I 
119TH CONGRESS 
1ST SESSION H. R. 5427 
To amend the Internal Revenue Code of 1986 to eliminate tax loopholes 
that allow billionaires to defer tax indefinitely through planning strategies 
such as ‘‘buy, borrow, die’’, to modify over 30 tax provisions so that 
billionaires are required to pay taxes annually, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 17, 2025 
Mr. COHEN (for himself, Mr. BEYER, Ms. TLAIB, Mr. GARCI´A of Illinois, Mr. 
MCGOVERN, Ms. NORTON, Mr. DAVIS of Illinois, Ms. DELAURO, Mr. 
BOYLE of Pennsylvania, Ms. MCCOLLUM, Mr. NADLER, Mr. GARAMENDI, 
Ms. KELLY of Illinois, Ms. DEAN of Pennsylvania, Mr. MULLIN, Ms. 
OMAR, Mr. LANDSMAN, Ms. SCANLON, Ms. CLARKE of New York, Mr. 
HUFFMAN, Mr. NORCROSS, Ms. SA´NCHEZ, Mr. EVANS of Pennsylvania, 
Mr. FROST, Ms. LEE of Pennsylvania, Ms. SIMON, Mr. JACKSON of Illi-
nois, and Mrs. RAMIREZ) 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 eliminate 
tax loopholes that allow billionaires to defer tax indefi-
nitely through planning strategies such as ‘‘buy, borrow, 
die’’, to modify over 30 tax provisions so that billionaires 
are required to pay taxes annually, and for other pur-
poses. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; 
TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Billionaires Income Tax Act’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986. 
(c) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows: 
Sec. 1. Short title; amendment of 1986 Code; table of contents. 
Sec. 2. Purpose. 
TITLE I—ELIMINATION OF DEFERRAL FOR APPLICABLE 
TAXPAYERS 
Sec. 101. Elimination of deferral of tax. 
Sec. 102. Carryback of capital losses attributable to mark-to-market rules. 
TITLE II—APPLICATION OF OTHER PROVISIONS TO APPLICABLE 
TAXPAYERS AND ENTITIES 
Subtitle A—Individuals 
Sec. 201. Applicable taxpayers not eligible for adjusted gross income limitation 
on net investment tax. 
Sec. 202. Treatment of covered expatriates. 
Subtitle B—Rules for Applicable Entities and Trusts 
Sec. 211. Treatment of like-kind exchanges by applicable entities. 
Sec. 212. Treatment of transfers by applicable entities in exchange for stock. 
Sec. 213. Special rules for applicable trusts. 
Subtitle C—Treatment of Deferred Compensation and Certain Life Insurance 
and Annuity Contracts 
Sec. 221. Elimination of deferral of tax on certain compensation. 
Sec. 222. Rules relating to certain life insurance and annuity contracts of appli-
cable taxpayers. 
Subtitle D—Repeal of Special Treatment for Certain Investments 
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Sec. 231. Treatment of exclusion for certain small business stock. 
Sec. 232. Modifications for investments in qualified opportunity funds. 
SEC. 2. PURPOSE. 
The purpose of this Act is to require billionaires to 
pay taxes annually by eliminating the ability of high in-
come and high net worth taxpayers to use tax planning 
strategies such as ‘‘buy, borrow, die’’ to defer paying taxes 
indefinitely, specifically by— 
(1) under the provisions of title I of this Act— 
(A) requiring high income and high net 
worth taxpayers to pay tax on the income they 
earn on an annual basis, just like working peo-
ple do on their income from wages, through 
mark-to-market taxation, and 
(B) shutting down the ability of the ultra 
wealthy to buy and hold appreciating assets and 
borrow against those assets to support their 
lavish lifestyles, all completely tax-free, and 
(2) under the provisions of title II of this Act, 
closing loopholes in the tax code that allow high in-
come and high net worth taxpayers to shield their 
income from taxation, including the loophole that al-
lows ultra wealthy taxpayers to transfer untaxed ap-
preciated assets to their heirs at death and such 
heirs to sell such assets completely tax-free. 
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TITLE I—ELIMINATION OF DE-
FERRAL 
FOR 
APPLICABLE 
TAXPAYERS 
SEC. 101. ELIMINATION OF DEFERRAL OF TAX. 
(a) IN GENERAL.—Subchapter E of chapter 1 is 
amended by adding at the end the following new part: 
‘‘PART IV—ELIMINATION OF DEFERRAL FOR 
APPLICABLE TAXPAYERS 
‘‘Subpart A. General provisions. 
‘‘Subpart B. Definitions and rules relating to applicable taxpayers. 
‘‘Subpart C. Other definitions and rules. 
‘‘Subpart A—General Provisions 
‘‘Sec. 490. Elimination of deferral of tax for applicable taxpayers. 
‘‘Sec. 491. Treatment of tradable covered assets. 
‘‘Sec. 492. Deferral recapture amount on applicable transfers of nontradable 
covered assets. 
‘‘Sec. 493. Special rules for application of nondeferral rules to certain pass- 
through entities. 
‘‘Sec. 494. Treatment of gifts, bequests, and transfers in trust. 
‘‘SEC. 490. ELIMINATION OF DEFERRAL OF TAX FOR APPLI-
CABLE TAXPAYERS. 
‘‘In the case of an applicable taxpayer for any taxable 
year— 
‘‘(1) if there is a taxable event with respect to 
any tradable covered asset of the taxpayer during 
the taxable year, gain or loss shall be recognized as 
provided in section 491, 
‘‘(2) if there is an applicable transfer by the 
taxpayer during the taxable year of any nontradable 
covered asset— 
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‘‘(A) if such applicable transfer is a dis-
regarded nonrecognition event, gain or loss 
shall be recognized as provided in section 
492(a)(1), and 
‘‘(B) the tax imposed by this chapter for 
the taxable year shall be increased as provided 
in section 492 with respect to any gain from 
any such transfer, 
‘‘(3) gain or loss with respect to any applicable 
entity held by the taxpayer shall be taken into ac-
count as provided in section 493, and 
‘‘(4) in the case of any gift, bequest, or transfer 
in trust by an applicable taxpayer or applicable enti-
ty held by an applicable taxpayer, section 494 shall 
apply. 
‘‘SEC. 491. TREATMENT OF TRADABLE COVERED ASSETS. 
‘‘(a) IN GENERAL.—For purposes of this title, in the 
case of a taxable event with respect to any tradable cov-
ered asset of an applicable taxpayer— 
‘‘(1) notwithstanding any other provision of this 
title— 
‘‘(A) gain or loss shall be recognized and 
taken into account in the taxable year in which 
the taxable event occurs as if the taxpayer had 
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sold the tradable covered asset for its fair mar-
ket value— 
‘‘(i) in the case of a taxable event de-
scribed in subsection (b)(1), on the date of 
the taxable event, and 
‘‘(ii) in the case of a taxable event de-
scribed in subsection (b)(2), immediately 
before the taxable event, and 
‘‘(B) except as provided in subsection 
(c)(1), gain or loss taken into account by reason 
of a taxable event described in subsection (b)(1) 
with respect to a tradable covered asset which 
is a capital asset shall be treated as long-term 
capital gain or long-term capital loss, respec-
tively, and 
‘‘(2) proper adjustments shall be made in the 
amount of gain or loss subsequently realized for gain 
or loss taken into account under paragraph (1). 
‘‘(b) TAXABLE EVENT.—For purposes of this part, 
the term ‘taxable event’ means, with respect to any 
tradable covered asset— 
‘‘(1) the holding of such asset as of the close 
of any taxable year with respect to which a taxpayer 
is an applicable taxpayer, and 
‘‘(2) any disregarded nonrecognition event. 
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‘‘(c) SPECIAL RULES.— 
‘‘(1) CHARACTERIZATION AS ORDINARY INCOME 
OR LOSS.—Except as provided by the Secretary, sub-
section (a)(1)(B) shall not apply to any gain or loss 
from a tradable covered asset if, under any other 
provision of this title, such gain or loss— 
‘‘(A) is treated as gain or loss from the 
sale or exchange of an asset which is not a cap-
ital asset, or 
‘‘(B) is treated as ordinary income or loss 
on a basis other than the taxpayer’s holding pe-
riod in such asset. 
‘‘(2) HOLDING PERIOD.—For purposes of this 
title, any taxable event described in subsection (b)(1) 
with respect to any tradable covered asset shall not 
be taken into account in determining the holding pe-
riod of the taxpayer with respect to such tradable 
covered asset. 
‘‘(3) PROPER ADJUSTMENTS FOR SUBSEQUENT 
GAIN OR LOSS.—For purposes of subsection (a)(2), 
section 492(a)(1)(B), section 493(c)(1)(A)(ii), and 
section 493(c)(3)(C), the proper adjustments re-
quired under such provisions shall include such ad-
justments in basis of property, or such other adjust-
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ments in respect of property, as the Secretary deter-
mines necessary or appropriate. 
‘‘SEC. 492. DEFERRAL RECAPTURE AMOUNT ON APPLICA-
BLE TRANSFERS OF NONTRADABLE COV-
ERED ASSETS. 
‘‘(a) IN GENERAL.—If there is an applicable transfer 
during a taxable year of a nontradable covered asset of 
an applicable taxpayer— 
‘‘(1) in the case of an applicable transfer which 
is a disregarded nonrecognition event— 
‘‘(A) notwithstanding any other provision 
of this title, gain or loss shall be recognized and 
taken into account by the taxpayer (including 
for purposes of paragraph (2) and subsection 
(c)) in the taxable year in which the transfer 
occurs as if the taxpayer had sold the 
nontradable covered asset for its fair market 
value immediately before such transfer, and 
‘‘(B) proper adjustments shall be made in 
the amount of gain or loss subsequently realized 
for gain or loss taken into account under sub-
paragraph (A), and 
‘‘(2) if there is gain from the applicable trans-
fer, the tax imposed by this chapter for the taxable 
year (determined without regard to this section) 
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shall be increased by the sum of the deferral recap-
ture amounts determined under subsection (b) for 
each such transfer. 
‘‘(b) DEFERRAL RECAPTURE AMOUNT.— 
‘‘(1) IN GENERAL.—For purposes of this part— 
‘‘(A) IN GENERAL.—The term ‘deferral re-
capture amount’ means, with respect to any ap-
plicable transfer of any nontradable covered 
asset, the aggregate amount of interest (deter-
mined in the manner provided under paragraph 
(3)) on the deemed tax amount determined 
under paragraph (2) for each taxable year to 
which gain is allocated under paragraph (2)(A) 
and which precedes the taxable year of the ap-
plicable transfer. 
‘‘(B) 
LIMITATION
ON
AMOUNT.—The 
amount determined under subparagraph (A) 
with respect to any applicable transfer shall not 
exceed the applicable percentage of the gain 
from such transfer. For purposes of this sub-
paragraph, the applicable percentage is the ex-
cess of— 
‘‘(i) 49 percent, over 
‘‘(ii) in the case of the transfer of a 
nontradable covered asset which— 
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‘‘(I) is a capital asset, the rate of 
tax in effect under section 1(h)(1)(D) 
for the taxable year of the transfer, or 
‘‘(II) is not a capital asset, the 
highest rate of tax in effect under sec-
tion 1 for such taxable year. 
‘‘(2) DEEMED TAX AMOUNT.—For purposes of 
paragraph (1)— 
‘‘(A) IN
GENERAL.—The deemed tax 
amount for any taxable year preceding the tax-
able year of any applicable transfer of a 
nontradable covered asset shall be the amount 
determined— 
‘‘(i) first, except as provided in sub-
paragraph (B), by allocating the amount of 
gain from such transfer ratably to each 
day in the taxpayer’s holding period of 
such asset, and 
‘‘(ii) then by multiplying the amount 
allocated under clause (i) to days in such 
preceding taxable year by— 
‘‘(I) if such asset is a capital 
asset, the rate of tax in effect under 
section 1(h)(1)(D) for the taxable 
year of such transfer, or 
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‘‘(II) if such asset is not a capital 
asset, the highest rate of tax in effect 
under section 1 for such taxable year. 
‘‘(B) SPECIAL RULE FOR PERIODS BEFORE 
BECOMING
APPLICABLE
TAXPAYER.—Notwith-
standing subparagraph (A)(i), any gain allo-
cated under such subparagraph to any taxable 
year preceding the first taxable year for which 
the taxpayer is treated as an applicable tax-
payer shall be allocated to such first taxable 
year. 
‘‘(C) INCREASE IN DEEMED TAX AMOUNT 
BY TAX ON NET INVESTMENT INCOME.—If gain 
from a transfer to which this section applies for 
any taxable year is of a type taken into account 
in computing net investment income (as defined 
in section 1411), the deemed tax amount under 
this paragraph for any preceding taxable year 
to which such gain is allocated under subpara-
graph (A)(i) shall be increased by an amount 
equal to the amount of such allocated gain mul-
tiplied by the rate of tax in effect under section 
1411(a)(1) for the taxable year of such trans-
fer. 
‘‘(3) COMPUTATION OF INTEREST.— 
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‘‘(A) IN GENERAL.—The amount of inter-
est referred to in paragraph (1) on any deemed 
tax amount determined under paragraph (2) for 
any preceding taxable year shall be determined 
for the period— 
‘‘(i) beginning on the due date for 
such preceding taxable year, and 
‘‘(ii) ending on the date on which the 
applicable transfer occurs, 
by using the rates determined under section 
6621(b) (plus 1 percentage point), and the 
method applicable under section 6621, for un-
derpayments of tax for such period. 
‘‘(B) DUE
DATE.—For purposes of this 
paragraph, the term ‘due date’ means, with re-
spect to any preceding taxable year, the date 
prescribed by law (determined without regard to 
extensions) for filing the return of the tax im-
posed by this chapter for such taxable year. 
‘‘(c) SPECIAL RULE
FOR TAXPAYERS WITH NET 
CAPITAL LOSSES.— 
‘‘(1) IN GENERAL.—If a taxpayer has a net 
capital loss for any taxable year for which there is 
an increase in tax under subsection (a)(2), such in-
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crease in tax shall be reduced (but not below zero) 
by the credit equivalent of such net capital loss. 
‘‘(2) CREDIT
EQUIVALENT.—For purposes of 
this subsection, the term ‘credit equivalent’ means, 
with respect to any net capital loss for any taxable 
year, an amount equal to such loss multiplied by the 
rate of tax in effect under section 1(h)(1)(D) for 
such taxable year. 
‘‘(3) COORDINATION
WITH
CARRYOVERS
OF 
LOSS.—For purposes of subsection (b) of section 
1212, the net capital loss for a taxable year to which 
paragraph (1) applies (determined without regard to 
this subsection) shall be reduced (but not below 
zero) by an amount equal to the amount of the re-
duction under paragraph (1) for such taxable year 
divided by the rate of tax in effect under section 
1(h)(1)(D) for such taxable year. 
‘‘(d) SPECIAL RULES FOR CERTAIN DIVIDEND DIS-
TRIBUTIONS.— 
‘‘(1) EXCESS DIVIDEND DISTRIBUTIONS.— 
‘‘(A) IN GENERAL.—For purposes of ap-
plying this section, any excess dividend shall be 
treated as gain from an applicable transfer of 
a nontradable covered asset occurring on the 
date such dividend is received. 
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‘‘(B) EXCESS DIVIDEND.—For purposes of 
this part, the term ‘excess dividend’ means, 
with respect to any nontradable covered asset 
which consists of stock in a C corporation, any 
dividend in respect of such stock received dur-
ing any taxable year to the extent such dividend 
does not exceed its ratable portion of the total 
excess dividends (if any) for such taxable year. 
‘‘(C) TOTAL
EXCESS
DIVIDENDS.—For 
purposes of this paragraph— 
‘‘(i) IN
GENERAL.—The term ‘total 
excess dividends’ means, with respect to 
stock in a C corporation described in sub-
paragraph (B), the excess (if any) of— 
‘‘(I) the amount of the dividends 
in respect of such stock received by 
the taxpayer during the taxable year, 
over 
‘‘(II) 125 percent of the average 
amount of dividends received in re-
spect of such stock by the taxpayer 
during the 3 preceding taxable years 
(or, if shorter, the portion of the tax-
payer’s holding period before the tax-
able year). 
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by such other person shall be taken into 
account as if received by the taxpayer. 
‘‘(2) CAPITAL
GAIN
DIVIDENDS
OF
CERTAIN 
REITS.— 
‘‘(A) IN GENERAL.—For purposes of ap-
plying this section, if an applicable taxpayer 
holds directly (or indirectly through 1 or more 
nontradable interests) stock in a real estate in-
vestment trust which is a nontradable covered 
asset, any capital gain dividend received by 
such taxpayer from such entity shall be treated 
as gain from an applicable transfer of a 
nontradable covered asset occurring on the date 
such dividend is received. 
‘‘(B) REPORTING.—A real estate invest-
ment trust shall include in the written notice 
for a capital gain dividend under section 
857(b)(3)(B) its holding period in the asset giv-
ing rise to the capital gain dividend. The Sec-
retary shall provide rules for the determination 
of holding periods in cases where the dividend 
is properly allocable to gain from more than 1 
asset. 
‘‘(3) HOLDING PERIOD.—Except as prescribed 
by the Secretary, if an applicable taxpayer is treated 
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under this subsection as receiving gain from an ap-
plicable transfer of a nontradable covered asset, the 
taxpayer’s holding period for purposes of computing 
the deferral recapture amount under this section 
shall be the taxpayer’s holding period with respect to 
the stock or ownership interest in the entity to which 
paragraph (1) or (2) applies (or, if shorter, the hold-
ing period included in the notice described in para-
graph (2)(B) in the case of a capital gain dividend). 
‘‘(e) HOLDING PERIOD.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—The taxpayer’s holding pe-
riod shall be determined under section 1223, except 
that if a tradable covered asset of an applicable tax-
payer is converted to, or exchanged for, a 
nontradable covered asset, such period shall only in-
clude the period after the most recent taxable event 
under this part with respect to such tradable covered 
asset. 
‘‘(2) SECRETARIAL AUTHORITY.—The Secretary 
shall prescribe such regulations, rules, or guidance 
providing for other modifications to holding periods 
as may be necessary to carry out the purposes of 
this section. 
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‘‘SEC. 493. SPECIAL RULES FOR APPLICATION OF NON-
DEFERRAL 
RULES 
TO 
CERTAIN 
PASS- 
THROUGH ENTITIES. 
‘‘(a) TREATMENT OF OWNERSHIP INTERESTS IN AP-
PLICABLE ENTITIES.—For purposes of applying this part, 
except as provided in this section, any ownership interest 
in an applicable entity held directly (or indirectly through 
1 or more nontradable interests) by an applicable taxpayer 
which is a tradable or nontradable covered asset shall be 
treated in the same manner as any other such asset. 
‘‘(b) ADDITIONAL REQUIREMENTS FOR APPLICABLE 
TAXPAYERS WHO ARE SIGNIFICANT OWNERS.—For pur-
poses of this part— 
‘‘(1) IN GENERAL.—In the case of any applica-
ble taxpayer which is a significant owner of an appli-
cable entity— 
‘‘(A) such taxpayer shall meet the report-
ing requirements under paragraph (2) with re-
spect to such entity, and 
‘‘(B) such taxpayer shall take into account 
amounts with respect to such entity as required 
under paragraph (3). 
‘‘(2) REPORTING REQUIREMENTS FOR SIGNIFI-
CANT OWNERS.— 
‘‘(A) NOTICE TO ENTITY OF STATUS.— 
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‘‘(i) IN GENERAL.—In the case of the 
first taxable year for which a taxpayer— 
‘‘(I) is an applicable taxpayer, 
‘‘(II) is a significant owner of an 
applicable entity, and 
‘‘(III) 
holds 
directly 
a 
nontradable interest in such applicable 
entity, 
such taxpayer shall, at such time and in 
such manner as the Secretary shall pre-
scribe, notify such applicable entity that 
such taxpayer is a taxpayer meeting the 
requirements of subclauses (I), (II), and 
(III) and that the applicable entity is sub-
ject to the notice requirements under sub-
section (c) with respect to such taxpayer. 
Such taxpayer shall include with such no-
tice such information as the Secretary may 
prescribe. 
‘‘(ii) PERIOD OF NOTICE.—Any notice 
provided by a taxpayer under clause (i) 
shall remain in effect, and such entity shall 
continue to be subject to the reporting re-
quirements under subsection (c) with re-
spect to such taxpayer, for the period spec-
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ified by the Secretary. The Secretary may 
require additional reporting by the tax-
payer for purposes of carrying out this 
clause. 
‘‘(B) REPORTING OF ELECTIONS TO TREAT 
NONTRADABLE
INTERESTS
AS
TRADABLE
AS-
SETS.—If— 
‘‘(i) section 496(a)(1) applies to an 
applicable taxpayer for any taxable year 
for which a notice with respect to such tax-
payer is in effect under subparagraph (A), 
and 
‘‘(ii) the applicable taxpayer made the 
election under section 496(a)(3) to treat 
any nontradable interest in an applicable 
entity as a tradable covered asset for pur-
poses of section 496(a)(1), 
the applicable taxpayer shall, at such times and 
in such manner as the Secretary shall prescribe, 
report to such applicable entity notice of such 
election, the amount of gain described in section 
496(c)(1) with respect to such treatment, and 
the requirement for the entity to make the basis 
adjustments described in section 496(c)(2). 
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‘‘(3) CERTAIN GAIN OR LOSS OF APPLICABLE 
ENTITY
TAKEN
INTO
ACCOUNT
BY
SIGNIFICANT 
OWNERS.— 
‘‘(A) IN GENERAL.—Each applicable tax-
payer for which a notice with respect to such 
taxpayer is in effect under paragraph (2)(A) or 
subsection (c)(2) with respect to an applicable 
entity for any taxable year of the taxpayer 
shall, in computing the taxpayer’s tax liability 
under this chapter for such taxable year, take 
into account such taxpayer’s share of any gain 
or loss reported under subsection (c)(1)(A)(i) or 
(c)(1)(B)(i) to the taxpayer for any taxable year 
of such entity ending with or within such tax-
able year of the taxpayer. 
‘‘(B) BASIS ADJUSTMENTS.—Under rules 
prescribed by the Secretary, if gain or loss is 
taken into account by an applicable taxpayer 
under subparagraph (A) with respect to any 
tradable covered asset by reason of the taxpayer 
holding a nontradable interest in an applicable 
entity— 
‘‘(i) the applicable entity’s adjusted 
basis of such asset (solely for purposes of 
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computing the taxpayer’s share of such ad-
justed basis), and 
‘‘(ii) the taxpayer’s adjusted basis of 
such nontradable interest, 
shall each be appropriately adjusted to reflect 
gain or loss so taken into account. Such rules 
shall also provide proper adjustments to ad-
justed bases where such ownership is held 
through tiered entities. 
‘‘(C) SPECIAL RULES FOR DEFERRAL RE-
CAPTURE AMOUNT.— 
‘‘(i) HOLDING
PERIOD.—Except as 
prescribed by the Secretary, if an applica-
ble taxpayer takes into account gain under 
subparagraph (A) for any taxable year 
from an applicable transfer by such appli-
cable entity of a nontradable covered asset, 
the taxpayer’s holding period with respect 
to such asset for purposes of computing 
the deferral recapture amount under sec-
tion 492 shall be the shorter of— 
‘‘(I) the entity’s holding period in 
such asset, or 
‘‘(II) the taxpayer’s holding pe-
riod in such entity. 
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‘‘(ii) OTHER RULES.—The Secretary 
shall prescribe rules for purposes of this 
section— 
‘‘(I) for the treatment of frag-
mented holding periods, 
‘‘(II) for the determination of 
holding periods in the case of tiered 
structures, and 
‘‘(III) to prevent the shifting of 
any deferral recapture amount be-
tween taxpayers holding ownership in-
terests in an applicable entity. 
‘‘(D) TAXPAYERS
FAILING
TO
FILE
NO-
TICE.—Under rules required by the Secretary, 
if a taxpayer fails to file a notice with any ap-
plicable entity as required under paragraph 
(2)(A), such taxpayer shall take into account, in 
computing the taxpayer’s tax liability under this 
chapter for any taxable year for which such no-
tice (or a related notice under subsection (c)(2)) 
would otherwise have been in effect, gain or loss 
described in subparagraph (A) which would 
have been reported if such notice had been 
filed. 
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‘‘(4) SIGNIFICANT
OWNER.—For purposes of 
this subsection— 
‘‘(A) IN GENERAL.—The term ‘significant 
owner’ means, with respect to any applicable 
entity, an applicable taxpayer who, at any time 
during the applicable taxpayer’s taxable year— 
‘‘(i) is a 5-percent owner with respect 
to such entity, or 
‘‘(ii) holds nontradable interests in 
such entity with an aggregate applicable 
value of greater than $50,000,000. 
‘‘(B) 5-PERCENT OWNER.— 
‘‘(i) IN GENERAL.—The term ‘5-per-
cent owner’ means, with respect to any ap-
plicable entity, an applicable taxpayer who 
owns (or is considered as owning within 
the meaning of section 318) at least 5 per-
cent of— 
‘‘(I) in the case of a corporation, 
the stock (by vote or value) in such 
corporation, or 
‘‘(II) in the case of an applicable 
entity other than a corporation, the 
capital or profits interests in such en-
tity. 
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‘‘(ii) 
CONSTRUCTIVE
OWNERSHIP 
RULES.—For purposes of this subpara-
graph— 
‘‘(I) subparagraph (C) of section 
318(a)(2) shall be applied by sub-
stituting ‘5 percent’ for ‘50 percent’, 
and 
‘‘(II) in the case of an applicable 
entity which is not a corporation, 
ownership in such entity shall be de-
termined in accordance with regula-
tions prescribed by the Secretary 
which shall be based on principles 
similar to the principles of section 318 
(as modified by subclause (I)). 
‘‘(c) ADDITIONAL ENTITY REPORTING REQUIRE-
MENTS.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (4), an applicable entity for any taxable year 
shall, at such times and in such manner as the Sec-
retary shall prescribe, report to each applicable tax-
payer with respect to which a notice is in effect 
under subsection (b)(2)(A) or paragraph (2)— 
‘‘(A) in the case of tradable covered assets 
held by such entity, such taxpayer’s share of— 
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‘‘(i) gain or loss determined by the en-
tity under rules similar to the rules under 
section 491, and 
‘‘(ii) proper adjustments shall be 
made in the amount of gain or loss subse-
quently realized for gain or loss taken into 
account under clause (i), 
‘‘(B) in the case of nontradable covered as-
sets held by such entity— 
‘‘(i) such person’s share of any gain 
or loss on any applicable transfer during 
such taxable year of any such asset, and 
‘‘(ii) the holding period in each such 
asset, and 
‘‘(C) such other information as the Sec-
retary determines necessary to carry out this 
part. 
‘‘(2) NOTICE
OF
TAXPAYERS
HOLDING
INDI-
RECT
INTERESTS
IN
OTHER
APPLICABLE
ENTI-
TIES.— 
‘‘(A) IN
GENERAL.—Under rules pre-
scribed by the Secretary, except as provided in 
subparagraph (B), if an applicable entity in a 
tier of entities— 
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‘‘(i) receives a notice under subsection 
(b)(2)(A) with respect to an applicable tax-
payer, such entity shall notify each other 
applicable entity in which such applicable 
taxpayer holds, by reason of holding a 
nontradable interest in such entity, a 
nontradable interest in such other entity 
that the person holding such interest in 
such other entity is an applicable taxpayer 
with respect to which the notice require-
ments of paragraph (1) apply to such other 
entity, or 
‘‘(ii) receives a notice under clause (i) 
or this clause, such entity shall notify each 
other applicable entity in which the appli-
cable taxpayer holds, by reason of holding 
an interest in the entity receiving such no-
tice, a nontradable interest in such other 
entity that the person holding such interest 
in such other entity is an applicable tax-
payer with respect to which the notice re-
quirements of paragraph (1) apply to such 
other entity. 
Any such notice shall remain in effect, and any 
entity receiving such notice shall treat such tax-
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payer as an applicable taxpayer, for the period 
specified by the Secretary. The Secretary may 
require additional reporting by such entities for 
purposes of carrying out this clause. 
‘‘(B) REQUIREMENT ONLY APPLIES IF AP-
PLICABLE TAXPAYER IS SIGNIFICANT OWNER.— 
An applicable entity shall be required to report 
under subparagraph (A) to another applicable 
entity only if the applicable taxpayer is a sig-
nificant owner (within the meaning of sub-
section (b)(4)) of such other entity, determined 
only by taking into account interests in such 
other entity which such applicable taxpayer 
holds by reason of its ownership interests in the 
entity otherwise required to report and such 
other ownership interests in such other entity 
as the Secretary may require to be taken into 
account to prevent the avoidance of the pur-
poses of this part. 
‘‘(3) SPECIAL RULES FOR DISREGARDED NON-
RECOGNITION EVENTS.—In the case of an applicable 
transfer of a nontradable covered asset of an appli-
cable entity which is a disregarded nonrecognition 
event— 
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‘‘(A) notwithstanding any other provision 
of this title, gain or loss shall be recognized and 
taken into account in the taxable year in which 
the transfer occurs as if the entity had sold the 
nontradable covered asset for its fair market 
value immediately before such transfer (or such 
other value as is determined as of such time 
under rules prescribed by the Secretary), 
‘‘(B) such entity shall report the amount 
of gain or loss required to be taken into account 
under subparagraph (A) to— 
‘‘(i) each applicable taxpayer with re-
spect to which a notice is in effect which 
such entity has received under subsection 
(b)(1), and 
‘‘(ii) each other applicable entity from 
which it has received a notice under para-
graph (2) with respect to such an applica-
ble taxpayer, and 
‘‘(C) proper adjustments shall be made in 
the amount of gain or loss subsequently realized 
for gain or loss taken into account under sub-
paragraph (A). 
‘‘(4) DELAY IN REPORTING REQUIREMENT.— 
If— 
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‘‘(A) a notice is received by an applicable 
entity under subsection (b)(2)(A) or paragraph 
(2) for any taxable year of the entity with re-
spect to any person holding directly (or indi-
rectly through 1 or more nontradable interests) 
a nontradable interest in such entity, and 
‘‘(B) no notice is in effect with respect to 
such person or any other person for the pre-
ceding taxable year, 
then, except as provided by the Secretary, such no-
tice shall be treated as first taking effect for pur-
poses of this subsection, section 351(h), and section 
1031(i) for the taxable year immediately following 
the taxable year in which the notice is received. This 
paragraph shall not apply to a notice described in 
subparagraph (A) received by an applicable entity 
from a person who was a significant owner (within 
the meaning of subsection (b)(4)) of such entity (or 
any predecessor entity) on the date of the enactment 
of this part. 
‘‘(5) SECRETARIAL AUTHORITY.—In prescribing 
rules for the application of this subsection, the Sec-
retary may provide— 
‘‘(A) simplified methods for applicable en-
tities to meet the requirements of this sub-
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section, including the aggregation of gains and 
losses where appropriate, 
‘‘(B) rules for determining a holder’s share 
of amounts required to be reported by an appli-
cable entity under paragraph (1), and 
‘‘(C) any rules necessary to prevent the 
avoidance of the purposes of this section, in-
cluding through the delay in the reporting re-
quirement under paragraph (4). 
‘‘(d) DEFINITIONS AND RULES RELATING TO APPLI-
CATION OF SECTION.—For purposes of this part— 
‘‘(1) APPLICABLE ENTITY.—The term ‘applica-
ble entity’ means any— 
‘‘(A) partnership, 
‘‘(B) S corporation, or 
‘‘(C) other pass-through entity specified in 
regulations or guidance prescribed by the Sec-
retary. 
‘‘(2) ELECTION TO TREAT ENTITY AS APPLICA-
BLE TAXPAYER FOR TAXABLE EVENTS INVOLVING 
TRADABLE ASSETS.—If an applicable entity elects 
the application of this paragraph for any taxable 
year— 
‘‘(A) this section shall not apply with re-
spect to any gain or loss in connection with a 
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taxable event involving any tradable covered 
asset held directly (or indirectly through 1 or 
more nontradable interests) by such entity, and 
‘‘(B) such entity shall be treated as an ap-
plicable taxpayer for purposes of applying sec-
tions 490(1) and 491 to such taxable event. 
Such an election shall be made at such time and in 
such manner as the Secretary may prescribe and, 
once made, shall be irrevocable without the consent 
of the Secretary. 
‘‘(e) NONTRADABLE INTEREST.—For purposes of 
this part, the term ‘nontradable interest’ means any own-
ership interest in an applicable entity which is a 
nontradable covered asset. 
‘‘(f) REGULATIONS AND GUIDANCE.—The Secretary 
shall prescribe such regulations and guidance as are nec-
essary to carry out the provisions of this section, including 
regulations or guidance necessary— 
‘‘(1) to prevent the use of pass-through entities 
to avoid the purposes of this part, 
‘‘(2) to simplify the application of this part. 
‘‘SEC. 494. TREATMENT OF GIFTS, BEQUESTS, AND TRANS-
FERS IN TRUST. 
‘‘(a) IN GENERAL.— 
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‘‘(1) DEEMED SALE.—If any person described 
in paragraph (3) transfers any covered asset by gift, 
upon death, or in trust, such covered asset shall be 
treated as sold by such person for its fair market 
value to the transferee on the date of such gift, 
death, or transfer. 
‘‘(2) NO RECOGNITION FOR LOSSES ON TRANS-
FERS BY GIFT OR IN TRUST.— 
‘‘(A) IN GENERAL.—No loss shall be recog-
nized with respect to any covered asset which is 
treated as sold under subsection (a) by reason 
of a transfer by gift or in trust. 
‘‘(B) AMOUNT
OF
GAIN
FOR
TRANS-
FEREE.—If a loss is not recognized by the 
transferor by reason of subparagraph (A) and 
the transferee sells or otherwise disposes of the 
covered asset (or of other property the basis of 
which in the taxpayer’s hands is determined di-
rectly or indirectly by reference to such prop-
erty) at a gain, then such gain shall be recog-
nized only to the extent that it exceeds so much 
of such loss as is properly allocable to the cov-
ered asset sold or otherwise disposed of by the 
transferee. 
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‘‘(3) PERSON
DESCRIBED.—A person is de-
scribed in this section if such person is— 
‘‘(A) an individual who is an applicable 
taxpayer for the taxable year in which the 
transfer is made, or 
‘‘(B) an applicable entity with respect to 
which a notice received by the entity under sub-
section (b)(2)(A) or (c)(2) of section 493 is in 
effect at the time of such transfer. 
‘‘(b) SPECIAL
RULES
FOR
CERTAIN
GRANTOR 
TRUSTS.— 
‘‘(1) TRANSFERS OF NONTRADABLE COVERED 
ASSETS INTO CERTAIN GRANTOR TRUSTS.—For pur-
poses of applying this section to any transfer in 
trust, except as otherwise provided in this para-
graph, any transfer of a nontradable covered asset 
from the person treated as the owner of an applica-
ble grantor trust (other than a grantor trust which 
is a wholly revocable trust) to such trust shall be 
treated as a transfer to which subsection (a) applies. 
‘‘(2) DEEMED DISTRIBUTIONS.—In the case of 
any applicable grantor trust, any property held by 
such trust shall be treated as transferred by the 
owner in a transfer to which subsection (a) ap-
plies— 
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‘‘(A) on any date that— 
‘‘(i) the owner ceases to be treated as 
the owner under this chapter, 
‘‘(ii) such property is distributed to 
any person other than the owner, or 
‘‘(iii) the property would no longer be 
included in the owner’s gross estate under 
chapter 11, or 
‘‘(B) on the date of the death of the owner. 
‘‘(3) APPLICABLE GRANTOR TRUST.—For pur-
poses of this subsection— 
‘‘(A) IN GENERAL.—The term ‘applicable 
grantor trust’ means the portion of any trust 
with respect to which an applicable taxpayer is 
considered the owner under subpart E of part 
I of subchapter J. 
‘‘(B) EXCEPTIONS.—The Secretary shall 
provide for appropriate exceptions to the treat-
ment of categories of trusts as applicable grant-
or trusts under subparagraph (A), including ar-
rangements which are ordinarily used in the 
course of a trade or business, employee benefit 
arrangements, 
and 
arrangements 
for 
securitization transactions. 
‘‘(c) EXCEPTIONS.— 
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‘‘(1) SPOUSAL EXCEPTION.— 
‘‘(A) IN
GENERAL.—Subsection (a) shall 
not apply to any transfer if such transfer— 
‘‘(i) is— 
‘‘(I) made to the spouse or the 
surviving spouse of the transferor, or 
‘‘(II) made to a former spouse of 
the transferor if the transfer is inci-
dent to divorce, or 
‘‘(ii) is a transfer of qualified ter-
minable interest property or of property to 
which section 2056(b)(5) or 2523(e) ap-
plies. 
‘‘(B) CERTAIN
REMAINDER
INTERESTS 
TREATED AS TRANSFERRED BY SPOUSE.—Prop-
erty described in subparagraph (A)(ii) shall be 
treated as sold by the spouse or surviving 
spouse on the earlier of the date of the disposi-
tion of such property by such spouse or sur-
viving spouse or the date of the death of such 
spouse or surviving spouse. 
‘‘(C) QUALIFIED
TERMINABLE
INTEREST 
PROPERTY.—For purposes of this paragraph, 
the term ‘qualified terminable interest property’ 
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means any property described in section 
2056(b)(7) or 2523(f)(2). 
‘‘(D) DISALLOWANCE OF SPOUSAL EXCEP-
TION
WHERE
SPOUSE
OR
SURVIVING
SPOUSE 
NOT UNITED STATES CITIZEN OR LONG-TERM 
RESIDENT.— 
‘‘(i) IN GENERAL.—Subparagraph (A) 
shall not apply if the spouse or surviving 
spouse of the decedent is not a citizen or 
long-term resident of the United States. 
‘‘(ii) 
LONG-TERM
RESIDENT.—For 
purposes of clause (i), the term ‘long-term 
resident’ means any individual (other than 
a citizen of the United States) who is a 
lawful permanent resident of the United 
States— 
‘‘(I) for the taxable year in which 
the transfer described in subsection 
(a) occurs, and 
‘‘(II) in at least 8 taxable years 
during the period of 15 taxable years 
ending with the taxable year during 
which the transfer described in sub-
section (a) or (b)(1) occurs. 
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For purposes of the preceding sentence, an 
individual shall not be treated as a lawful 
permanent resident for any taxable year if 
such individual is treated as a resident of 
a foreign country for the taxable year 
under the provisions of a tax treaty be-
tween the United States and the foreign 
country and does not waive the benefits of 
such treaty applicable to residents of the 
foreign country. 
‘‘(2) GIFTS AND BEQUESTS TO CHARITY.— 
‘‘(A) IN
GENERAL.—Subsection (a) shall 
not apply to any transfer if such transfer is 
made to or for the use of an organization de-
scribed in section 170(c). 
‘‘(B) SPECIAL RULE FOR SPLIT-INTEREST 
TRUSTS.—In the case of any transfer— 
‘‘(i) to a charitable remainder annuity 
trust (as defined in section 664) or a char-
itable remainder unitrust (as defined in 
section 664), or 
‘‘(ii) of an interest described in sec-
tion 170(f)(2)(B), 
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subsection (a) shall not apply to the portion of 
such transfer which is to or for the use of an 
organization described in section 170(c). 
‘‘(C) SPECIAL RULE FOR POOLED INCOME 
FUNDS.—In the case of any transfer to a pooled 
income fund (as defined in section 642(c)(5)), 
subsection (a) shall not apply to the portion of 
such transfer which is to or for the use of an 
organization described in section 170(b)(1)(A) 
(other than in clauses (vii) or (viii)). 
‘‘(3) QUALIFIED DISABILITY TRUSTS AND CEM-
ETERY
PERPETUAL
CARE
FUNDS.—Subsection (a) 
shall not apply to transfers to any qualified dis-
ability trust (as defined in section 642(b)(2)(C)(ii)) 
or to transfers to any cemetery perpetual care fund 
described in section 642(i). 
‘‘(d) BASIS OF TRANSFEREE.— 
‘‘(1) IN
GENERAL.—Notwithstanding sections 
1014 and 1015, to the extent that subsection (a) ap-
plies to any transfer of property— 
‘‘(A) except as provided in subparagraph 
(B), the basis of the property in the hands of 
the transferee shall be the fair market value of 
the property (consistent with the amount taken 
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into account by the transferor under subsection 
(a)), and 
‘‘(B) in the case such transfer is a transfer 
upon death to any individual described in sub-
section (c)(1)(A)(i), the basis of the property in 
the hands of the transferee shall be the same as 
it would be in the hands of the transferor, ex-
cept that if such basis (adjusted for the period 
before the date of the transfer as provided in 
section 1016) is greater than the fair market 
value of the property at the time of death, then 
for the purpose of determining loss the basis 
shall be such fair market value. 
‘‘(2) CONSISTENT
BASIS
RULES
FOR
TRANS-
FERS BY DEATH.—In the case of any transfer upon 
death, rules similar to section 1014(f) shall apply for 
purposes of this section. 
‘‘(e) APPLICATION OF DEPRECIATION RECAPTURE 
RULES.—Paragraphs (1) and (2) of section 1245(b) and 
paragraphs (1) and (2) of section 1250(d) shall not apply 
to any property treated as sold by reason of subsection 
(a). 
‘‘Subpart B—Definitions and Rules Relating to 
Applicable Taxpayers 
‘‘Sec. 495. Applicable taxpayer defined. 
‘‘Sec. 496. Special rules for taxpayers entering or changing status as applicable 
taxpayers. 
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‘‘SEC. 495. APPLICABLE TAXPAYER DEFINED. 
‘‘(a) IN GENERAL.—For purposes of this part— 
‘‘(1) IN GENERAL.—The term ‘applicable tax-
payer’ means, with respect to any taxable year, any 
taxpayer— 
‘‘(A) which is an individual who met either 
the income test of paragraph (2) or the asset 
test of paragraph (3) for each of the 3 imme-
diately preceding taxable years (including tax-
able years beginning before the date of the en-
actment of this part which are included in any 
such 3-taxable-year period), or 
‘‘(B) which is— 
‘‘(i) an applicable trust, or 
‘‘(ii) the estate of an individual who 
was an applicable taxpayer for any taxable 
year during the 4-taxable-year period end-
ing with the taxable year in which the indi-
vidual died. 
‘‘(2) INCOME TEST.—The requirements of this 
paragraph are met for any taxable year if the appli-
cable adjusted gross income of the taxpayer for the 
taxable year exceeds $100,000,000 ($50,000,000 in 
the case of a married individual filing separately). 
‘‘(3) ASSET TEST.—The requirements of this 
paragraph are met for any taxable year if the aggre-
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gate applicable value of all tradable and nontradable 
covered assets held by the taxpayer as of the close 
of 
the 
taxable 
year 
exceeds 
$1,000,000,000 
($500,000,000 in the case of a married individual 
filing separately). 
‘‘(4) SPECIAL RULES RELATING TO APPLICABLE 
TAXPAYER STATUS.— 
‘‘(A) TERMINATION OF STATUS OF INDI-
VIDUAL TAXPAYERS.—A taxpayer who is treat-
ed as an applicable taxpayer under paragraph 
(1)(A) for any taxable year shall continue to be 
so treated until the first taxable year with re-
spect to which— 
‘‘(i) the taxpayer does not, for each of 
the 3 taxable years immediately preceding 
such taxable year, meet either— 
‘‘(I) the income test of paragraph 
(2) in effect for such preceding tax-
able year, or 
‘‘(II) the asset test of paragraph 
(3) in effect for such preceding tax-
able year, 
except that each such paragraph shall be 
applied for purposes of this clause by sub-
stituting an amount equal to one-half of 
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the dollar amount otherwise in effect for 
such taxpayer under such paragraph for 
each such preceding taxable year for such 
dollar amount, and 
‘‘(ii) the taxpayer elects, in such man-
ner and form and at such time as the Sec-
retary may prescribe, not to be so treated 
for such first taxable year. 
‘‘(B) EARLIER TERMINATION ELECTION OF 
APPLICABLE TAXPAYER STATUS FOR DIVORCED 
INDIVIDUALS.—If— 
‘‘(i) an applicable taxpayer ceases to 
be a married individual by reason of a de-
cree of divorce or separate maintenance 
issued during any taxable year, and 
‘‘(ii) such taxpayer, for the first tax-
able year following the taxable year de-
scribed in clause (i), does not meet ei-
ther— 
‘‘(I) the income test of paragraph 
(2), except that such paragraph shall 
be applied for purposes of this sub-
clause by substituting ‘$1,000,000’ 
for the dollar amount otherwise in ef-
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fect for such taxpayer under such 
paragraph, or 
‘‘(II) the asset test of paragraph 
(3), except that such paragraph shall 
be applied for purposes of this sub-
clause by substituting ‘$10,000,000’ 
for the dollar amount otherwise in ef-
fect for such taxpayer under such 
paragraph, 
then such taxpayer may elect, in such manner 
and form and at such time as the Secretary 
may prescribe, not to be treated as an applica-
ble taxpayer beginning with such first taxable 
year. 
‘‘(C) ELECTION.—An election under sub-
paragraph (A) or (B)— 
‘‘(i) shall be made with the taxpayer’s 
return of tax for the taxable year to which 
such election first applies (or such other 
time as the Secretary shall prescribe) and 
shall be in such form and manner as the 
Secretary may prescribe, and 
‘‘(ii) shall apply to such first taxable 
year and all subsequent taxable years until 
the first taxable year for which the tax-
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payer is again treated as an applicable tax-
payer by reason of meeting the require-
ments of paragraph (1)(A). 
‘‘(5) SPECIAL RULES FOR MARRIED INDIVID-
UALS.— 
‘‘(A) APPLICABLE TAXPAYERS BECOMING 
MARRIED INDIVIDUALS.—If an individual was 
an applicable taxpayer for the taxable year be-
fore the individual became a married individual 
(within the meaning of section 7703), such indi-
vidual and the individual’s spouse shall be 
treated as applicable taxpayers for such taxable 
year of marriage and subsequent taxable years 
until such status is otherwise terminated under 
this section. 
‘‘(B) MARRIED INDIVIDUALS FILING SEPA-
RATELY.—If a married individual filing sepa-
rately is treated as an applicable taxpayer for 
any taxable year, such individual’s spouse shall 
be treated as an applicable taxpayer for such 
taxable year. 
‘‘(C) 
FIRST-YEAR
ELECTIONS.—Under 
rules prescribed by the Secretary, if an indi-
vidual is first treated as an applicable taxpayer 
for a taxable year by reason of the application 
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of subparagraph (A) or (B), section 496 shall 
apply to such taxpayer for such first taxable 
year only with respect to assets held separately 
by such individual unless such taxable year is 
also the first taxable year for which the individ-
ual’s spouse is an applicable taxpayer. 
‘‘(6) REGULATORY AUTHORITY.—The Secretary 
shall prescribe such regulations and guidance as may 
be necessary to carry out the provisions of this sub-
section, including— 
‘‘(A) rules waiving the application of para-
graph (5)(B) in cases where the Secretary de-
termines equitable relief is appropriate, 
‘‘(B) rules providing for the application of 
this subsection in cases where the filing status 
of a taxpayer changes between any taxable year 
and any of the 3 immediately preceding taxable 
years, including the first taxable year in which 
a taxpayer files a joint return after becoming 
married, and 
‘‘(C) rules requiring such information re-
porting as the Secretary determines necessary 
to determine whether a taxpayer is an applica-
ble taxpayer. 
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‘‘(b) APPLICABLE ADJUSTED GROSS INCOME.—For 
purposes of this section, the term ‘applicable adjusted 
gross income’ means modified adjusted gross income as 
defined in section 36B(d)(2)(B), except that— 
‘‘(1) clause (i) thereof shall be applied by sub-
stituting ‘sections 911, 931, and 933’ for ‘section 
911’, and 
‘‘(2) in the case of a trust, no deduction under 
section 651 or 661 shall be allowed. 
‘‘(c) APPLICABLE TRUST.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—The term ‘applicable trust’ 
means a trust (other than a grantor trust) which, 
for each of the 3 taxable years immediately pre-
ceding such taxable year (including taxable years be-
ginning before the date of the enactment of this part 
which are included in any such 3-taxable-year pe-
riod), meets either— 
‘‘(A) the income test of subsection (a)(2), 
except that such subsection shall be applied for 
purposes of this subparagraph by substituting 
‘$10,000,000’ for the dollar amount otherwise 
in effect for such taxable year under such para-
graph, or 
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‘‘(B) the asset test of subsection (a)(3), ex-
cept that such subsection shall be applied for 
purposes of this subparagraph by substituting 
‘$100,000,000’ for the dollar amount otherwise 
in effect for such taxable year under such para-
graph. 
‘‘(2) EXCEPTIONS.—Such term shall not in-
clude— 
‘‘(A) a qualified disability trust (as defined 
in section 642(b)(2)(C)(ii)), 
‘‘(B) any portion of a trust which consists 
of property permanently set aside for the exclu-
sive use of an organization described in section 
170(c), 
‘‘(C) a pooled income fund (as defined in 
section 642(c)(5)) or a cemetery perpetual care 
fund (as described in section 642(i)), 
‘‘(D) a settlement trust (as defined in sec-
tion 646), 
‘‘(E) any charitable remainder annuity 
trust (as defined in section 664), 
‘‘(F) any charitable remainder unitrust (as 
defined in section 664), or 
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‘‘(G) any other category of trust identified 
in regulations or guidance provided by the Sec-
retary. 
‘‘(3) GRANTOR TRUSTS.— 
‘‘(A) GRANTOR
TRUST
DEFINED.—For 
purposes of this section, the term ‘grantor 
trust’ means any portion of a trust with respect 
to which the grantor or any other person is con-
sidered the owner under subpart E of part I of 
subchapter J. 
‘‘(B) ASSETS OF GRANTOR TRUST TAKEN 
INTO
ACCOUNT.—For purposes of subsection 
(a)(1)(A), the assets of a grantor trust shall be 
included in the assets of— 
‘‘(i) the grantor of such trust if the 
grantor is considered the owner of such as-
sets, and 
‘‘(ii) if a person other than the grant-
or is considered the owner of such assets, 
both the grantor and such person. 
‘‘(d) SPECIAL RULES FOR FOREIGN PERSONS AND 
EXPATRIATES.—For purposes of this part— 
‘‘(1) NONRESIDENT ALIEN INDIVIDUALS.—The 
following rules shall apply in determining whether a 
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nonresident alien individual is an applicable tax-
payer: 
‘‘(A) INCOME TEST.—For purposes of the 
income test under subsection (a)(2)— 
‘‘(i) such subsection shall be applied 
for purposes of this subparagraph by sub-
stituting ‘$50,000,000’ for the dollar 
amount otherwise in effect for such taxable 
year under such paragraph, and 
‘‘(ii) the applicable adjusted gross in-
come of such individual shall be equal to 
the taxable income of such individual, de-
termined by only taking into account items 
of income, gain, deduction, and loss which 
are effectively connected with the conduct 
of trades or businesses within the United 
States. 
‘‘(B) ASSET TEST.—For purposes of the 
asset test under subsection (a)(3)— 
‘‘(i) such subsection shall be applied 
for purposes of this subparagraph by sub-
stituting ‘$500,000,000’ for the dollar 
amount otherwise in effect for such taxable 
year under such paragraph, and 
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‘‘(ii) only assets which produce income 
described in subparagraph (A) shall be 
taken into account. 
‘‘(2) EXPATRIATES.— 
‘‘(A) IN
GENERAL.—If, for the taxable 
year which includes a covered expatriate’s expa-
triation date, such expatriate— 
‘‘(i) was an applicable taxpayer (with-
out regard to this paragraph), or 
‘‘(ii) is an applicable taxpayer under 
the rules of subparagraph (B), 
such expatriate shall be treated as an applicable 
taxpayer during each of the taxable years dur-
ing the 10-taxable-year period beginning with 
such taxable year (and such status shall not be 
terminated during such period by reason of any 
other provision of this part). 
‘‘(B) SPECIAL RULES FOR DETERMINING 
STATUS.—For 
purposes 
of 
subparagraph 
(A)(ii), a covered expatriate not otherwise treat-
ed as an applicable taxpayer shall be treated as 
an applicable taxpayer if, during any of the 5 
taxable years immediately preceding the taxable 
year which includes the covered expatriate’s ex-
patriation date (including taxable years begin-
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ning before the date of the enactment of this 
part which are included in any such 5-taxable- 
year period), the expatriate meets either— 
‘‘(i) the income test of subsection 
(a)(2), except that such subsection shall be 
applied for purposes of this subparagraph 
by substituting ‘$50,000,000’ for the dollar 
amount otherwise in effect for such taxable 
year under such paragraph, or 
‘‘(ii) the asset test of subsection 
(a)(3), except that such subsection shall be 
applied for purposes of this subparagraph 
by substituting ‘$500,000,000’ for the dol-
lar amount otherwise in effect for such 
taxable year under such paragraph. 
‘‘(C) DEFINITIONS.—Any term used in 
this paragraph which is also used in section 
877A shall have the same meaning as when 
used in such section. 
‘‘SEC. 496. SPECIAL RULES FOR TAXPAYERS ENTERING OR 
CHANGING STATUS AS APPLICABLE TAX-
PAYERS. 
‘‘(a) INITIAL TREATMENT
AS APPLICABLE TAX-
PAYER.— 
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‘‘(1) IN GENERAL.—In the case of the first tax-
able year for which a taxpayer is an applicable tax-
payer— 
‘‘(A) the taxpayer may make the election 
under 
paragraph 
(3) 
with 
respect 
to 
nontradable covered assets, and 
‘‘(B) if the taxpayer elects the application 
of this subparagraph, the net first-year tax li-
ability of the taxpayer for such taxable year 
shall be payable in 5 equal annual installments 
over the 5-taxable-year period beginning with 
such taxable year. 
‘‘(2) NET
FIRST-YEAR
TAX
LIABILITY.—For 
purposes of this section— 
‘‘(A) IN GENERAL.—The term ‘net first- 
year tax liability’ means, with respect to the 
first taxable year described in paragraph (1), 
the excess (if any) of— 
‘‘(i) such taxpayer’s net income tax 
for such taxable year, over 
‘‘(ii) such taxpayer’s net income tax 
for such taxable year determined without 
regard to gain or loss of the taxpayer 
taken into account for such taxable year by 
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reason of a taxable event described in sec-
tion 491(b)(1). 
‘‘(B) NET INCOME TAX.—The term ‘net 
income tax’ means the regular tax liability re-
duced by the credits allowed under subparts A, 
B, and D of part IV of subchapter A. 
‘‘(3) ELECTION TO PAY AND DEFER TAX ON 
NONTRADABLE ASSETS.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (C), a taxpayer may elect to treat 
any nontradable covered asset held by the tax-
payer as of the end of the first taxable year de-
scribed in paragraph (1) as a tradable covered 
asset for purposes of applying section 491(b)(1) 
and this subsection. 
‘‘(B) DETERMINATION OF GAIN.— 
‘‘(i) IN
GENERAL.—For purposes of 
applying section 491(a)(1)(A), the fair 
market value of any asset with respect to 
which an election is in effect under sub-
paragraph (A) shall be the amount speci-
fied by the taxpayer in such election, ex-
cept that such value may not, unless other-
wise provided by the Secretary, be less 
than the taxpayer’s adjusted basis in such 
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asset as of the end of the first taxable year 
described in paragraph (1). 
‘‘(ii) NO
DEDUCTIONS
OR
CREDITS 
FOR BASIS INCREASES.—If there is any in-
crease under this part in the taxpayer’s ad-
justed basis of any asset by reason of an 
election under this paragraph, no deduc-
tion or credit shall be allowed under this 
title with respect to the portion of such ad-
justed basis attributable to such increase. 
‘‘(C) ONLY SIGNIFICANT OWNER OF APPLI-
CABLE ENTITY MAY ELECT.—In the case of a 
nontradable 
covered 
asset 
which 
is 
a 
nontradable interest in an applicable entity, an 
applicable taxpayer may make an election under 
subparagraph (A) with respect to such asset 
only if such taxpayer is a significant owner (as 
defined in section 493(b)(4)(A)) of such entity 
with respect to whom a notice is in effect under 
section 493(b)(2)(A) for the taxable year for 
which the election is being made. 
‘‘(4) SPECIAL RULE WHERE DELAY IN REPORT-
ING BY APPLICABLE ENTITY.— 
‘‘(A) IN GENERAL.—If— 
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‘‘(i) there is a delay in reporting to an 
applicable taxpayer by 1 or more applicable 
entities by reason of section 493(c)(4), and 
‘‘(ii) any gain or loss is reported by 
such entities to such taxpayer under sec-
tion 493(c)(1)(A)(i) and is taken into ac-
count in such taxpayer’s taxable year im-
mediately succeeding the first taxable year 
described in paragraph (1), 
then, subject to such rules as the Secretary may 
prescribe, the taxpayer may elect under para-
graph (1)(B) to treat the net tax liability de-
scribed in subparagraph (B) as net first-year 
tax liability payable in 5 equal annual install-
ments beginning with such succeeding taxable 
year. The rules of paragraph (5) shall apply to 
such installments in the same manner as such 
rules apply to installments for such first taxable 
year. 
‘‘(B) NET TAX LIABILITY.—For purposes 
of subparagraph (A), the net tax liability de-
scribed in this subparagraph is, with respect to 
the taxable year described in such subpara-
graph, the excess (if any) of— 
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‘‘(i) such taxpayer’s net income tax 
for such taxable year, over 
‘‘(ii) such taxpayer’s net income tax 
for such taxable year determined without 
regard to gain or loss of the taxpayer de-
scribed in subparagraph (A)(ii). 
‘‘(5) RULES RELATING TO INSTALLMENT PAY-
MENTS.— 
‘‘(A) DATE
FOR
PAYMENT
OF
INSTALL-
MENTS.—If an election is made under para-
graph (1), the first installment shall be paid on 
the due date (determined without regard to any 
extension of time for filing the return) for the 
return of tax for the first taxable year described 
in paragraph (1) and each succeeding install-
ment shall be paid on the due date (as so deter-
mined) for the return of tax for the taxable 
year following the taxable year with respect to 
which the preceding installment was made. 
‘‘(B) ACCELERATION OF PAYMENT.— 
‘‘(i) DISPOSITION OF ASSETS.— 
‘‘(I) IN GENERAL.—If, before the 
close of the 5-year period described in 
paragraph (1), a taxpayer sells or ex-
changes, transfers, or otherwise dis-
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poses of an asset with respect to 
which an election is in effect under 
paragraph (1)(B), then the applicable 
percentage of the unpaid portion of all 
remaining installments described in 
paragraph (1)(B) shall be due on the 
date of such disposition (or such later 
date as the Secretary may prescribe). 
‘‘(II) 
APPLICABLE
PERCENT-
AGE.—For purposes of this subpara-
graph, the applicable percentage is the 
percentage determined by dividing the 
gain not taken into account in deter-
mining net income tax under para-
graph (2)(A)(ii) with respect to the 
asset described in subclause (I) by the 
aggregate amount of all gain not so 
taken into account. 
‘‘(ii) FAILURE TO PAY, ETC.—In the 
case of an addition to tax for failure to 
timely pay any installment required under 
this subsection, the death of the taxpayer, 
or the filing of a petition by the taxpayer 
in a title 11 or similar case, then the un-
paid portion of all remaining installments 
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shall be due on the date of such event (or 
in the case of a title 11 or similar case, the 
day before the petition is filed). 
‘‘(C) PRORATION OF DEFICIENCY TO IN-
STALLMENTS.—If an election is made under 
paragraph (1) to pay the net first-year tax li-
ability under this section in installments and a 
deficiency has been assessed with respect to 
such net tax liability, the deficiency shall be 
prorated to the installments payable under 
paragraph (1). The part of the deficiency so 
prorated to any installment the date for pay-
ment of which has not arrived shall be collected 
at the same time as, and as a part of, such in-
stallment. The part of the deficiency so pro-
rated to any installment the date for payment 
of which has arrived shall be paid upon notice 
and demand from the Secretary. This sub-
section shall not apply if the deficiency is due 
to negligence, to intentional disregard of rules 
and regulations, or to fraud. 
‘‘(D) INSTALLMENTS
NOT
TO
PREVENT 
CREDIT OR REFUND OF OVERPAYMENTS OR IN-
CREASE ESTIMATED TAXES.—If an election is 
made under paragraph (1) to pay the net first- 
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year tax liability under this subsection in in-
stallments— 
‘‘(i) no installment of such liability 
shall— 
‘‘(I) in the case of a request for 
credit or refund, be taken into ac-
count as a liability for purposes of de-
termining whether an overpayment ex-
ists for purposes of section 6402 be-
fore the date on which such install-
ment is due, or 
‘‘(II) be treated as a tax imposed 
by section 1 for purposes of section 
6654, and 
‘‘(ii) the first sentence of section 6403 
shall not apply with respect to any such in-
stallment. 
‘‘(6) ELECTIONS.— 
‘‘(A) IN
GENERAL.—Any election under 
paragraph (1), (3)(A), or (4)(A) shall be made 
not later than the due date for the return of tax 
for the first taxable year described in paragraph 
(1) and shall be made in such manner as the 
Secretary shall provide. 
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‘‘(B) EXTENSIONS.—The Secretary shall 
by regulation prescribe such circumstances and 
procedures under which extensions of time will 
be granted to make any election under para-
graph (1), (3)(A), or (4)(A). In determining 
whether to grant relief under this subpara-
graph, the Secretary shall take into account all 
relevant circumstances and the time for making 
the election shall be treated as not expressly 
provided by statute. 
‘‘(b) TREATMENT OF TAXPAYERS LEAVING AND RE-
ENTERING APPLICABLE STATUS.—If a taxpayer’s status 
as an applicable taxpayer is terminated under section 
495(a)(4) and the taxpayer is again treated as an applica-
ble taxpayer for a subsequent taxable year by reason of 
meeting the requirements of section 495(a)(1)(A), the fol-
lowing rules shall apply: 
‘‘(1) SUBSEQUENT
YEAR
NOT
TREATED
AS 
FIRST YEAR OF APPLICABLE TAXPAYER STATUS.— 
Subsection (a) shall not apply to any taxable year in 
which the taxpayer is again treated as an applicable 
taxpayer and such subsequent taxable year shall not 
be treated as the first taxable year for which the 
taxpayer is an applicable taxpayer for any other pur-
pose of this part. 
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‘‘(2) NONTRADABLE
ASSETS.—If there is an 
applicable transfer by a taxpayer of a nontradable 
covered asset after the taxpayer is again treated as 
an applicable taxpayer, the taxpayer’s holding period 
of such asset for purposes of section 492 shall in-
clude all periods during which the taxpayer’s status 
as an applicable taxpayer was previously terminated 
and the taxpayer held such asset. 
‘‘(c) SPECIAL RULES RELATING TO OWNERSHIP OF 
NONTRADABLE INTERESTS IN APPLICABLE ENTITIES.— 
‘‘(1) IN GENERAL.—For purposes of subsection 
(a), if an applicable taxpayer elects under subsection 
(a)(3) to treat a nontradable interest in an applica-
ble entity held directly as a tradable covered asset 
for the first taxable year described in subsection 
(a)(1), the amount of the gain taken into account 
under subsection (a) with respect to such interest 
shall be equal to the excess (if any) of— 
‘‘(A) the value of such interest specified by 
the taxpayer under subsection (a)(3)(B), over 
‘‘(B) the taxpayer’s adjusted basis in such 
interest as of the close of such taxable year. 
‘‘(2) ADJUSTMENTS
TO
BASES
OF
ENTITY’S 
NONTRADABLE ASSETS.— 
‘‘(A) PARTNERSHIPS.— 
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‘‘(i) IN GENERAL.—If the applicable 
entity is a partnership, the partnership 
shall increase the adjusted bases of the 
partnership’s assets by the amount de-
scribed in paragraph (1). Such increase 
shall constitute an adjustment to the bases 
of partnership assets solely for determining 
the applicable taxpayer’s share of such 
bases. 
‘‘(ii) 
ALLOCATION.—The 
Secretary 
shall prescribe rules for the allocation of 
the increase in adjusted bases among part-
nership assets in a manner which has the 
effect of reducing the difference between 
the value and such adjusted bases. Such 
rules shall also provide proper adjustments 
to adjusted bases where ownership is held 
through tiered entities. 
‘‘(B) OTHER
APPLICABLE
ENTITIES.— 
Rules similar to the rules of clause (i) shall 
apply to applicable entities other than partner-
ships. 
‘‘(C) NO
DEDUCTIONS
OR
CREDITS
FOR 
BASIS INCREASES.—If there is any increase in 
the applicable entity’s adjusted basis of any 
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asset by reason of subparagraph (A), no deduc-
tion or credit shall be allowed under this title 
with respect to the portion of such adjusted 
basis attributable to such increase. 
‘‘(3) DEFINITIONS.—Any term used in this sub-
section which is also used in section 493 shall have 
the same meaning as when used in such section. 
‘‘(d) SPECIAL ELECTION FOR CERTAIN TRADABLE 
ASSETS OF APPLICABLE TAXPAYERS.— 
‘‘(1) IN
GENERAL.—If a qualified taxpayer 
makes an election under this subsection, then any 
stock held by such qualified taxpayer which would 
(but for such election) be a tradable covered asset 
and which is specified in such election shall be treat-
ed as a as a nontradable capital asset of the tax-
payer for purposes of this part. 
‘‘(2) LIMITATIONS.— 
‘‘(A) ONLY STOCK OF A SINGLE ENTITY 
TAKEN
INTO
ACCOUNT.—An election made 
under this subsection may not specify stock in 
more than one C corporation or specify more 
than one class of stock in such corporation. 
‘‘(B) VALUE.— 
‘‘(i) IN
GENERAL.—The aggregate 
value of stock specified in an election made 
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under this subsection shall not exceed 
$1,000,000,000. 
‘‘(ii) DETERMINATION.—For purposes 
of clause (i), the value of any stock speci-
fied in an election made under this section 
shall be determined as of the last day of 
the first taxable year for which the tax-
payer is an applicable taxpayer. 
‘‘(3) QUALIFIED TAXPAYER.—For purposes of 
this subsection, the term ‘qualified taxpayer’ means 
any taxpayer— 
‘‘(A) which is not an estate or trust, and 
‘‘(B) for which the first taxable year for 
which such taxpayer is an applicable taxpayer is 
a taxable year that begins before January 1, 
2025. 
‘‘(4) ELECTION.— 
‘‘(A) IN
GENERAL.—Any election under 
this subsection shall be made not later than the 
due date for the return of tax for the first tax-
able year for which the taxpayer is an applica-
ble taxpayer and shall be made in such manner 
as the Secretary shall provide. 
‘‘(B) EXTENSIONS.—The Secretary shall 
by regulation prescribe such circumstances and 
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Subtitle B—Rules for Applicable 
Entities and Trusts 
SEC. 211. TREATMENT OF LIKE-KIND EXCHANGES BY AP-
PLICABLE ENTITIES. 
(a) IN GENERAL.—Section 1031 is amended by add-
ing at the end the following new subsection: 
‘‘(i) SPECIAL RULES FOR APPLICABLE ENTITIES.— 
Subsection (a) shall not apply to an exchange by an appli-
cable entity if a notice received by the entity under sub-
section (b)(2)(A) or (c)(2) of section 493 is in effect at 
the time of such exchange.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to exchanges completed after De-
cember 31, 2025. 
SEC. 212. TREATMENT OF TRANSFERS BY APPLICABLE EN-
TITIES IN EXCHANGE FOR STOCK. 
(a) IN GENERAL.—Section 351 is amended by redes-
ignating subsection (h) as subsection (i) and by inserting 
after subsection (g) the following new subsection: 
‘‘(h) SPECIAL RULES FOR APPLICABLE ENTITIES.— 
‘‘(1) IN
GENERAL.—Subsection (a) shall not 
apply to an exchange by an applicable entity if an 
applicable notice received by the entity is in effect at 
the time of such exchange. 
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‘‘(2) 10 percent of the amount of any severance 
pay which is includible in the gross income of the in-
dividual during the taxable year. 
‘‘(b) DEFERRAL RECAPTURE AMOUNT.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘deferral recap-
ture amount’ means, with respect to any applicable 
deferred compensation includible in gross income for 
the taxable year, the aggregate amount of interest 
(determined in the manner provided under para-
graph (3)) on the deemed tax amount determined 
under paragraph (2) for each preceding taxable year 
to which compensation is allocated under paragraph 
(2)(A). 
‘‘(2) DEEMED TAX AMOUNT.— 
‘‘(A) IN
GENERAL.—The deemed tax 
amount for any taxable year preceding the tax-
able year in which applicable deferred com-
pensation is includible in gross income shall be 
the amount determined— 
‘‘(i) first, except as provided in sub-
paragraph (B), by allocating the amount of 
such compensation ratably to each day in 
the deferral period with respect to the ap-
plicable deferred compensation, and 
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