8 |
|---|
| 418 | 418 | | into account under subsection (c)(1)(A) if the 9 |
|---|
| 419 | 419 | | aggregate amount thereof during the taxable 10 |
|---|
| 420 | 420 | | year with respect to such property or stock is 11 |
|---|
| 421 | 421 | | less than $1,000, and 12 |
|---|
| 422 | 422 | | ‘‘(B) such addition shall be treated as a 13 |
|---|
| 423 | 423 | | separate asset acquired at the close of such tax-14 |
|---|
| 424 | 424 | | able year if the aggregate amount thereof dur-15 |
|---|
| 425 | 425 | | ing the taxable year with respect to such prop-16 |
|---|
| 426 | 426 | | erty or stock is $1,000 or more. 17 |
|---|
| 427 | 427 | | A rule similar to the rule of the preceding sentence 18 |
|---|
| 428 | 428 | | shall apply to any other portion of an asset to the 19 |
|---|
| 429 | 429 | | extent that separate treatment of such portion is ap-20 |
|---|
| 430 | 430 | | propriate to carry out the purposes of this section. 21 |
|---|
| 431 | 431 | | ‘‘(2) A |
|---|
| 432 | 432 | | SSETS WHICH ARE NOT INDEXED ASSETS 22 |
|---|
| 433 | 433 | | THROUGHOUT HOLDING PERIOD .—The applicable in-23 |
|---|
| 434 | 434 | | flation adjustment shall be appropriately reduced for 24 |
|---|
| 435 | 435 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 436 | 436 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 15 |
|---|
| 437 | 437 | | •HR 1857 IH |
|---|
| 438 | 438 | | periods during which the asset was not an indexed 1 |
|---|
| 439 | 439 | | asset. 2 |
|---|
| 440 | 440 | | ‘‘(3) T |
|---|
| 441 | 441 | | REATMENT OF CERTAIN DISTRIBU -3 |
|---|
| 442 | 442 | | TIONS.—A distribution with respect to stock in a 4 |
|---|
| 443 | 443 | | corporation which is not a dividend shall be treated 5 |
|---|
| 444 | 444 | | as a disposition. 6 |
|---|
| 445 | 445 | | ‘‘(4) S |
|---|
| 446 | 446 | | ECTION CANNOT INCREASE ORDINARY 7 |
|---|
| 447 | 447 | | LOSS.—To the extent that (but for this paragraph) 8 |
|---|
| 448 | 448 | | this section would create or increase a net ordinary 9 |
|---|
| 449 | 449 | | loss to which section 1231(a)(2) applies or an ordi-10 |
|---|
| 450 | 450 | | nary loss to which any other provision of this title 11 |
|---|
| 451 | 451 | | applies, such provision shall not apply. The taxpayer 12 |
|---|
| 452 | 452 | | shall be treated as having a long-term capital loss in 13 |
|---|
| 453 | 453 | | an amount equal to the amount of the ordinary loss 14 |
|---|
| 454 | 454 | | to which the preceding sentence applies. 15 |
|---|
| 455 | 455 | | ‘‘(5) A |
|---|
| 456 | 456 | | CQUISITION DATE WHERE THERE HAS 16 |
|---|
| 457 | 457 | | BEEN PRIOR APPLICATION OF SUBSECTION (a)(1) 17 |
|---|
| 458 | 458 | | WITH RESPECT TO THE TAXPAYER .—If there has 18 |
|---|
| 459 | 459 | | been a prior application of subsection (a)(1) to an 19 |
|---|
| 460 | 460 | | asset while such asset was held by the taxpayer, the 20 |
|---|
| 461 | 461 | | date of acquisition of such asset by the taxpayer 21 |
|---|
| 462 | 462 | | shall be treated as not earlier than the date of the 22 |
|---|
| 463 | 463 | | most recent such prior application. 23 |
|---|
| 464 | 464 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H1857.IH H1857 |
|---|
| 465 | 465 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB 16 |
|---|
| 466 | 466 | | •HR 1857 IH |
|---|
| 467 | 467 | | ‘‘(j) REGULATIONS.—The Secretary shall prescribe 1 |
|---|
| 468 | 468 | | such regulations as may be necessary or appropriate to 2 |
|---|
| 469 | 469 | | carry out the purposes of this section.’’. 3 |
|---|
| 470 | 470 | | (b) C |
|---|
| 471 | 471 | | LERICALAMENDMENT.—The table of sections 4 |
|---|
| 472 | 472 | | for part II of subchapter O of chapter 1 of the Internal 5 |
|---|
| 473 | 473 | | Revenue Code of 1986 is amended by striking the item 6 |
|---|
| 474 | 474 | | relating to section 1023 and by inserting after the item 7 |
|---|
| 475 | 475 | | relating to section 1022 the following new item: 8 |
|---|
| 476 | 476 | | ‘‘Sec. 1023. Indexing of certain assets for purposes of determining gain or loss. |
|---|
| 477 | 477 | | ‘‘Sec. 1024. Cross references.’’. |
|---|
| 478 | 478 | | (c) EFFECTIVEDATE.—The amendments made by 9 |
|---|
| 479 | 479 | | this section shall apply to indexed assets acquired by the 10 |
|---|
| 480 | 480 | | taxpayer after December 31, 2025, in taxable years ending 11 |
|---|
| 481 | 481 | | after such date. 12 |
|---|
| 482 | 482 | | Æ |
|---|
| 483 | 483 | | VerDate Sep 11 2014 23:49 Mar 18, 2025 Jkt 059200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6301 E:\BILLS\H1857.IH H1857 |
|---|
| 484 | 484 | | kjohnson on DSK7ZCZBW3PROD with $$_JOB |
|---|