I 

111TH CONGRESS 

1ST SESSION H. R. 2284 

To amend the Internal Revenue Code of 1986 to allow individuals to defer 

tax on income reinvested in a partnership or S corporation. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 6, 2009 

Mr. PAULSEN 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 tax on income reinvested in a partnership 

or S corporation. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. DEFERRAL OF TAX ON INCOME REINVESTED IN 

4 A PARTNERSHIP OR S CORPORATION. 

5 (a) IN GENERAL.—Part III of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 is amended 

7 by inserting after section 139C the following new section: 


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1 ‘‘SEC. 139D. INCOME REINVESTED IN A PARTNERSHIP OR S 

2 CORPORATION. 

3 ‘‘(a) EXCLUSION FROM GROSS INCOME OF PASS4 THRU INCOME.— 

5 ‘‘(1) IN GENERAL.—In the case of an indi6 vidual, gross income shall not include— 

7 ‘‘(A) any specified item of partnership 

8 pass-thru income, and 

9 ‘‘(B) any specified item of S corporation 

10 pass-thru income. 

11 ‘‘(2) LIMITATION.—The aggregate amount of 

12 items which may be designated by the taxpayer as 

13 specified items under paragraphs (3)(B) and (4)(B) 

14 with respect to any taxable year shall not exceed 

15 $250,000 ($500,000 in the case of a joint return). 

16 ‘‘(3) SPECIFIED ITEM OF PARTNERSHIP PASS17 THRU INCOME.—For purposes of this section, the 

18 term ‘specified item of partnership pass-thru income’ 

19 means, with respect to any taxable year, any item of 

20 income or gain which— 

21 ‘‘(A) would, but for this section, be taken 

22 into account by the taxpayer under section 702 

23 for such taxable year, and 

24 ‘‘(B) is designated by the taxpayer as a 

25 specified item for purposes of this section. 


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1 ‘‘(4) SPECIFIED ITEM OF S CORPORATION PASS2 THRU INCOME.—For purposes of this section, the 

3 term ‘specified item of S corporation pass-thru in4 come’ means, with respect to any taxable year, any 

5 item of income or gain which— 

6 ‘‘(A) would, but for this section, be taken 

7 into account by the taxpayer under section 

8 1366 for such taxable year, and 

9 ‘‘(B) is designated by the taxpayer as a 

10 specified item for purposes of this section. 

11 ‘‘(b) NO INCREASE IN ADJUSTED BASIS WITH RE12 SPECT TO ITEMS EXCLUDED FROM GROSS INCOME.—Any 

13 specified item which is not includible in the gross income 

14 of an individual under subsection (a) shall not be taken 

15 into account in determining the adjusted basis of such in16 dividual’s interest in the partnership or S corporation with 

17 respect to which such item relates. 

18 ‘‘(c) REGULATIONS.—The Secretary shall prescribe 

19 such regulations or other guidance as may be necessary 

20 or appropriate to carry out the purposes of this section.’’. 

21 (b) CLERICAL AMENDMENT.—The table of sections 

22 for part III of subchapter B of chapter 1 of the Internal 

23 Revenue Code of 1986 is amended by inserting after the 

24 item relating to section 139C the following new item: 

‘‘Sec. 139D. Income held in a partnership or S corporation.’’. 


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

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

Æ 


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