I

104TH CONGRESS

1ST SESSION H. R. 593

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 19, 1995

Mr. ROHRABACHER (for himself, Mr. DOOLITTLE, Mr. MOORHEAD, Mr.

MANZULLO, Mr. BURTON of Indiana, Mr. HASTERT, Mr. STUMP, Mr.

MCCOLLUM, Mr. BLUTE, Mr. BARTLETT of Maryland, Mr. KING, Mr.

KNOLLENBERG, Mr. ZIMMER, Mr. SENSENBRENNER, Mr. BUNNING of

Kentucky, Mr. SPENCE, Mr. DORNAN, Mr. BUNN of Oregon, Mr.

FORBES, Mr. MCHUGH, Mr. SMITH of New Jersey, Mr. FOX of Pennsylvania, Mr. HALL of Texas, Mr. ISTOOK, and Mr. SOLOMON) 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,
2

•HR 593 IH

1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Senior Citizens’ Tax

3 Relief Act of 1995’’.

4 SEC. 2. INCREASE IN LIMITATION ON 1-TIME EXCLUSION OF

5 GAIN FROM SALE OF PRINCIPAL RESIDENCE.

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

7 121(b) of the Internal Revenue Code of 1986 (relating to

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

9 ($62,500’’ and inserting ‘‘$205,000 ($102,500’’.

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

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

12 end thereof the following new paragraph:

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

14 case of any taxable year beginning in a calendar

15 year after 1995, each dollar amount set forth in

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

17 to—

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

19 ‘‘(B) the cost-of-living adjustment deter20 mined under section 1(f)(3) for the calendar

21 year in which the taxable year begins, by sub22 stituting ‘calendar year 1994’ for ‘calendar year

23 1992’ in subparagraph (B) thereof.

24 Any increase determined under the preceding sen25 tence shall be rounded to the nearest multiple of

26 $1,000.’’
3

•HR 593 IH

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

2 this section shall apply to any sale or exchange after

3 December 31, 1994.

4 SEC. 3. INCREASE IN UNIFIED ESTATE AND GIFT TAX

5 CREDITS.

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 $808,000.

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

25 case of any decedent dying, and gift made, in a cal-
4

•HR 593 IH

1 endar year after 1995, the $808,000 amount set

2 forth in paragraph (1) shall be increased by an

3 amount equal to—

4 ‘‘(A) $808,000, multiplied by

5 ‘‘(B) the cost-of-living adjustment deter6 mined under section 1(f)(3) for such calendar

7 year by substituting ‘calendar year 1994’ for

8 ‘calendar year 1992’ in subparagraph (B)

9 thereof.

10 Any increase determined under the preceding sen11 tence shall be rounded to the nearest multiple of

12 $1,000.’’

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

14 Code is amended by striking ‘‘$600,000’’ and insert15 ing ‘‘$808,000 (adjusted as provided in section

16 2010(c)(2))’’.

17 (4) Paragraph (2) of section 2001(c) of such

18 Code is amended by striking ‘‘$21,040,000’’ and in19 serting ‘‘the amount at which the effective tax rate

20 under this section is 55 percent’’.

21 (5) Subparagraph (A) of section 2102(c)(3) of

22 such Code is amended by striking ‘‘$192,800’’ and

23 inserting ‘‘the applicable credit amount in effect

24 under section 2010(c) for the calendar year which

25 includes the date of death’’.
5

•HR 593 IH

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

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

3 ‘‘$193,500’’ and inserting ‘‘the applicable credit amount

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

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

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

7 and gifts made, after December 31, 1994.

8 SEC. 4. REDUCTION IN CAPITAL GAINS TAX FOR INDIVID9 UALS.

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

11 chapter 1 of the Internal Revenue Code of 1986 is amend12 ed by inserting after section 1201 the following new

13 section:

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

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

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

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

18 be allowed as a deduction.

19 ‘‘(b) ESTATES AND TRUSTS.—In the case of an es20 tate or trust, the deduction under subsection (a) shall be

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

22 for the taxable year from sales or exchanges of capital as23 sets which, under sections 652 and 662 (relating to inclu24 sions of amounts in gross income of beneficiaries of
6

•HR 593 IH

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

2 derived from the sale or exchange of capital assets.

3 ‘‘(c) COORDINATION WITH TREATMENT OF CAPITAL

4 GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—

5 For purposes of this section, the net capital gain for any

6 taxable year shall be reduced (but not below zero) by the

7 amount which the taxpayer takes into account as invest8 ment income under section 163(d)(4)(B)(iii).’’

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

10 amended by adding at the end thereof the following new

11 paragraph:

12 ‘‘(4) CAPITAL GAINS DEDUCTION DISALLOW13 ANCE.—The deduction under section 1202 shall not

14 be allowed.’’

15 (c) CONFORMING AMENDMENTS.—

16 (1) Section 13113 of the Revenue Reconcili17 ation Act of 1993 (relating to 50-percent exclusion

18 for gain from certain small business stock), and the

19 amendments made by such section, are hereby re20 pealed; and the Internal Revenue Code of 1986 shall

21 be applied as if such section (and amendments) had

22 never been enacted.

23 (2) Subsection (h) of section 1 of such Code is

24 hereby repealed.
7

•HR 593 IH

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

2 inserting after paragraph (15) the following new

3 paragraph:

4 ‘‘(16) CAPITAL GAINS DEDUCTION.—The deduc5 tion allowed by section 1202.’’

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

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

8 other than a corporation, 50 percent of the amount

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

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

11 amended to read as follows:

12 ‘‘(2) CAPITAL GAINS AND LOSSES OF TAX13 PAYERS OTHER THAN CORPORATIONS.—In the case

14 of a taxpayer other than a corporation—

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

16 losses from sales or exchanges of capital assets

17 shall not exceed the amount includible on ac18 count of gains from sales or exchanges of cap19 ital assets; and

20 ‘‘(B) the deduction provided by section

21 1202 shall not be allowed.’’

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

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

24 ‘‘paragraph (1)’’.
8

•HR 593 IH

1 (6)(A) Section 220 of such Code is amended to

2 read as follows:

3 ‘‘SEC. 220. CROSS REFERENCES.

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

1202.

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

section 691.’’

4 (B) The table of sections for part VII of sub5 chapter B of chapter 1 is amended by striking ‘‘ref6 erence’’ in the item relating to section 220 and in7 serting ‘‘references’’.

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

9 Code is amended to read as follows:

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

11 amount otherwise allowable as a deduction under

12 this subsection consists of gain from the sale or ex13 change of capital assets held for more than 1 year,

14 proper adjustment shall be made for any deduction

15 allowable to the estate or trust under section 1202

16 (relating to deduction for net capital gain). In the

17 case of a trust, the deduction allowed by this sub18 section shall be subject to section 681 (relating to

19 unrelated business income).’’

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

21 Code is amended by adding at the end thereof the

22 following new sentence: ‘‘The deduction under sec-
9

•HR 593 IH

1 tion 1202 (relating to deduction for net capital gain)

2 shall not be taken into account.’’.

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

4 Code is amended—

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

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

7 under section 1202 (relating to deduction for

8 capital gains) shall not be taken into account’’

9 before the period at the end thereof.

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

11 Code is amended by striking ‘‘1(h), 1201’’ and in12 serting ‘‘1201, 1202,’’.

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

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

15 ‘‘such gains and losses shall be determined without

16 regard to section 1202 (relating to deduction for net

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

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

19 of such Code is amended by striking so much of

20 such subparagraph as precedes clause (i) and insert21 ing the following:

22 ‘‘(B) SPECIAL RULES WHERE CORPORATE

23 CAPITAL RATE GAIN DIFFERENTIAL.—In the

24 case of a corporation, for any taxable year for
10

•HR 593 IH

1 which there is a capital gain rate differen2 tial—’’.

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

4 904(b)(3) of such Code are amended to read as

5 follows:

6 ‘‘(D) CAPITAL GAIN RATE DIFFEREN7 TIAL.—There is a capital gain rate differential

8 for any taxable year if any rate of tax imposed

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

10 applies) exceeds the alternative rate of tax

11 under section 1201(a) (determined without re12 gard to the last sentence of section 11(b)(1)).

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

14 rate differential portion of foreign source net

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

16 capital gain from sources within the United

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

18 is the same proportion of such amount as—

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

20 tax specified in section 11(b)(1) over the

21 alternative rate of tax under section

22 1201(a), bears to

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

24 in section 11(b)(1).’’
11

•HR 593 IH

1 (13) Subsection (d) of section 1044 of such

2 Code is amended by striking the last sentence.

3 (14) Section 1402(i)(1) of such Code is amend4 ed to read as follows:

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

6 earnings from self-employment of any options dealer

7 or commodities dealer—

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

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

10 the normal course of the taxpayer’s activity of

11 dealing in or trading section 1256 contracts)

12 from section 1256 contracts or property related

13 to such contracts, and

14 ‘‘(B) the deduction provided by section

15 1202 shall not apply.’’

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

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

18 amended by striking the item relating to section 1202 and

19 inserting the following new item:

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

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

21 this section shall apply to taxable years beginning after

22 the date of the enactment of this Act.

Æ