Retirement Inflation Protection Act of 2020

To amend the Internal Revenue Code of 1986 to provide for the indexing of certain assets for purposes of determining gain or loss of eligible individuals. 1. Short title This Act may be cited as the Retirement Inflation Protection Act of 2020 2. Indexing of certain assets for purposes of determining gain or loss of eligible individuals (a) In General Part II of subchapter O of chapter 1 1018. Indexing of certain assets for purposes of determining gain or loss of eligible individuals (a) In general (1) Indexed basis substituted for adjusted basis Solely for purposes of determining gain or loss on the sale or other disposition by an eligible individual of an indexed asset which has been held by such individual for more than 3 years, the indexed basis of the asset shall be substituted for its adjusted basis. (2) Exception for depreciation, etc The deductions for depreciation, depletion, and amortization shall be determined without regard to the application of paragraph (1) to the taxpayer or any other person. (3) Written documentation requirement Paragraph (1) shall apply only with respect to indexed assets for which the taxpayer has written documentation of the original purchase price paid or incurred by the taxpayer to acquire such asset. (b) Eligible individual For purposes of this section, the term eligible individual 1/2 (c) Indexed asset (1) In general For purposes of this section, the term indexed asset (A) common stock in a C corporation (other than a foreign corporation), or (B) tangible property, which is a capital asset or property used in the trade or business (as defined in section 1231(b)). (2) Stock in certain foreign corporations included For purposes of this section— (A) In general The term indexed asset (B) Exception Subparagraph (A) shall not apply to— (i) stock of a foreign investment company, (ii) stock in a passive foreign investment company (as defined in section 1296), (iii) stock in a foreign corporation held by a United States person who meets the requirements of section 1248(a)(2), and (iv) stock in a foreign personal holding company. (C) Treatment of American depository receipts An American depository receipt for common stock in a foreign corporation shall be treated as common stock in such corporation. (d) Indexed basis For purposes of this section— (1) In general The indexed basis for any asset is— (A) the adjusted basis of the asset, increased by (B) the applicable inflation adjustment. (2) Applicable inflation adjustment The applicable inflation adjustment for any asset is an amount equal to— (A) the adjusted basis of the asset, multiplied by (B) the percentage (if any) by which— (i) C-CPI-U for the last calendar month ending before the asset is disposed of, exceeds (ii) C-CPI-U for the last calendar month ending before the asset was acquired by the taxpayer. The percentage under subparagraph (B) shall be rounded to the nearest 1/10 (3) C-CPI-U (A) In general The term C-CPI-U (B) Determination for calendar month The C-CPI-U for any calendar month is the average of the C-CPI-U as of the close of the 12-month period ending with the month which precedes such calendar month by 4 months. (e) Suspension of holding period where diminished risk of loss; treatment of short sales (1) In general If the taxpayer (or a related person) enters into any transaction which substantially reduces the risk of loss from holding any asset, such asset shall not be treated as an indexed asset for the period of such reduced risk. (2) Short sales (A) In general In the case of a short sale of an indexed asset with a short sale period in excess of 3 years, for purposes of this title, the amount realized shall be an amount equal to the amount realized (determined without regard to this paragraph) increased by the applicable inflation adjustment. In applying subsection (d)(2) for purposes of the preceding sentence, the date on which the property is sold short shall be treated as the date of acquisition and the closing date for the sale shall be treated as the date of disposition. (B) Short sale period For purposes of subparagraph (A), the short sale period begins on the day that the property is sold and ends on the closing date for the sale. (f) Dispositions between related persons (1) In general This section shall not apply to any sale or other disposition of property between related persons except to the extent that the basis of such property in the hands of the transferee is a substituted basis. (2) Related persons defined For purposes of this section, the term related persons (A) persons bearing a relationship set forth in section 267(b), and (B) persons treated as single employer under subsection (b) or (c) of section 414. (g) Transfers To increase indexing adjustment If any person transfers cash, debt, or any other property to another person and the principal purpose of such transfer is to secure or increase an adjustment under subsection (a), the Secretary may disallow part or all of such adjustment or increase. (h) Special rules For purposes of this section— (1) Treatment of improvements, etc If there is an addition to the adjusted basis of any tangible property or of any stock in a corporation during the taxable year by reason of an improvement to such property or a contribution to capital of such corporation— (A) such addition shall never be taken into account under subsection (d)(1)(A) if the aggregate amount thereof during the taxable year with respect to such property or stock is less than $1,000, and (B) such addition shall be treated as a separate asset acquired at the close of such taxable year if the aggregate amount thereof during the taxable year with respect to such property or stock is $1,000 or more. A rule similar to the rule of the preceding sentence shall apply to any other portion of an asset to the extent that separate treatment of such portion is appropriate to carry out the purposes of this section. (2) Assets which are not indexed assets throughout holding period The applicable inflation adjustment shall be appropriately reduced for periods during which the asset was not an indexed asset. (3) Treatment of certain distributions A distribution with respect to stock in a corporation which is not a dividend shall be treated as a disposition. (4) Section cannot increase ordinary loss To the extent that (but for this paragraph) this section would create or increase a net ordinary loss to which section 1231(a)(2) applies or an ordinary loss to which any other provision of this title applies, such provision shall not apply. The taxpayer shall be treated as having a long-term capital loss in an amount equal to the amount of the ordinary loss to which the preceding sentence applies. (5) Acquisition date where there has been prior application of subsection (a)(1) If there has been a prior application of subsection (a)(1) to an asset while such asset was held by the taxpayer, the date of acquisition of such asset by the taxpayer shall be treated as not earlier than the date of the most recent such prior application. (i) Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section. . (b) Clerical amendment The table of sections for part II of subchapter O of chapter 1 of such Code is amended by inserting after the item relating to section 1017 the following new item: Sec. 1018. Indexing of certain assets for purposes of determining gain or loss of eligible individuals. . (c) Effective date The amendments made by this section shall apply to sales or other dispositions after the date of the enactment of this Act, in taxable years ending after such date.

Summary: Retirement Inflation Protection Act of 2020 This bill allows the adjusted basis of certain assets, including C corporation common stock and tangible property used in a trade or business, to be adjusted for inflation solely for the purpose of determining the gain or loss of individuals who (1) have held such assets for more than 3 years, and (2) have attained the age of 59 1/2 as of the date of the sale or other disposition of the assets. The bill uses the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) for purposes of making the inflation adjustment. The bill sets forth rules for applying the inflation adjustment to short sales, dispositions between related persons, and improvements to property. The Internal Revenue Service may disallow an adjustment if any person transfers cash, debt, or any other property to another person for the principal purpose of securing or increasing an inflation adjustment.