I

105TH CONGRESS

1ST SESSION H. R. 862

To amend the Internal Revenue Code of 1986 to provide a decrease in

the maximum rate of tax on capital gains which is based on the length

of time the taxpayer held the capital asset.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 27, 1997

Mr. BENTSEN 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 provide

a decrease in the maximum rate of tax on capital gains

which is based on the length of time the taxpayer held

the capital asset.

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

3 SECTION 1. DECREASE IN MAXIMUM CAPITAL GAINS RATE

4 BASED ON TAXPAYER’S HOLDING PERIOD.

5 (a) IN GENERAL.—Section 1(h) of the Internal Reve6 nue Code of 1986 (relating to maximum capital gains

7 rate) is amended to read as follows:

8 ‘‘(h) MAXIMUM CAPITAL GAINS RATE.—
2

•HR 862 IH

1 ‘‘(1) IN GENERAL.—If a taxpayer has a net

2 capital gain for any taxable year, then the tax im3 posed by this section shall not exceed the sum of—

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

5 the same manner as if this subsection had not

6 been enacted on the greater of—

7 ‘‘(i) taxable income reduced by the

8 amount of the net capital gain, or

9 ‘‘(ii) the 15-percent bracket amount,

10 plus

11 ‘‘(B) a tax equal to the sum of the

12 amounts determined by applying the applicable

13 percentage to long-term capital gain taken into

14 account in computing net capital gain.

15 ‘‘(2) 15-PERCENT BRACKET AMOUNT.—For

16 purposes of this subsection—

17 ‘‘(A) IN GENERAL.—The term ‘15-percent

18 bracket amount’ means the amount of taxable

19 income taxed at a rate below 28 percent, deter20 mined without taking into account long-term

21 capital gain attributable to a capital asset for

22 which the taxpayers’ holding period exceeds 8

23 years.
3

•HR 862 IH

1 ‘‘(B) LIFO ORDERING RULE.—For pur2 poses of applying paragraph (1)(B), the deter3 mination as to which long-term capital gain (if

4 any) was taken into account in determining the

5 15-percent bracket amount shall be made on

6 the basis of the holding period of the capital as7 sets to which such gain is attributable, begin8 ning with assets with the shortest holding pe9 riod.

10 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes

11 of paragraph (1)—

12 ‘‘(A) IN GENERAL.—The term ‘applicable

13 percentage’ means, with respect to any long14 term capital gain, 28 percent reduced (but not

15 below 14 percent) by 2 percentage points for

16 each year (or fraction thereof) by which the

17 taxpayer’s holding period for the capital asset

18 to which the gain is attributable exceeds 2

19 years.

20 ‘‘(B) LIMITATION ON GAIN TO WHICH PER21 CENTAGE APPLIES.—Subparagraph (A) shall

22 not apply to long-term capital gain on any sale

23 or exchange to the extent the gain exceeds the

24 excess (if any) of—
4

•HR 862 IH

1 ‘‘(i) net capital gain for the taxable

2 year, over

3 ‘‘(ii) the sum of—

4 ‘‘(I) that portion of the 15-per5 cent bracket amount which is attrib6 utable to net capital gain, plus

7 ‘‘(II) other long-term capital gain

8 to which paragraph (1)(B) applies

9 and which is attributable to capital

10 assets for which the taxpayer’s hold11 ing period is longer.

12 ‘‘(C) APPLICATION TO CLASSES OF

13 GAIN.—Subject to such rules as the Secretary

14 may prescribe, all long-term capital gain from

15 the sale or exchange of capital assets with the

16 same holding period (determined on the basis of

17 the number of years or fractions thereof) shall

18 be treated as gain from the sale or exchange of

19 a single capital asset.

20 ‘‘(4) INVESTMENT INCOME.—For purposes of

21 this subsection, the net capital gain for any taxable

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

23 amount which the taxpayer elects to take into ac24 count as investment income for the taxable year

25 under section 163(d)(4)(B)(iii).’’
5

•HR 862 IH

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

2 this section shall apply to taxable years beginning after

3 December 31, 1996.

Æ