IB
Union Calendar No. 206
105TH CONGRESS
1ST SESSION
H. R. 2645
[Report No. 105–356]
To make technical corrections related to the Taxpayer Relief Act of 1997
and certain other tax legislation.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 9, 1997
Mr. ARCHER (for himself and Mr. RANGEL) introduced the following bill;
which was referred to the Committee on Ways and Means
OCTOBER 29, 1997
Reported with amendments, committed to the Committee of the Whole House
on the State of the Union, and ordered to be printed
[Omit the part struck through and insert the part printed in italic]
A BILL
To make technical corrections related to the Taxpayer Relief
Act of 1997 and certain other tax legislation.
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 ‘‘Tax Technical Correc-
tions Act of 1997’’.
SEC. 2. DEFINITIONS.
For purposes of this Act—
(1) 1986 
CODE.—The term ‘‘1986 Code’’
means the Internal Revenue Code of 1986.
(2) 1997 ACT.—The term ‘‘1997 Act’’ means
the Taxpayer Relief Act of 1997.
SEC. 3. AMENDMENTS RELATED TO TITLE I OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 101(a) OF
1997 ACT.—
(1) Subsection (d) of section 24 of the 1986
Code is amended—
(A) by striking paragraphs (3) and (4),
(B) by redesignating paragraph (5) as
paragraph (3), and
(C) by striking paragraphs (1) and (2) and
inserting the following new paragraphs:
‘‘(1) IN GENERAL.—In the case of a taxpayer
with 3 or more qualifying children for any taxable
year, the aggregate credits allowed under subpart C
shall be increased by the lesser of—
‘‘(A) the credit which would be allowed
under this section without regard to this sub-
section and the limitation under section 26(a),
or
‘‘(B) the amount by which the aggregate
amount of credits allowed by this subpart (with-
out regard to this subsection) would increase if
the limitation imposed by section 26(a) were in-
creased by the excess (if any) of—
‘‘(i) the taxpayer’s social security
taxes for the taxable year, over
‘‘(ii) the credit allowed under section
32 for the taxable year. 32 (determined
without regard to subsection (n)) for the
taxable year.
The amount of the credit allowed under this sub-
section shall not be treated as a credit allowed
under this subpart and shall reduce the amount
of credit otherwise allowable under subsection (a)
without regard to section 26(a).
‘‘(2) REDUCTION
OF
CREDIT
TO
TAXPAYER
SUBJECT
TO
ALTERNATIVE
MINIMUM
TAX.—The
credit determined under this subsection for the tax-
able year shall be reduced by the excess (if any) of—
‘‘(A) the amount of tax imposed by section
55 (relating to alternative minimum tax) with
respect to such taxpayer for such taxable year,
over
‘‘(B) the amount of the reduction under
section 32(h) with respect to such taxpayer for
such taxable year.’’
(2) Paragraph (3) of section 24(d) of the 1986
Code (as redesignated by paragraph (1)) is amended
by striking ‘‘paragraph (3)’’ and inserting ‘‘para-
graph (1)’’.
(b) AMENDMENTS RELATED TO SECTION 101(b) OF
1997 ACT.—
(1) The subsection (m) of section 32 of the
1986 Code added by section 101(b) of the 1997 Act
is amended to read as follows:
‘‘(n) SUPPLEMENTAL CHILD CREDIT.—
‘‘(1) IN GENERAL.—In the case of a taxpayer
with respect to whom a credit is allowed under sec-
tion 24 for the taxable year, the credit otherwise al-
lowable under this section shall be increased by the
lesser of—
‘‘(A) the credit which would be allowed
under section 24 without regard to this sub-
section and the limitation under section 26(a),
or
‘‘(B) the amount by which the aggregate
amount of credits allowed by subpart A (with-
out regard to this subsection) would be reduced
if the limitation imposed by section 26(a) were
reduced by the excess (if any) of—
‘‘(i) the credit allowed by this section
(without regard to this subsection) for the
taxable year, over
‘‘(ii) the taxpayer’s social security
taxes (as defined in section 24(d)) for the
taxable year.
The credit determined under this subsection shall be
allowed without regard to any other provision of this
section, including subsection (d).
‘‘(2) COORDINATION WITH OTHER CREDITS.—
‘‘(A) IN
GENERAL.—The amount of the
credit under this subsection shall reduce the
amount of the credit otherwise allowable under
section 24, but the amount of the credit under
this subsection (and such reduction) shall not
otherwise be taken into account in determining
the amount of any other credit allowable under
this part.
‘‘(B) TREATMENT OF CREDIT UNDER SEC-
TION 24(d).—For purposes of this subsection,
the credit determined under section 24(d) shall
be treated as not allowed under section 24.’’
SEC. 4. AMENDMENTS RELATED TO TITLE II OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 201 OF
1997 ACT.—
(1) Subparagraph (B) of section 25A(h)(1) of
the 1986 Code is amended by striking ‘‘$1,000’’
each place it appears and inserting ‘‘$100’’.
(2) (1) The item relating to section 25A in the
table of sections for subpart A of part IV of sub-
chapter A of chapter 1 of the 1986 Code is amended
to read as follows:
‘‘Sec. 25A. Hope and Lifetime Learning credits.’’
(3) (2) Subsection (a) of section 6050S of the
1986 Code is amended to read as follows:
‘‘(a) IN GENERAL.—Any person—
‘‘(1) which is an eligible educational institu-
tion—
‘‘(A) which receives payments for qualified
tuition and related expenses with respect to any
individual for any calendar year, or
‘‘(B) which makes reimbursements or re-
funds (or similar amounts) to any individual of
qualified tuition and related expenses,
‘‘(2) which is engaged in a trade or business of
making payments to any individual under an insur-
ance arrangement as reimbursements or refunds (or
similar amounts) of qualified tuition and related ex-
penses, or
‘‘(3) except as provided in regulations, any per-
son which is engaged in a trade or business and, in
the course of which, receives from any individual in-
terest aggregating $600 or more for any calendar
year on 1 or more qualified education loans,
shall make the return described in subsection (b) with re-
spect to the individual at such time as the Secretary may
by regulations prescribe.’’
(4) (3) Subparagraph (A) of section 201(c)(2)
of the 1997 Act is amended to read as follows:
‘‘(A) 
Subparagraph 
(B) 
of 
section
6724(d)(1) (relating to definitions) is amended
by redesignating clauses (x) through (xv) as
clauses (xi) through (xvi), respectively, and by
inserting after clause (ix) the following new
clause:
‘‘ ‘(x) section 6050S (relating to re-
turns relating to payments for qualified
tuition and related expenses),’ ’’.
(b) AMENDMENTS RELATED TO SECTION 211 OF
1997 ACT.—
(1) Paragraph (3) of section 135(c) of the 1986
Code is amended to read as follows:
‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.—
The term ‘eligible educational institution’ has the
meaning given such term by section 529(e)(5).’’.
(2) Subparagraph (A) of section 529(c)(3) of
the 1986 Code is amended by striking ‘‘section
72(b)’’ and inserting ‘‘section 72’’.
(c) AMENDMENTS RELATED TO SECTION 213 OF
1997 ACT.—
(1)(A) Section 530(b)(1)(E) of the 1986 Code
(defining education individual retirement account) is
amended to read as follows:
‘‘(E) Any balance to the credit of the des-
ignated beneficiary on the date on which the
beneficiary attains age 30 shall be distributed
within 30 days after such date to the bene-
ficiary or, if the beneficiary dies before attain-
ing age 30, shall be distributed within 30 days
after the date of death to the estate of such
beneficiary.’’
(B) Subsection (d) of section 530 of the 1986
Code is amended by adding at the end the following
new paragraph:
‘‘(8) DEEMED
DISTRIBUTION
ON
REQUIRED
DISTRIBUTION DATE.—In any case in which a dis-
tribution is required under subsection (b)(1)(E), any
balance to the credit of a designated beneficiary as
of the close of the 30-day period referred to in such
subsection for making such distribution shall be
deemed distributed at the close of such period.’’
(2)(A) Paragraph (1) of section 530(d) of the
1986 Code is amended by striking ‘‘section 72(b)’’
and inserting ‘‘section 72’’.
(B) Subsection (e) of section 72 of the 1986
Code is amended by inserting after paragraph (8)
the following new paragraph:
‘‘(9) EXTENSION
OF
PARAGRAPH
(2)(B)
TO
QUALIFIED
STATE
TUITION
PROGRAMS
AND
EDU-
CATIONAL
INDIVIDUAL
RETIREMENT
ACCOUNTS.—
Notwithstanding any other provision of this sub-
section, paragraph (2)(B) shall apply to amounts re-
ceived under a qualified State tuition program (as
defined in section 529(b)) or under an education in-
dividual retirement account (as defined in section
530(b)). The rule of paragraph (8)(B) shall apply
for purposes of this paragraph.’’
(3) So much of section 530(d)(4)(C) of the
1986 Code as precedes clause (ii) thereof is amended
to read as follows:
‘‘(C) CONTRIBUTIONS RETURNED BEFORE
DUE
DATE
OF
RETURN.—Subparagraph (A)
shall not apply to the distribution of any con-
tribution made during a taxable year on behalf
of the designated beneficiary if—
‘‘(i) such distribution is made on or
before the day prescribed by law (including
extensions of time) for filing the bene-
ficiary’s return of tax for the taxable year
or, if the beneficiary is not required to file
such a return, the 15th day of the 4th
month of the taxable year following the
taxable year, and’’.
(4) Subparagraph (C) of section 135(c)(2) of
the 1986 Code is amended—
(A) by inserting ‘‘AND EDUCATION INDI-
VIDUAL RETIREMENT ACCOUNTS’’ in the head-
ing after ‘‘PROGRAM’’, and
(B) by striking ‘‘section 529(c)(3)(A)’’ and
inserting ‘‘section 72’’.
(5) Subparagraph (A) of section 4973(e)(1) of
the 1986 Code is amended by inserting before the
comma ‘‘(or, if less, the sum of the maximum
amounts permitted to be contributed under section
530(c) by the contributors to such accounts for such
year)’’.
(d) AMENDMENT RELATED
TO SECTION 224 OF
1997 ACT.—Section 170(e)(6)(F) of the 1986 Code (relat-
ing to termination) is amended by striking ‘‘1999’’ and
inserting ‘‘2000’’.
(e) AMENDMENTS RELATED TO SECTION 225 OF
1997 ACT.—
(1) The last sentence of section 108(f)(2) of the
1986 Code is amended to read as follows:
‘‘The term ‘student loan’ includes any loan made by
an educational organization described in section
170(b)(1)(A)(ii) or by an organization exempt from
tax under section 501(a) to refinance a loan to an
individual to assist the individual in attending any
such educational organization but only if the refi-
nancing loan is pursuant to a program of the refi-
nancing organization which is designed as described
in subparagraph (D)(ii).’’
(2) Section 108(f)(3) of the 1986 Code is
amended by striking ‘‘(or by an organization de-
scribed in paragraph (2)(E) from funds provided by
an organization described in paragraph (2)(D))’’.
(f) AMENDMENTS RELATED TO SECTION 226 OF
1997 ACT.—
(1) Section 226(a) of the 1997 Act is amended
by striking ‘‘section 1397E’’ and inserting ‘‘section
1397D’’.
(2) Section 1397E(d)(4)(B) of the 1986 Code
is amended by striking ‘‘local education agency as
defined’’ and inserting ‘‘local educational agency as
defined’’.
SEC. 5. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 301 OF
1997 ACT.—Section 219(g) of the 1986 Code is amend-
ed—
(1) by inserting ‘‘or the individual’s spouse’’
after ‘‘individual’’ in paragraph (1), and
(2) by striking paragraph (7) and inserting:
‘‘(7) SPECIAL RULE FOR SPOUSES WHO ARE
NOT ACTIVE PARTICIPANTS.—If this subsection ap-
plies to an individual for any taxable year solely be-
cause their spouse is an active participant, then, in
applying this subsection to the individual (but not
their spouse)—
‘‘(A) the applicable dollar amount under
paragraph (3)(B)(i) shall be $150,000, and
‘‘(B) the amount applicable under para-
graph (2)(A)(ii) shall be $10,000.’’
(b) AMENDMENTS RELATED TO SECTION 302 OF
1997 ACT.—
(1) Section 408A(c)(3)(A) of the 1986 Code is
amended by striking ‘‘shall be reduced’’ and insert-
ing ‘‘shall not exceed an amount equal to the
amount determined under paragraph (2)(A) for such
taxable year, reduced’’.
(2) Section 408A(c)(3) of the 1986 Code (relat-
ing to limits based on modified adjusted gross in-
come) is amended—
(A) by inserting ‘‘or a married individual
filing a separate return’’ after ‘‘joint return’’ in
subparagraph (A)(ii), and
(B) by striking ‘‘and the deduction under
section 219 shall be taken into account’’ in sub-
paragraph (C)(i).
(3) Section 408A(d)(2) of the 1986 Code (de-
fining qualified distribution) is amended by striking
subparagraph (B) and inserting the following:
‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU-
SION PERIOD.—A payment or distribution from
a Roth IRA shall not be treated as a qualified
distribution under subparagraph (A) if such
payment or distribution is made before the ex-
clusion date for the Roth IRA.
‘‘(C) EXCLUSION DATE.—For purposes of
this section, the exclusion date for any Roth
IRA is the first day of the taxable year imme-
diately following the 5-taxable-year period be-
ginning with—
‘‘(i) the first taxable year for which a
contribution to any Roth IRA maintained
for the benefit of the individual was made,
or
‘‘(ii) in the case of a Roth IRA to
which 1 or more qualified rollover con-
tributions were made—
‘‘(I) from an individual retire-
ment plan other than a Roth IRA, or
‘‘(II) from another Roth IRA to
the extent such contributions are
properly allocable to contributions de-
scribed in subclause (I),
the most recent taxable year for which any
such qualified rollover contribution was
made.’’
(4) Section 408A(d)(3) of the 1986 Code (relat-
ing to rollovers from IRAs other than Roth IRAs)
is amended by adding at the end the following:
‘‘(F) SPECIAL RULE FOR APPLYING SEC-
TION 72.—
‘‘(i) IN GENERAL.—If—
‘‘(I) any distribution from a Roth
IRA is made before the exclusion
date, and
‘‘(II) any portion of such dis-
tribution is properly allocable to a
qualified 
rollover 
contribution 
de-
scribed in paragraph (2)(C)(ii),
then section 72(t) shall be applied as if
such portion were includible in gross in-
come.
‘‘(ii) LIMITATION.—Clause (i) shall
apply only to the extent of the amount in-
cludible in gross income under subpara-
graph (A)(i) by reason of the qualified roll-
over contribution.
‘‘(G) SPECIAL RULES FOR CONTRIBUTIONS
TO WHICH 4-YEAR AVERAGING APPLIES.—In the
case of a qualified rollover contribution to a
Roth IRA of a distribution to which subpara-
graph (A)(iii) applied, the following rules shall
apply:
‘‘(i) DEATH OF DISTRIBUTEE.—
‘‘(I) IN GENERAL.—If the indi-
vidual required to include amounts in
gross income under such subpara-
graph dies before all of such amounts
are included, all remaining amounts
shall be included in gross income for
the taxable year which includes the
date of death.
‘‘(II) SPECIAL RULE FOR SURVIV-
ING SPOUSE.—If the spouse of the in-
dividual described in subclause (I) ac-
quires the Roth IRA to which such
qualified rollover contribution is prop-
erly allocable, the spouse may elect to
include the remaining amounts de-
scribed in subclause (I) in the
spouse’s gross income in the taxable
years of the spouse ending with or
within the taxable years of such indi-
vidual in which such amounts would
otherwise have been includible.
‘‘(ii) ADDITIONAL
TAX
FOR
EARLY
DISTRIBUTION.—
‘‘(I) IN
GENERAL.—If any dis-
tribution from a Roth IRA is made
before the exclusion date, and any
portion of such distribution is prop-
erly allocable to such qualified rollover
contribution, the distributee’s tax
under this chapter for the taxable
year in which the amount is received
shall be increased by 10 percent of the
amount of such portion not in excess
of the amount includible in gross in-
come under subparagraph (A)(i) by
reason of such qualified rollover con-
tribution.
‘‘(II) TREATMENT OF TAX.—For
purposes of this title, any tax imposed
by subclause (I) shall be treated as a
tax imposed by section 72(t) and shall
be in addition to any other tax im-
posed by such section.’’
(5)(A) Section 408A(d)(4) of the 1986 Code is
amended to read as follows:
‘‘(4) AGGREGATION AND ORDERING RULES.—
‘‘(A) 
AGGREGATION
RULES.—Section
408(d)(2) shall be applied separately with re-
spect to—
‘‘(i) Roth IRAs and other individual
retirement plans,
‘‘(ii) Roth IRAs described in para-
graph (2)(C)(ii) and Roth IRAs not so de-
scribed, and
‘‘(iii) Roth IRAs described in para-
graph (2)(C)(ii) with different exclusion
dates.
‘‘(B) ORDERING RULES.—For purposes of
applying section 72 to any distribution from a
Roth IRA which is not a qualified distribution,
such distribution shall be treated as made—
‘‘(i) from contributions to the extent
that the amount of such distribution, when
added to all previous distributions from the
Roth IRA, does not exceed the aggregate
contributions to the Roth IRA, and
‘‘(ii) from such contributions in the
following order:
‘‘(I) Qualified rollover contribu-
tions to the extent includible in gross
income in the manner described in
paragraph (3)(A)(iii).
‘‘(II) Qualified rollover contribu-
tions not described in subclause (I) to
the extent includible in gross income
under paragraph (3)(A).
‘‘(III) 
Contributions 
not 
de-
scribed in subclause (I) or (II).
Such rules shall also apply in determining the
character of qualified rollover contributions
from one Roth IRA to another Roth IRA.’’
(B) Section 408A(d)(1) of the 1986 Code is
amended to read as follows:
‘‘(1) EXCLUSION.—Any qualified distribution
from a Roth IRA shall not be includible in gross in-
come.’’
(6)(A) Section 408A(d) of the 1986 Code (re-
lating to distribution rules) is amended by adding at
the end the following:
‘‘(6) TAXPAYER MAY MAKE ADJUSTMENTS BE-
FORE DUE DATE.—
‘‘(A) IN GENERAL.—Except as provided by
the Secretary, if, on or before the due date for
any taxable year, a taxpayer transfers in a
trustee-to-trustee transfer any contribution to
an individual retirement plan made during such
taxable year from such plan to any other indi-
vidual retirement plan, then, for purposes of
this chapter, such contribution shall be treated
as having been made to the transferee plan
(and not the transferor plan).
‘‘(B) SPECIAL RULES.—
‘‘(i) TRANSFER OF EARNINGS.—Sub-
paragraph (A) shall not apply to the trans-
fer of any contribution unless such transfer
is accompanied by any net income allocable
to such contribution.
‘‘(ii) NO DEDUCTION.—Subparagraph
(A) shall apply to the transfer of any con-
tribution only to the extent no deduction
was allowed with respect to the contribu-
tion to the transferor plan.
‘‘(C) DUE
DATE.—For purposes of this
paragraph, the due date for any taxable year is
the last date for filing the return of tax for
such taxable year (including extensions).’’
(B) Section 408A(d)(3) of the 1986 Code, as
amended by this subsection, is amended by striking
subparagraph (D) and by redesignating subpara-
graphs (E), (F), and (G) as subparagraphs (D), (E),
and (F), respectively.
(7) Section 302(b) of the 1997 Act is amended
by striking ‘‘Section 4973(b)’’ and inserting ‘‘Sec-
tion 4973’’.
(8) Section 408A of the 1986 Code is amended
by adding at the end the following new subsection:
‘‘(f) INDIVIDUAL RETIREMENT PLAN.—For purposes
of this section, except as provided by the Secretary, the
term ‘individual retirement plan’ shall not include a sim-
plified employee pension or a simple retirement account.’’
(c) AMENDMENTS RELATED TO SECTION 303 OF
1997 ACT.—
(1) Section 72(t)(8)(E) of the 1986 Code is
amended—
(A) by striking ‘‘120 days’’ and inserting
‘‘120th day’’, and
(B) by striking ‘‘60 days’’ and inserting
‘‘60th day’’.
(2)(A) Section 402(c) of the 1986 Code is
amended by adding at the end the following:
‘‘(11) DENIAL OF ROLLOVER TREATMENT FOR
TRANSFERS OF HARDSHIP DISTRIBUTIONS TO INDI-
VIDUAL RETIREMENT PLANS.—This subsection shall
not apply to the transfer of any hardship distribu-
tion described in section 401(k)(2)(B)(i)(IV) from a
qualified cash or deferred arrangement to an eligible
retirement plan described in clause (i) or (ii) of
paragraph (8)(B).’’
(B) The amendment made by this paragraph
shall apply to distributions made after December 31,
1997.
(d) AMENDMENTS RELATED TO SECTION 311 OF
1997 ACT.—
(1) Subsection (h) of section 1 of the 1986
Code (relating to maximum capital gains rate) is
amended to read as follows:
‘‘(h) MAXIMUM CAPITAL GAINS RATE.—
‘‘(1) IN GENERAL.—If a taxpayer has a net
capital gain for any taxable year, the tax imposed by
this section for such taxable year shall not exceed
the sum of—
‘‘(A) a tax computed at the rates and in
the same manner as if this subsection had not
been enacted on the greater of—
‘‘(i) taxable income reduced by the net
capital gain, or
‘‘(ii) the lesser of—
‘‘(I) the amount of taxable in-
come taxed at a rate below 28 per-
cent, or
‘‘(II) taxable income reduced by
the adjusted net capital gain,
‘‘(B) 10 percent of so much of the ad-
justed net capital gain (or, if less, taxable in-
come) as does not exceed the excess (if any)
of—
‘‘(i) the amount of taxable income
which would (without regard to this para-
graph) be taxed at a rate below 28 per-
cent, over
‘‘(ii) the taxable income reduced by
the adjusted net capital gain,
‘‘(C) 20 percent of the adjusted net capital
gain (or, if less, taxable income) in excess of the
amount on which a tax is determined under
subparagraph (B),
‘‘(D) 25 percent of the excess (if any) of—
‘‘(i) the unrecaptured section 1250
gain (or, if less, the net capital gain), over
‘‘(ii) the excess (if any) of—
‘‘(I) the sum of the amount on
which tax is determined under sub-
paragraph (A) plus the net capital
gain, over
‘‘(II) taxable income, and
‘‘(E) 28 percent of the amount of taxable
income in excess of the sum of the amounts on
which tax is determined under the preceding
subparagraphs of this paragraph.
‘‘(2) REDUCED
CAPITAL
GAIN
RATES
FOR
QUALIFIED 5-YEAR GAIN.—
‘‘(A) REDUCTION IN 10-PERCENT RATE.—
In the case of any taxable year beginning after
December 31, 2000, the rate under paragraph
(1)(B) shall be 8 percent with respect to so
much of the amount to which the 10-percent
rate would otherwise apply as does not exceed
qualified 5-year gain, and 10 percent with re-
spect to the remainder of such amount.
‘‘(B) REDUCTION IN 20-PERCENT RATE.—
The rate under paragraph (1)(C) shall be 18
percent with respect to so much of the amount
to which the 20-percent rate would otherwise
apply as does not exceed the lesser of—
‘‘(i) the excess of qualified 5-year gain
over the amount of such gain taken into
account under subparagraph (A) of this
paragraph, or
‘‘(ii) the amount of qualified 5-year
gain (determined by taking into account
only property the holding period for which
begins after December 31, 2000),
and 20 percent with respect to the remainder of
such amount. For purposes of determining
under the preceding sentence whether the hold-
ing period of property begins after December
31, 2000, the holding period of property ac-
quired pursuant to the exercise of an option (or
other right or obligation to acquire property)
shall include the period such option (or other
right or obligation) was held.
‘‘(3) NET CAPITAL GAIN TAKEN INTO ACCOUNT
AS INVESTMENT INCOME.—For purposes of this sub-
section, the net capital gain for any taxable year
shall be reduced (but not below zero) by the amount
which the taxpayer takes into account as investment
income under section 163(d)(4)(B)(iii).
‘‘(4) ADJUSTED NET CAPITAL GAIN.—For pur-
poses of this subsection, the term ‘adjusted net cap-
ital gain’ means net capital gain reduced (but not
below zero) by the sum of—
‘‘(A) unrecaptured section 1250 gain, and
‘‘(B) 28 percent rate gain.
‘‘(5) 28 PERCENT RATE GAIN.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘28 percent
rate gain’ means the excess (if any) of—
‘‘(i) the sum of—
‘‘(I) the aggregate long-term cap-
ital gain from property held for more
than 1 year but not more than 18
months,
‘‘(II) collectibles gain, and
‘‘(III) section 1202 gain, over
‘‘(ii) the sum of—
‘‘(I) the aggregate long-term cap-
ital loss (not described in subclause
(IV)) from property referred to in
clause (i)(I),
‘‘(II) collectibles loss,
‘‘(III) the net short-term capital
loss, and
‘‘(IV) the amount of long-term
capital loss carried under section
1212(b)(1)(B) to the taxable year.
‘‘(B) SPECIAL RULES.—
‘‘(i) SHORT
SALES
AND
OPTIONS.—
Rules similar to the rules of subsections
(b) and (d) of section 1233 shall apply to
substantially identical property, and sec-
tion 1092(f) with respect to stock, held for
more than 1 year but not more than 18
months.
‘‘(ii) SECTION
1256
CONTRACTS.—
Amounts treated as long-term capital gain