(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to individuals who begin work
for the employer after June 30, 1992.
SEC. 106. REDUCTION IN CAPITAL GAINS TAX FOR INDIVID-
UALS.
(a) GENERAL RULE.—Part I of subchapter P of
chapter 1 is amended by adding at the end thereof the
following new section:
‘‘SEC. 1202. DEDUCTION FOR CAPITAL GAINS.
‘‘(a) DEDUCTION ALLOWED FOR CAPITAL GAIN.—
‘‘(1) IN GENERAL.—If, for any taxable year, a
taxpayer other than a corporation has a net capital
gain, an amount equal to the sum of the applicable
percentages of the applicable capital gain shall be al-
lowed as a deduction.
‘‘(2) ESTATES AND TRUSTS.—In the case of an
estate or trust, the deduction under paragraph (1)
shall be computed by excluding the portion (if any)
of the gains for the taxable year from sales or ex-
changes of capital assets which, under sections 652
and 662 (relating to inclusions of amounts in gross
income of beneficiaries of trusts), is includible by the
income beneficiaries as gain derived from the sale or
exchange of capital assets.
‘‘(b) APPLICABLE PERCENTAGES.—For purposes of
this subsection, the applicable percentages shall be the
percentages determined in accordance with the following
table:
The applicable
‘‘In the case of:
percentage is:
1-year gain ................................................................................
2-year gain ................................................................................
3-year gain ................................................................................
30.
‘‘(c) GAIN TO WHICH DEDUCTION APPLIES.—For
purposes of this section—
‘‘(1) APPLICABLE
CAPITAL
GAIN.—The term
‘applicable capital gain’ means 1-year gain, 2-year
gain, or 3-year gain determined by taking into ac-
count only gain which is properly taken into account
for periods on or after January 1, 1993.
‘‘(2) 3-YEAR
GAIN.—The term ‘3-year gain’
means the lesser of—
‘‘(A) the net capital gain for the taxable
year, or
‘‘(B) the long-term capital gain determined
by taking into account only gain from the sale
or exchange of assets held more than 3 years.
‘‘(3) 2-YEAR
GAIN.—The term ‘2-year gain’
means the lesser of—
‘‘(A) the net capital gain for the taxable
year, reduced by 3-year gain, or
‘‘(B) the long-term capital gain determined
by taking into account only gain from the sale
or exchange of assets held more than 2 years
but not more than 3 years.
‘‘(4) 1-YEAR
GAIN.—The term ‘1-year gain’
means the net capital gain for the taxable year de-
termined by taking into account only—
‘‘(A) gain from the sale or exchange of as-
sets held more than 1 year but not more than
2 years, and
‘‘(B) losses from the sale or exchange of
assets held more than 1 year.
‘‘(5) SPECIAL
RULES
FOR
PASS-THRU
ENTI-
TIES.—
‘‘(A) IN GENERAL.—In applying this sub-
section with respect to any pass-thru entity, the
determination of when a sale or exchange has
occurred shall be made at the entity level.
‘‘(B) PASS-THRU ENTITY DEFINED.—For
purposes of subparagraph (A), the term ‘pass-
thru entity’ means—
‘‘(i) a regulated investment company,
‘‘(ii) a real estate investment trust,
‘‘(iii) an S corporation,
‘‘(iv) a partnership,
‘‘(v) an estate or trust, and
‘‘(vi) a common trust fund.
‘‘(6) RECAPTURE
OF
NET
ORDINARY
LOSS
UNDER SECTION 1231.—For purposes of this sub-
section, if any amount is treated as ordinary income
under section 1231(c) for any taxable year—
‘‘(A) the amount so treated shall be allo-
cated proportionately among the section 1231
gains (as defined in section 1231(a)) for such
taxable year, and
‘‘(B) the amount so allocated to any such
gain shall reduce the amount of such gain.’’
(b) TREATMENT OF COLLECTIBLES.—
(1) IN GENERAL.—Section 1222 is amended by
inserting after paragraph (11) the following new
paragraph:
‘‘(12) SPECIAL RULE FOR COLLECTIBLES.—
‘‘(A) IN GENERAL.—Any gain or loss from
the sale or exchange of a collectible shall be
treated as a short-term capital gain or loss (as
the case may be), without regard to the period
such asset was held. The preceding sentence
shall apply only to the extent the gain or loss
is taken into account in computing taxable in-
come.
‘‘(B) TREATMENT OF CERTAIN SALES OF
INTEREST
IN
PARTNERSHIP, ETC.—For pur-
poses of subparagraph (A), any gain from the
sale or exchange of an interest in a partnership,
S corporation, or trust which is attributable to
unrealized appreciation in the value of collect-
ibles held by such entity shall be treated as gain
from the sale or exchange of a collectible. Rules
similar to the rules of section 751(f) shall apply
for purposes of the preceding sentence.
‘‘(C) COLLECTIBLE.—For purposes of this
paragraph, the term ‘collectible’ means any cap-
ital asset which is a collectible (as defined in
section 408(m) without regard to paragraph (3)
thereof).’’
(2) 
CHARITABLE
DEDUCTION
NOT
AF-
FECTED.—
(A) Paragraph (1) of section 170(e) is
amended by adding at the end thereof the fol-
lowing new sentence: ‘‘For purposes of this
paragraph, section 1222 shall be applied with-
out regard to paragraph (12) thereof (relating
to special rule for collectibles).’’
(B) Clause (iv) of section 170(b)(1)(C) is
amended by inserting before the period at the