II 

117TH CONGRESS 

1ST SESSION S. 3153 

To amend the Internal Revenue Code of 1986 to provide for the indexing 

of certain assets for purposes of determining gain or loss. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 3, 2021 

Mr. CRUZ (for himself, Mr. TILLIS, Mr. BRAUN, Mr. BARRASSO, Mr. TOOMEY, 

Mr. LANKFORD, and Mr. INHOFE) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for the indexing of certain assets for purposes of determining gain or loss. 

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 ‘‘Capital Gains Inflation 

5 Relief Act of 2021’’. 

6 SEC. 2. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF 

7 DETERMINING GAIN OR LOSS. 

8 (a) IN GENERAL.—Part II of subchapter O of chap9 ter 1 of the Internal Revenue Code of 1986 (relating to 


kjohnson on DSK79L0C42PROD with BILLS
2 

•S 3153 IS

1 basis rules of general application) is amended by redesig2 nating section 1023 as section 1024 and by inserting after 

3 section 1022 the following new section: 

4 ‘‘SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES 

5 OF DETERMINING GAIN OR LOSS. 

6 ‘‘(a) GENERAL RULE.— 

7 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD8 JUSTED BASIS.—Solely for purposes of determining 

9 gain or loss on the sale or other disposition by a tax10 payer (other than a corporation) of an indexed asset 

11 which has been held for more than 3 years, the in12 dexed basis of the asset shall be substituted for its 

13 adjusted basis. 

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

15 The deductions for depreciation, depletion, and am16 ortization shall be determined without regard to the 

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

18 other person. 

19 ‘‘(3) WRITTEN DOCUMENTATION REQUIRE20 MENT.—Paragraph (1) shall apply only with respect 

21 to indexed assets for which the taxpayer has written 

22 documentation of the original purchase price paid or 

23 incurred by the taxpayer to acquire such asset. 

24 ‘‘(b) INDEXED ASSET.— 


kjohnson on DSK79L0C42PROD with BILLS
3 

•S 3153 IS

1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the term ‘indexed asset’ means— 

3 ‘‘(A) any common stock in a C corporation 

4 (other than a foreign corporation), 

5 ‘‘(B) any digital asset, or 

6 ‘‘(C) any tangible property, 

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

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

9 ‘‘(2) STOCK IN CERTAIN FOREIGN CORPORA10 TIONS INCLUDED.—For purposes of this section— 

11 ‘‘(A) IN GENERAL.—The term ‘indexed 

12 asset’ includes common stock in a foreign cor13 poration which is regularly traded on an estab14 lished securities market. 

15 ‘‘(B) EXCEPTION.—Subparagraph (A) 

16 shall not apply to— 

17 ‘‘(i) stock of a foreign investment 

18 company, 

19 ‘‘(ii) stock in a passive foreign invest20 ment company (as defined in section 

21 1296), 

22 ‘‘(iii) stock in a foreign corporation 

23 held by a United States person who meets 

24 the requirements of section 1248(a)(2), 

25 and 


kjohnson on DSK79L0C42PROD with BILLS
4 

•S 3153 IS

1 ‘‘(iv) stock in a foreign personal hold2 ing company. 

3 ‘‘(C) TREATMENT OF AMERICAN DEPOSI4 TORY RECEIPTS.—An American depository re5 ceipt for common stock in a foreign corporation 

6 shall be treated as common stock in such cor7 poration. 

8 ‘‘(3) DIGITAL ASSET.—For purposes of this sec9 tion, the term ‘digital asset’ means any natively elec10 tronic asset which— 

11 ‘‘(A) is recorded on a cryptographically se12 cured distributed ledger, and 

13 ‘‘(B) is designed to confer only economic 

14 or access rights. 

15 ‘‘(c) INDEXED BASIS.—For purposes of this sec16 tion— 

17 ‘‘(1) GENERAL RULE.—The indexed basis for 

18 any asset is— 

19 ‘‘(A) the adjusted basis of the asset, in20 creased by 

21 ‘‘(B) the applicable inflation adjustment. 

22 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.— 

23 The applicable inflation adjustment for any asset is 

24 an amount equal to— 


kjohnson on DSK79L0C42PROD with BILLS
5 

•S 3153 IS

1 ‘‘(A) the adjusted basis of the asset, multi2 plied by 

3 ‘‘(B) the percentage (if any) by which— 

4 ‘‘(i) the gross domestic product 

5 deflator for the last calendar quarter end6 ing before the asset is disposed of, exceeds 

7 ‘‘(ii) the gross domestic product 

8 deflator for the last calendar quarter end9 ing before the asset was acquired by the 

10 taxpayer. 

11 The percentage under subparagraph (B) shall be 

rounded to the nearest 1 12 ⁄10 of 1 percentage point. 

13 ‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.— 

14 The gross domestic product deflator for any cal15 endar quarter is the implicit price deflator for the 

16 gross domestic product for such quarter (as shown 

17 in the last revision thereof released by the Secretary 

18 of Commerce before the close of the following cal19 endar quarter). 

20 ‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI21 MINISHED RISK OF LOSS; TREATMENT OF SHORT

22 SALES.— 

23 ‘‘(1) IN GENERAL.—If the taxpayer (or a re24 lated person) enters into any transaction which sub25 stantially reduces the risk of loss from holding any 


kjohnson on DSK79L0C42PROD with BILLS
6 

•S 3153 IS

1 asset, such asset shall not be treated as an indexed 

2 asset for the period of such reduced risk. 

3 ‘‘(2) SHORT SALES.— 

4 ‘‘(A) IN GENERAL.—In the case of a short 

5 sale of an indexed asset with a short sale period 

6 in excess of 3 years, for purposes of this title, 

7 the amount realized shall be an amount equal 

8 to the amount realized (determined without re9 gard to this paragraph) increased by the appli10 cable inflation adjustment. In applying sub11 section (c)(2) for purposes of the preceding sen12 tence, the date on which the property is sold 

13 short shall be treated as the date of acquisition 

14 and the closing date for the sale shall be treat15 ed as the date of disposition. 

16 ‘‘(B) SHORT SALE PERIOD.—For purposes 

17 of subparagraph (A), the short sale period be18 gins on the day that the property is sold and 

19 ends on the closing date for the sale. 

20 ‘‘(e) TREATMENT OF REGULATED INVESTMENT

21 COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.— 

22 ‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.— 

23 ‘‘(A) IN GENERAL.—Except as otherwise 

24 provided in this paragraph, the adjustment 

25 under subsection (a) shall be allowed to any 


kjohnson on DSK79L0C42PROD with BILLS
7 

•S 3153 IS

1 qualified investment entity (including for pur2 poses of determining the earnings and profits of 

3 such entity). 

4 ‘‘(B) EXCEPTION FOR CORPORATE SHARE5 HOLDERS.—Under regulations— 

6 ‘‘(i) in the case of a distribution by a 

7 qualified investment entity (directly or in8 directly) to a corporation— 

9 ‘‘(I) the determination of whether 

10 such distribution is a dividend shall be 

11 made without regard to this section, 

12 and 

13 ‘‘(II) the amount treated as gain 

14 by reason of the receipt of any capital 

15 gain dividend shall be increased by the 

16 percentage by which the entity’s net 

17 capital gain for the taxable year (de18 termined without regard to this sec19 tion) exceeds the entity’s net capital 

20 gain for such year determined with re21 gard to this section, and 

22 ‘‘(ii) there shall be other appropriate 

23 adjustments (including deemed distribu24 tions) so as to ensure that the benefits of 

25 this section are not allowed (directly or inVerDate Sep 11 2014 04:04 Nov 04, 2021 Jkt 029200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S3153.IS S3153

kjohnson on DSK79L0C42PROD with BILLS
8 

•S 3153 IS

1 directly) to corporate shareholders of quali2 fied investment entities. 

3 For purposes of the preceding sentence, any 

4 amount includible in gross income under section 

5 852(b)(3)(D) shall be treated as a capital gain 

6 dividend and an S corporation shall not be 

7 treated as a corporation. 

8 ‘‘(C) EXCEPTION FOR QUALIFICATION

9 PURPOSES.—This section shall not apply for 

10 purposes of sections 851(b) and 856(c). 

11 ‘‘(D) EXCEPTION FOR CERTAIN TAXES IM12 POSED AT ENTITY LEVEL.— 

13 ‘‘(i) TAX ON FAILURE TO DISTRIBUTE

14 ENTIRE GAIN.—If any amount is subject to 

15 tax under section 852(b)(3)(A) for any 

16 taxable year, the amount on which tax is 

17 imposed under such section shall be in18 creased by the percentage determined 

19 under subparagraph (B)(i)(II). A similar 

20 rule shall apply in the case of any amount 

21 subject to tax under paragraph (2) or (3) 

22 of section 857(b) to the extent attributable 

23 to the excess of the net capital gain over 

24 the deduction for dividends paid deter25 mined with reference to capital gain diviVerDate Sep 11 2014 04:04 Nov 04, 2021 Jkt 029200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S3153.IS S3153

kjohnson on DSK79L0C42PROD with BILLS
9 

•S 3153 IS

1 dends only. The first sentence of this 

2 clause shall not apply to so much of the 

3 amount subject to tax under section 

4 852(b)(3)(A) as is designated by the com5 pany under section 852(b)(3)(D). 

6 ‘‘(ii) OTHER TAXES.—This section 

7 shall not apply for purposes of determining 

8 the amount of any tax imposed by para9 graph (4), (5), or (6) of section 857(b). 

10 ‘‘(2) ADJUSTMENTS TO INTERESTS HELD IN

11 ENTITY.— 

12 ‘‘(A) REGULATED INVESTMENT COMPA13 NIES.—Stock in a regulated investment com14 pany (within the meaning of section 851) shall 

15 be an indexed asset for any calendar quarter in 

16 the same ratio as— 

17 ‘‘(i) the average of the fair market 

18 values of the indexed assets held by such 

19 company at the close of each month during 

20 such quarter, bears to 

21 ‘‘(ii) the average of the fair market 

22 values of all assets held by such company 

23 at the close of each such month. 

24 ‘‘(B) REAL ESTATE INVESTMENT

25 TRUSTS.—Stock in a real estate investment 


kjohnson on DSK79L0C42PROD with BILLS
10 

•S 3153 IS

1 trust (within the meaning of section 856) shall 

2 be an indexed asset for any calendar quarter in 

3 the same ratio as— 

4 ‘‘(i) the fair market value of the in5 dexed assets held by such trust at the close 

6 of such quarter, bears to 

7 ‘‘(ii) the fair market value of all as8 sets held by such trust at the close of such 

9 quarter. 

10 ‘‘(C) RATIO OF 80 PERCENT OR MORE.—If 

11 the ratio for any calendar quarter determined 

12 under subparagraph (A) or (B) would (but for 

13 this subparagraph) be 80 percent or more, such 

14 ratio for such quarter shall be 100 percent. 

15 ‘‘(D) RATIO OF 20 PERCENT OR LESS.—If 

16 the ratio for any calendar quarter determined 

17 under subparagraph (A) or (B) would (but for 

18 this subparagraph) be 20 percent or less, such 

19 ratio for such quarter shall be zero. 

20 ‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For 

21 purposes of this paragraph, a qualified invest22 ment entity which holds a partnership interest 

23 shall be treated (in lieu of holding a partnership 

24 interest) as holding its proportionate share of 

25 the assets held by the partnership. 


kjohnson on DSK79L0C42PROD with BILLS
11 

•S 3153 IS

1 ‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS2 TRIBUTIONS.—Except as otherwise provided by the 

3 Secretary, a distribution with respect to stock in a 

4 qualified investment entity which is not a dividend 

5 and which results in a reduction in the adjusted 

6 basis of such stock shall be treated as allocable to 

7 stock acquired by the taxpayer in the order in which 

8 such stock was acquired. 

9 ‘‘(4) QUALIFIED INVESTMENT ENTITY.—For 

10 purposes of this subsection, the term ‘qualified in11 vestment entity’ means— 

12 ‘‘(A) a regulated investment company 

13 (within the meaning of section 851), and 

14 ‘‘(B) a real estate investment trust (within 

15 the meaning of section 856). 

16 ‘‘(f) OTHER PASS-THRU ENTITIES.— 

17 ‘‘(1) PARTNERSHIPS.— 

18 ‘‘(A) IN GENERAL.—In the case of a part19 nership, the adjustment made under subsection 

20 (a) at the partnership level shall be passed 

21 through to the partners. 

22 ‘‘(B) SPECIAL RULE IN THE CASE OF SEC23 TION 754 ELECTIONS.—In the case of a transfer 

24 of an interest in a partnership with respect to 


kjohnson on DSK79L0C42PROD with BILLS
12 

•S 3153 IS

1 which the election provided in section 754 is in 

2 effect— 

3 ‘‘(i) the adjustment under section 

4 743(b)(1) shall, with respect to the trans5 feror partner, be treated as a sale of the 

6 partnership assets for purposes of applying 

7 this section, and 

8 ‘‘(ii) with respect to the transferee 

9 partner, the partnership’s holding period 

10 for purposes of this section in such assets 

11 shall be treated as beginning on the date 

12 of such adjustment. 

13 ‘‘(2) S CORPORATIONS.—In the case of an S 

14 corporation, the adjustment made under subsection 

15 (a) at the corporate level shall be passed through to 

16 the shareholders. This section shall not apply for 

17 purposes of determining the amount of any tax im18 posed by section 1374 or 1375. 

19 ‘‘(3) COMMON TRUST FUNDS.—In the case of a 

20 common trust fund, the adjustment made under sub21 section (a) at the trust level shall be passed through 

22 to the participants. 

23 ‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN

24 DETERMINING LOSS ON SALE OF INTEREST IN ENTI25 TY.—Notwithstanding the preceding provisions of 


kjohnson on DSK79L0C42PROD with BILLS
13 

•S 3153 IS

1 this subsection, for purposes of determining the 

2 amount of any loss on a sale or exchange of an in3 terest in a partnership, S corporation, or common 

4 trust fund, the adjustment made under subsection 

5 (a) shall not be taken into account in determining 

6 the adjusted basis of such interest. 

7 ‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.— 

8 ‘‘(1) IN GENERAL.—This section shall not apply 

9 to any sale or other disposition of property between 

10 related persons except to the extent that the basis 

11 of such property in the hands of the transferee is a 

12 substituted basis. 

13 ‘‘(2) RELATED PERSONS DEFINED.—For pur14 poses of this section, the term ‘related persons’ 

15 means— 

16 ‘‘(A) persons bearing a relationship set 

17 forth in section 267(b), and 

18 ‘‘(B) persons treated as single employer 

19 under subsection (b) or (c) of section 414. 

20 ‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST21 MENT.—If any person transfers cash, debt, or any other 

22 property to another person and the principal purpose of 

23 such transfer is to secure or increase an adjustment under 

24 subsection (a), the Secretary may disallow part or all of 

25 such adjustment or increase. 


kjohnson on DSK79L0C42PROD with BILLS
14 

•S 3153 IS

1 ‘‘(i) SPECIAL RULES.—For purposes of this section— 

2 ‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If 

3 there is an addition to the adjusted basis of any tan4 gible property or of any stock in a corporation dur5 ing the taxable year by reason of an improvement to 

6 such property or a contribution to capital of such 

7 corporation— 

8 ‘‘(A) such addition shall never be taken 

9 into account under subsection (c)(1)(A) if the 

10 aggregate amount thereof during the taxable 

11 year with respect to such property or stock is 

12 less than $1,000, and 

13 ‘‘(B) such addition shall be treated as a 

14 separate asset acquired at the close of such tax15 able year if the aggregate amount thereof dur16 ing the taxable year with respect to such prop17 erty or stock is $1,000 or more. 

18 A rule similar to the rule of the preceding sentence 

19 shall apply to any other portion of an asset to the 

20 extent that separate treatment of such portion is ap21 propriate to carry out the purposes of this section. 

22 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

23 THROUGHOUT HOLDING PERIOD.—The applicable in24 flation adjustment shall be appropriately reduced for 


kjohnson on DSK79L0C42PROD with BILLS
15 

•S 3153 IS

1 periods during which the asset was not an indexed 

2 asset. 

3 ‘‘(3) TREATMENT OF CERTAIN DISTRIBU4 TIONS.—A distribution with respect to stock in a 

5 corporation which is not a dividend shall be treated 

6 as a disposition. 

7 ‘‘(4) SECTION CANNOT INCREASE ORDINARY

8 LOSS.—To the extent that (but for this paragraph) 

9 this section would create or increase a net ordinary 

10 loss to which section 1231(a)(2) applies or an ordi11 nary loss to which any other provision of this title 

12 applies, such provision shall not apply. The taxpayer 

13 shall be treated as having a long-term capital loss in 

14 an amount equal to the amount of the ordinary loss 

15 to which the preceding sentence applies. 

16 ‘‘(5) ACQUISITION DATE WHERE THERE HAS

17 BEEN PRIOR APPLICATION OF SUBSECTION (a)(1) 

18 WITH RESPECT TO THE TAXPAYER.—If there has 

19 been a prior application of subsection (a)(1) to an 

20 asset while such asset was held by the taxpayer, the 

21 date of acquisition of such asset by the taxpayer 

22 shall be treated as not earlier than the date of the 

23 most recent such prior application. 


kjohnson on DSK79L0C42PROD with BILLS
16 

•S 3153 IS

1 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

2 such regulations as may be necessary or appropriate to 

3 carry out the purposes of this section.’’. 

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

5 for part II of subchapter O of chapter 1 of the Internal 

6 Revenue Code of 1986 is amended by striking the item 

7 relating to section 1023 and by inserting after the item 

8 relating to section 1022 the following new item: 

‘‘Sec. 1022. Indexing of certain assets for purposes of determining gain or loss. 

‘‘Sec. 1023. Cross references.’’. 

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

10 this section shall apply to indexed assets acquired by the 

11 taxpayer after December 31, 2021, in taxable years ending 

12 after such date. 

Æ 


kjohnson on DSK79L0C42PROD with BILLS