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103D CONGRESS

1ST SESSION H. R. 854

To amend the Internal Revenue Code of 1986 to reduce the capital gains

tax in the case of senior citizens.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 4, 1993

Mr. MYERS of Indiana (for himself, Mr. ROHRABACHER, Mr. DORNAN, Mr.

DOOLITTLE, Mr. GALLEGLY, and Mr. LIGHTFOOT) 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 reduce

the capital gains tax in the case of senior citizens.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Senior Citizen Capital

5 Gains Rate Reduction Act of 1993’’.

6 SEC. 2. REDUCTION IN CAPITAL GAINS RATE FOR SENIOR

7 CITIZENS.

8 (a) GENERAL RULE.—Section 1 of the Internal Reve9 nue Code of 1986 (relating to tax imposed on individuals)
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1 is amended by adding at the end thereof the following new

2 subsection:

3 ‘‘(i) REDUCTION IN CAPITAL GAINS RATE FOR SEN4 IOR CITIZENS.—

5 ‘‘(1) IN GENERAL.—If a taxpayer who has at6 tained age 60 before the close of the taxable year

7 has a net capital gain, then the tax imposed by this

8 section shall not exceed the sum of—

9 ‘‘(A) a tax computed at the rates and in

10 the same manner as if this subsection had not

11 been enacted on the taxable income reduced by

12 the net capital gain, plus

13 ‘‘(B) a tax equal to the sum of—

14 ‘‘(i) 7.5 percent of so much of the net

15 capital gain as does not exceed—

16 ‘‘(I) the maximum amount of

17 taxable income to which the 15-per18 cent rate applies under the table ap19 plicable to the taxpayer, reduced by

20 ‘‘(II) the taxable income to which

21 subparagraph (A) applies, plus

22 ‘‘(ii) 15 percent of the net capital gain

23 in excess of the net capital gain to which

24 clause (i) applies.

25 ‘‘(2) SPECIAL RULES.—
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1 ‘‘(A) JOINT RETURNS.—In the case of a

2 joint return, if one spouse meets the age re3 quirement of paragraph (1), both spouses shall

4 be treated as meeting such requirement.

5 ‘‘(B) COORDINATION WITH SUBSECTION

6 (h).—Subsection (h) shall not apply to any indi7 vidual to whom paragraph (1) applies.’’

8 (b) TECHNICAL AMENDMENT.—Paragraph (1) of

9 section 170(e) of such Code is amended by striking ‘‘the

10 amount of gain’’ in the material following subparagraph

11 (B)(ii) and inserting ‘‘the amount of gain (or, in the case

12 of an individual who meets the age requirement of section

1(i), 13 13 ⁄28 of the amount of gain)’’.

14 SEC. 3. REDUCTION IN MINIMUM TAX RATE ON CAPITAL

15 GAINS OF SENIOR CITIZENS.

16 Paragraph (1) of section 55(b) of the Internal Reve17 nue Code of 1986 (relating to tentative minimum tax) is

18 amended by adding at the end thereof the following new

19 paragraph:

20 ‘‘(3) REDUCTION IN TAX ON CAPITAL GAINS OF

21 SENIOR CITIZENS.—In the case of an individual who

22 meets the age requirement of section 1(i), subpara23 graph (A) of paragraph (1) shall be applied as if it

24 read as follows:

25 ‘‘ ‘(A) the sum of—
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1 ‘‘ ‘(i) 15 percent of the lesser of—

2 ‘‘ ‘(I) the net capital gain (deter3 mined with the adjustments provided

4 in this part), or

5 ‘‘ ‘(II) so much of the alternative

6 minimum taxable income for the tax7 able year as exceeds the exemption

8 amount, plus

9 ‘‘ ‘(ii) 24 percent of the amount (if

10 any) by which the excess referred to in

11 clause (i)(II) exceeds the net capital gain

12 (as so determined), reduced by’.’’

13 SEC. 4. INDEXING OF RETIREMENT ASSETS FOR PURPOSES

14 OF DETERMINING GAIN OR LOSS.

15 (a) IN GENERAL.—Part II of subchapter O of chap16 ter 1 of the Internal Revenue Code of 1986 (relating to

17 basis rules of general application) is amended by inserting

18 after section 1021 the following new section:

19 ‘‘SEC. 1022. INDEXING OF RETIREMENT ASSETS FOR PUR20 POSES OF DETERMINING GAIN OR LOSS.

21 ‘‘(a) GENERAL RULE.—

22 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD23 JUSTED BASIS.—Except as provided in paragraph

24 (2), if an indexed retirement asset which has been

25 held for more than 5 years is sold or otherwise dis-
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1 posed of by an individual who meets the age require2 ment of section 1(i), for purposes of this title the in3 dexed basis of the asset shall be substituted for its

4 adjusted basis.

5 ‘‘(2) EXCEPTION FOR DEPRECIATION, ETC.—

6 The deduction for depreciation, depletion, and amor7 tization shall be determined without regard to the

8 application of paragraph (1) to the taxpayer or any

9 other person.

10 ‘‘(b) INDEXED RETIREMENT ASSET.—For purposes

11 of this section, the term ‘indexed retirement asset’

12 means—

13 ‘‘(1) stock in a corporation, and

14 ‘‘(2) tangible property (or any interest therein),

15 which is a capital asset or property used in the trade

16 or business (as defined in section 1231(b)).

17 ‘‘(c) INDEXED BASIS.—For purposes of this sec18 tion—

19 ‘‘(1) INDEXED BASIS.—The indexed basis for

20 any retirement asset is—

21 ‘‘(A) the adjusted basis of the retirement

22 asset, multiplied by

23 ‘‘(B) the applicable inflation ratio.
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1 ‘‘(2) APPLICABLE INFLATION RATIO.—The ap2 plicable inflation ratio for any retirement asset is the

3 percentage arrived at by dividing—

4 ‘‘(A) the gross national product deflator

5 for the calendar quarter in which the disposi6 tion takes place, by

7 ‘‘(B) the gross national product deflator

8 for the calendar quarter in which the retirement

9 asset was acquired by the taxpayer (or, if later,

10 the calendar quarter ending December 31,

11 1992).

12 The applicable inflation ratio shall not be taken into

13 account unless it is greater than 1. The applicable

14 inflation ratio for any retirement asset shall be

15 rounded to the nearest one-tenth of 1 percent.

16 ‘‘(3) GROSS NATIONAL PRODUCT DEFLATOR.—

17 The gross national product deflator for any calendar

18 quarter is the implicit price deflator for the gross

19 national product for such quarter (as shown in the

20 first revision thereof).

21 ‘‘(4) SECRETARY TO PUBLISH TABLES.—The

22 Secretary shall publish tables specifying the applica23 ble inflation ratios for each calendar quarter.

24 ‘‘(d) SPECIAL RULES.—For purposes of this sec25 tion—
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1 ‘‘(1) TREATMENT AS SEPARATE RETIREMENT

2 ASSET.—In the case of any retirement asset, the fol3 lowing shall be treated as a separate asset:

4 ‘‘(A) a substantial improvement to prop5 erty,

6 ‘‘(B) in the case of stock of a corporation,

7 a substantial contribution to capital, and

8 ‘‘(C) any other portion of a retirement

9 asset to the extent that separate treatment of

10 such portion is appropriate to carry out the

11 purposes of this section.

12 ‘‘(2) RETIREMENT ASSETS WHICH ARE NOT IN13 DEXED ASSETS THROUGHOUT HOLDING PERIOD.—

14 The applicable inflation ratio shall be appropriately

15 reduced for calendar months at any time during

16 which the retirement asset was not an indexed re17 tirement asset.’’.

18 SEC. 5. INDEXING OF LIMITATION ON CAPITAL LOSSES OF

19 SENIOR CITIZENS.

20 Section 1211 of the Internal Revenue Code of 1986

21 (relating to limitation on capital losses) is amended by

22 adding at the end thereof the following new subsection:

23 ‘‘(c) INDEXATION OF LIMITATION ON SENIOR CITI24 ZEN TAXPAYERS.—
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1 ‘‘(1) IN GENERAL.—In applying subsection (b)

2 to an individual who meets the age requirement of

3 section 1(i), the $3,000 and $1,500 amounts under

4 subsection (b)(1) shall be increased by an amount

5 equal to—

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

7 ‘‘(B) the applicable inflation adjustment

8 for the calendar year in which the taxable year

9 begins.

10 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—

11 For purposes of paragraph (1), the applicable infla12 tion adjustment for any calendar year is the percent13 age (if any) by which—

14 ‘‘(A) the gross national product deflator

15 for the last calendar quarter of the preceding

16 calendar year, exceeds

17 ‘‘(B) the gross national product deflator

18 for the last calendar quarter of 1991.

19 For purposes of this paragraph, the term ‘gross na20 tional product deflator’ has the meaning given such

21 term by section 1022(c)(3).’’.

22 SEC. 6. EFFECTIVE DATE.

23 The amendments made by this Act shall apply to tax24 able years beginning after December 31, 1992.

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