I

103D CONGRESS

1ST SESSION H. R. 567

To amend the Internal Revenue Code of 1986 to increase the dollar limitation

on the 1-time exclusion of gain from sale of a principal residence by

individuals who have attained age 55, to increase the amount of the

unified estate and gift tax credits, and to reduce the tax on capital

gains.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 25, 1993

Mr. ROHRABACHER (for himself, Mr. HERGER, Mr. SOLOMON, Mr. EMERSON,

Mr. PORTER, Mr. RAMSTAD, Mr. DOOLITTLE, Mr. SMITH of Oregon, Mr.

MCCOLLUM, Mr. SCHIFF, Mr. KYL, Mr. BAKER of Louisiana, Mr. MOORHEAD, Mr. RAVENEL, Mr. BURTON, Mr. GALLEGLY, Mr. GOSS, Mr. COX,

Mr. GILLMOR, Mr. DORNAN, Mr. MCHUGH, Mr. BAKER of California,

Mr. SMITH of New Jersey, Mr. SPENCE, Mr. TAYLOR of North Carolina,

Mrs. BENTLEY, Mr. SENSENBRENNER, Mr. LEVY, Mr. LINDER, Mr.

MYERS, Mr. BLUTE, Mr. POMBO, Mr. GINGRICH, Mr. HANCOCK, Mr.

SAM JOHNSON of Texas, Mr. ROYCE, and Mr. UPTON) 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 increase

the dollar limitation on the 1-time exclusion of gain

from sale of a principal residence by individuals who

have attained age 55, to increase the amount of the

unified estate and gift tax credits, and to reduce the

tax on capital gains.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. INCREASE IN LIMITATION ON 1-TIME EXCLU2 SION OF GAIN FROM SALE OF PRINCIPAL

3 RESIDENCE.

4 (a) GENERAL RULE.—Paragraph (1) of section

5 121(b) of the Internal Revenue Code of 1986 (relating to

6 dollar limitation) is amended by striking ‘‘$125,000

7 ($62,500’’ and inserting ‘‘$186,000 ($93,000’’.

8 (b) COST-OF-LIVING ADJUSTMENTS.—Subsection (b)

9 of section 121 of such Code is amended by adding at the

10 end thereof the following new paragraph:

11 ‘‘(4) COST-OF-LIVING ADJUSTMENTS.—In the

12 case of any taxable year beginning in a calendar

13 year after 1993, each dollar amount set forth in

14 paragraph (1) shall be increased by an amount equal

15 to—

16 ‘‘(A) such dollar amount, multiplied by

17 ‘‘(B) the cost-of-living adjustment deter18 mined under section 1(f)(3) for the calendar

19 year in which the taxable year begins, by sub20 stituting ‘calendar year 1992’ for ‘calendar year

21 1989’ in subparagraph (B) thereof.

22 Any increase determined under the preceding sen23 tence shall be rounded to the nearest multiple of

24 $1,000.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to any sale or exchange after De3 cember 31, 1992.

4 SEC. 2. INCREASE IN UNIFIED ESTATE AND GIFT TAX CRED5 ITS.

6 (a) ESTATE TAX CREDIT.—

7 (1) Subsection (a) of section 2010 of the Inter8 nal Revenue Code of 1986 (relating to unified credit

9 against estate tax) is amended by striking

10 ‘‘$193,500’’ and inserting ‘‘the applicable credit

11 amount’’.

12 (2) Section 2010 of such Code is amended by

13 redesignating subsection (c) as subsection (d) and by

14 inserting after subsection (b) the following new sub15 section:

16 ‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes

17 of this section—

18 ‘‘(1) IN GENERAL.—The applicable credit

19 amount is the amount of the tentative tax which

20 would be determined under the rate schedule set

21 forth in section 2001(c) if the amount with respect

22 to which such tentative tax is to be computed were

23 $770,000.

24 ‘‘(2) COST-OF-LIVING ADJUSTMENTS.—In the

25 case of any decedent dying in a calendar year after
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1 1993, the $770,000 amount set forth in paragraph

2 (1) shall be increased by an amount equal to—

3 ‘‘(A) $770,000, multiplied by

4 ‘‘(B) the cost-of-living adjustment deter5 mined under section 1(f)(3) for such calendar

6 year by substituting ‘calendar year 1992’ for

7 ‘calendar year 1989’ in subparagraph (B)

8 thereof.

9 Any increase determined under the preceding sen10 tence shall be rounded to the nearest multiple of

11 $1,000.’’

12 (3) Paragraph (1) of section 6018(a) of such

13 Code is amended by striking ‘‘$600,000’’ and insert14 ing ‘‘$770,000 (adjusted as provided in section

15 2010(c)(2))’’.

16 (b) UNIFIED GIFT TAX CREDIT.—Paragraph (1) of

17 section 2505(a) of such Code is amended by striking

18 ‘‘$193,500’’ and inserting ‘‘the applicable credit amount

19 in effect under section 2010(c) for such calendar year’’.

20 (c) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to the estates of decedents dying,

22 and gifts made, after December 31, 1992.
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1 SEC. 3. REDUCTION IN CAPITAL GAINS TAX FOR INDIVID2 UALS.

3 (a) GENERAL RULE.—Part I of subchapter P of

4 chapter 1 of the Internal Revenue Code of 1986 is amend5 ed by adding at the end thereof the following new section:

6 ‘‘SEC. 1202. DEDUCTION FOR CAPITAL GAINS.

7 ‘‘(a) GENERAL RULE.—If, for any taxable year, a

8 taxpayer other than a corporation has a net capital gain,

9 an amount equal to 50 percent of the net capital gain shall

10 be allowed as a deduction.

11 ‘‘(b) ESTATES AND TRUSTS.—In the case of an es12 tate or trust, the deduction under subsection (a) shall be

13 computed by excluding the portion (if any) of the gains

14 for the taxable year from sales or exchanges of capital as15 sets which, under sections 652 and 662 (relating to inclu16 sions of amounts in gross income of beneficiaries of

17 trusts), is includible by the income beneficiaries as gain

18 derived from the sale or exchange of capital assets.’’

19 (b) MINIMUM TAX.—Section 56(b) of such Code is

20 amended by adding at the end thereof the following new

21 paragraph:

22 ‘‘(4) CAPITAL GAINS DEDUCTION DISALLOW23 ANCE.—The deduction under section 1202 shall not

24 be allowed.’’

25 (c) CONFORMING AMENDMENTS.—
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1 (1) Subsection (h) of section 1 of such Code is

2 hereby repealed.

3 (2) Section 62(a) of such Code is amended by

4 inserting after paragraph (13) the following new

5 paragraph:

6 ‘‘(14) CAPITAL GAINS DEDUCTION.—The deduc7 tion allowed by section 1202.’’

8 (3) Clause (ii) of section 163(d)(4)(B) of such

9 Code is amended by inserting ‘‘, reduced by the

10 amount of any deduction allowable under section

11 1202 attributable to gain from such property’’ after

12 ‘‘investment’’.

13 (4) Section 170(e)(1)(B) of such Code is

14 amended by inserting ‘‘(or, in the case of a taxpayer

15 other than a corporation, 50 percent of the amount

16 of gain)’’ after ‘‘the amount of gain’’.

17 (5)(A) Section 172(d)(2) of such Code is

18 amended to read as follows:

19 ‘‘(2) CAPITAL GAINS AND LOSSES OF TAX20 PAYERS OTHER THAN CORPORATIONS.—In the case

21 of a taxpayer other than a corporation—

22 ‘‘(A) the amount deductible on account of

23 losses from sales or exchanges of capital assets

24 shall not exceed the amount includible on ac-
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1 count of gains from sales or exchanges of cap2 ital assets; and

3 ‘‘(B) the deduction provided by section

4 1202 shall not be allowed.’’

5 (B) Subparagraph (B) of section 172(d)(4) of

6 such Code is amended by inserting ‘‘, (2)(B),’’ after

7 ‘‘paragraph (1)’’.

8 (6)(A) Section 221 of such Code is amended to

9 read as follows:

10 ‘‘SEC. 221. CROSS REFERENCES.

‘‘(1) For deduction for net capital gain, see section

1202.

‘‘(2) For deductions in respect of a decedent, see

section 691.’’

11 (B) The table of sections for part VII of sub12 chapter B of chapter 1 is amended by striking ‘‘ref13 erence’’ in the item relating to section 221 and in14 serting ‘‘references’’.

15 (7) Paragraph (4) of section 642(c) of such

16 Code is amended to read as follows:

17 ‘‘(4) ADJUSTMENTS.—To the extent that the

18 amount otherwise allowable as a deduction under

19 this subsection consists of gain from the sale or ex20 change of capital assets held for more than 1 year,

21 proper adjustment shall be made for any deduction

22 allowable to the estate or trust under section 1202

23 (relating to deduction for net capital gain). In the
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1 case of a trust, the deduction allowed by this sub2 section shall be subject to section 681 (relating to

3 unrelated business income).’’

4 (8) Paragraph (3) of section 643(a) of such

5 Code is amended by adding at the end thereof the

6 following new sentence: ‘‘The deduction under sec7 tion 1202 (relating to deduction for net capital gain)

8 shall not be taken into account.’’.

9 (9) Paragraph (6)(C) of section 643(a) of such

10 Code is amended—

11 (A) by inserting ‘‘(i)’’ before ‘‘there’’, and

12 (B) by inserting ‘‘, and (ii) the deduction

13 under section 1202 (relating to deduction for

14 excess of capital gains over capital losses)’’ be15 fore the period at the end thereof.

16 (10) Paragraph (4) of section 691(c) of such

17 Code is amended by striking ‘‘1(h), 1201’’ and in18 serting ‘‘1201, 1202,’’.

19 (11) The second sentence of paragraph (2) of

20 section 871(a) of such Code is amended by inserting

21 ‘‘such gains and losses shall be determined without

22 regard to section 1202 (relating to deduction for net

23 capital gain) and’’ after ‘‘except that’’.

24 (12)(A) Subparagraph (B) of section 904(b)(2)

25 of such Code is amended by striking so much of
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1 such subparagraph as precedes clause (i) and insert2 ing the following:

3 ‘‘(B) SPECIAL RULES WHERE CORPORATE

4 CAPITAL RATE GAIN DIFFERENTIAL.—In the

5 case of a corporation, for any taxable year for

6 which there is a capital gain rate differen7 tial—’’.

8 (B) Subparagraphs (D) and (E) of section

9 904(b)(3) of such Code are amended to read as fol10 lows:

11 ‘‘(D) CAPITAL GAIN RATE DIFFEREN12 TIAL.—There is a capital gain rate differential

13 for any taxable year if any rate of tax imposed

14 by section 11, 511, or 831(a) or (b) (whichever

15 applies) exceeds the alternative rate of tax

16 under section 1201(a) (determined without re17 gard to the last sentence of section 11(b)(1)).

18 ‘‘(E) RATE DIFFERENTIAL PORTION.—The

19 rate differential portion of foreign source net

20 capital gain, net capital, or the excess of net

21 capital gain from sources within the United

22 States over net capital gain, as the case maybe,

23 is the same proportion of such amount as—

24 ‘‘(i) the excess of the highest rate of

25 tax specified in section 11(b)(1) over the
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1 alternative rate of tax under section

2 1201(a), bears to

3 ‘‘(ii) the highest rate of tax specified

4 in section 11(b)(1).’’

5 (13) Section 1402(i)(1) of such Code is amend6 ed to read as follows:

7 ‘‘(1) IN GENERAL.—In determining the net

8 earnings from self-employment of any options dealer

9 or commodities dealer—

10 ‘‘(A) notwithstanding subsection (a)(3)(A),

11 there shall not be excluded any gain or loss (in

12 the normal course of the taxpayer’s activity of

13 dealing in or trading section 1256 contracts)

14 from section 1256 contracts or property related

15 to such contracts, and

16 ‘‘(B) the deduction provided by section

17 1202 shall not apply.’’

18 (d) CLERICAL AMENDMENT.—The table of sections

19 for part I of subchapter P of chapter 1 of such Code is

20 amended by adding at the end thereof the following new

21 item:

‘‘Sec. 1202. Deduction for capital gains.’’

22 (e) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to taxable years beginning after

24 the date of the enactment of this Act.

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