I 
109TH CONGRESS 
1ST SESSION H. R. 2121 
To amend the Internal Revenue Code of 1986 to allow individuals to defer 
recognition of reinvested capital gains distributions from regulated invest-
ment companies. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 5, 2005 
Mr. RYAN of Wisconsin (for himself and Mr. JEFFERSON) 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 allow indi-
viduals to defer recognition of reinvested capital gains 
distributions from regulated investment companies. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Generate Retirement 
Ownership Through Long-Term Holding Act of 2005’’.
SEC. 2. DEFERRAL OF REINVESTED CAPITAL GAIN DIVI-
DENDS OF REGULATED INVESTMENT COMPA-
NIES. 
(a) IN GENERAL.—Part III of subchapter O of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
common nontaxable exchanges) is amended by inserting 
after section 1045 the following new section: 
‘‘SEC. 1046. REINVESTED CAPITAL GAIN DIVIDENDS OF 
REGULATED INVESTMENT COMPANIES. 
‘‘(a) NONRECOGNITION OF GAIN.—In the case of an 
individual, no gain shall be recognized on the receipt of 
a capital gain dividend distributed by a regulated invest-
ment company to which part I of subchapter M applies 
if such capital gain dividend is automatically reinvested 
in additional shares of the company pursuant to a dividend 
reinvestment plan. 
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) CAPITAL GAIN DIVIDEND.—The term ‘cap-
ital gain dividend’ has the meaning given to such 
term by section 852(b)(3)(C). 
‘‘(2) RECOGNITION
OF
DEFERRED
CAPITAL 
GAIN DIVIDENDS.— 
‘‘(A) IN GENERAL.—Gain treated as unrec-
ognized in accordance with subsection (a) shall
be recognized in accordance with subparagraph 
(B)— 
‘‘(i) upon a subsequent sale or re-
demption by such individual of stock in the 
distributing company, or 
‘‘(ii) upon the death of the individual. 
‘‘(B) GAIN RECOGNITION.— 
‘‘(i) IN GENERAL.—Upon a sale or re-
demption described in subparagraph (A), 
the taxpayer shall recognize that portion of 
total gain treated as unrecognized in ac-
cordance with subsection (a) (and not pre-
viously recognized pursuant to this sub-
paragraph) that is equivalent to the por-
tion of the taxpayer’s shares in the distrib-
uting company that are sold or redeemed. 
‘‘(ii) DEATH OF INDIVIDUAL.—Except 
as provided by regulations, any portion of 
such total gain not recognized under clause 
(i) prior to the taxpayer’s death shall be 
recognized upon the death of the taxpayer 
and included in the taxpayer’s gross in-
come for the taxable year ending on the 
date of the taxpayer’s death. 
‘‘(3) HOLDING PERIOD.—
‘‘(A) GENERAL
RULE.—The taxpayer’s 
holding period in shares acquired through rein-
vestment of a capital gain dividend to which 
subsection (a) applies shall be determined by 
treating the shareholder as having held such 
shares for one year and a day as of the date 
such shares are acquired. 
‘‘(B) SPECIAL RULE FOR DISTRIBUTIONS 
OF QUALIFIED 5-YEAR GAINS.—In the case of a 
distribution of a capital gain dividend (or por-
tion thereof) in a taxable year beginning after 
December 31, 2008, and properly treated as 
qualified 5-year gain (within the meaning of 
section 1(h), as in effect after such date), sub-
paragraph (A) shall apply by substituting ‘5 
years and a day’ for ‘one year and a day’. 
‘‘(c) SECTION
NOT
TO APPLY
TO CERTAIN TAX-
PAYERS.—This section shall not apply to— 
‘‘(1) an individual with respect to whom a de-
duction under section 151 is allowable to another 
taxpayer for a taxable year beginning in the cal-
endar year in which such individual’s taxable year 
begins, or 
‘‘(2) an estate or trust.
‘‘(d) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary to carry out the pur-
poses of this section.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 852(b)(3)(B) of such Code is 
amended by adding at the end the following new 
sentence: ‘‘For rules regarding nonrecognition of 
gain with respect to reinvested capital gain dividends 
received by individuals, see section 1046.’’. 
(2) The table of sections for part III of sub-
chapter O of chapter 1 of such Code is amended by 
inserting after the item relating to section 1045 the 
following new item: 
‘‘Sec. 1046. Reinvested capital gain dividends of regulated investment compa-
nies.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
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