I
103D CONGRESS
2D SESSION
H. R. 4792
To amend the Internal Revenue Code of 1986 to provide tax incentives
to encourage small investors, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 19, 1994
Mr. MANZULLO (for himself, Mr. LIVINGSTON, Mr. LEVY, Mr. SENSEN-
BRENNER, Mr. MCHUGH, Mr. CANADY, and Mr. PACKARD) 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 provide
tax incentives to encourage small investors, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Small Investors Tax Relief Act of 1994’’.
(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.
SEC. 2. EXEMPTION OF CERTAIN INTEREST AND DIVIDEND
INCOME FROM TAX.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 (relating to amounts specifically excluded from gross
income) is amended by inserting after section 115 the fol-
lowing new section:
‘‘SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTER-
EST RECEIVED BY INDIVIDUALS.
‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in-
come does not include the sum of the amounts received
during the taxable year by an individual as—
‘‘(1) dividends from domestic corporations, or
‘‘(2) interest.
‘‘(b) LIMITATIONS.—
‘‘(1) 
MAXIMUM
AMOUNT.—The 
aggregate
amount excluded under subsection (a) for any tax-
able year shall not exceed $2,000 ($4,000 in the
case of a joint return).
‘‘(2) CERTAIN
DIVIDENDS
EXCLUDED.—Sub-
section (a)(1) shall not apply to any dividend from
a corporation which, for the taxable year of the cor-
poration in which the distribution is made, or for the
next preceding taxable year of the corporation, is a
corporation exempt from tax under section 501 (re-
lating to certain charitable, etc., organization) or
section 521 (relating to farmers’ cooperative associa-
tions).
‘‘(3) INDEXING FOR INFLATION.—In the case of
any taxable year beginning after 1995—
‘‘(A) the $2,000 amount under paragraph
(1) shall be increased by an amount equal to—
‘‘(i) $2,000, multiplied by
‘‘(ii) the cost-of-living adjustment
under section 1(f)(3) for the calendar year
in which the taxable year begins, except
that subparagraph (B) thereof shall be ap-
plied by substituting ‘1994’ for ‘1992’, and
‘‘(B) the $4,000 amount under paragraph
(1) shall be increased to an amount equal to
twice the amount determined under subpara-
graph (A) for the taxable year.
If the dollar amount determined after the increase
under subparagraph (A) is not a multiple of $100,
such dollar amount shall be rounded to the next low-
est multiple of $100.
‘‘(c) SPECIAL RULES.—For purposes of this section:
‘‘(1) DISTRIBUTIONS
FROM
REGULATED
IN-
VESTMENT COMPANIES AND REAL ESTATE INVEST-
MENT TRUSTS.—Subsection (a) shall apply with re-
spect to distributions by—
‘‘(A) regulated investment companies to
the extent provided in section 854(c), and
‘‘(B) real estate investment trusts to the
extent provided in section 857(c).
‘‘(2) DISTRIBUTIONS BY A TRUST.—For pur-
poses of subsection (a), the amount of dividends and
interest properly allocable to a beneficiary under sec-
tion 652 or 662 shall be deemed to have been re-
ceived by the beneficiary ratably on the same date
that the dividends and interest were received by the
estate or trust.
‘‘(3) CERTAIN
NONRESIDENT
ALIENS
INELI-
GIBLE
FOR
EXCLUSION.—In the case of a non-
resident alien individual, subsection (a) shall apply
only—
‘‘(A) in determining the tax imposed for
the taxable year pursuant to section 871(b)(1)
and only in respect of dividends and interest
which are effectively connected with the conduct
of a trade or business within the United States,
or
‘‘(B) in determining the tax imposed for
the taxable year pursuant to section 877(b).’’
(b) CLERICAL AND CONFORMING AMENDMENTS.—
(1) The table of sections for part III of sub-
chapter B of chapter 1 is amended by inserting after
the item relating to section 115 the following new
item:
‘‘Sec. 116. Partial exclusion of dividends and interest received by
individuals.’’
(2) Paragraph (2) of section 265(a) is amended
by inserting before the period at the end thereof the
following: ‘‘, or to purchase or carry obligations or
shares, or to make deposits, to the extent the inter-
est thereon is excludable from gross income under
section 116’’.
(3) Subsection (c) of section 584 is amended by
adding at the end the following new sentence: ‘‘The
proportionate share of each participant in the
amount of dividends or interest received by the com-
mon trust fund and to which section 116 applies
shall be considered for purposes of such section as
having been received by such participant.’’
(4) Subsection (a) of section 643 is amended by
inserting after paragraph (6) the following new
paragraph:
‘‘(7) DIVIDENDS OR INTEREST.—There shall be
included the amount of any dividends or interest ex-
cluded from gross income pursuant to section 116.’’
(5) Section 854 is amended by adding at the
end the following new subsection:
‘‘(c) TREATMENT UNDER SECTION 116.—
‘‘(1) IN
GENERAL.—For purposes of section
116, in the case of any dividend (other than a divi-
dend described in subsection (a)) received from a
regulated investment company which meets the re-
quirements of section 852 for the taxable year in
which it paid the dividend—
‘‘(A) the entire amount of such dividend
shall be treated as a dividend if the aggregate
dividends and interest received by such com-
pany during the taxable year equal or exceed 75
percent of its gross income, or
‘‘(B) if subparagraph (A) does not apply,
a portion of such dividend shall be treated as
a dividend (and a portion of such dividend shall
be treated as interest) based on the portion of
the company’s gross income which consists of
aggregate dividends or aggregate interest, as
the case may be.
For purposes of the preceding sentence, gross in-
come and aggregate interest received shall each be
reduced by so much of the deduction allowable by
section 163 for the taxable year as does not exceed
aggregate interest received for the taxable year.
‘‘(2) NOTICE TO SHAREHOLDERS.—The amount
of any distribution by a regulated investment com-
pany which may be taken into account as a dividend
for purposes of the exclusion under section 116 shall
not exceed the amount so designated by the com-
pany in a written notice to its shareholders mailed
not later than 45 days after the close of its taxable
year.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) the term ‘gross income’ does not in-
clude gain from the sale or other disposition of
stock or securities, and
‘‘(B) the term ‘aggregate dividends re-
ceived’ includes only dividends received from do-
mestic corporations other than dividends de-
scribed in section 116(b)(2).
In determining the amount of any dividend for pur-
poses of subparagraph (B), the rules provided in sec-
tion 116(c)(1) (relating to certain distributions)
shall apply.’’
(6) Subsection (c) of section 857 of such Code
is amended to read as follows:
‘‘(c) LIMITATIONS APPLICABLE TO DIVIDENDS RE-
CEIVED FROM REAL ESTATE INVESTMENT TRUSTS.—
‘‘(1) IN
GENERAL.—For purposes of section
116 (relating to an exclusion for dividends and inter-
est received by individuals) and section 243 (relating
to deductions for dividends received by corpora-
tions), a dividend received from a real estate invest-
ment trust which meets the requirements of this
part shall not be considered as a dividend.
‘‘(2) TREATMENT AS INTEREST.—In the case of
a dividend (other than a capital gain dividend, as de-
fined in subsection (b)(3)(C)) received from a real
estate investment trust which meets the require-
ments of this part for the taxable year in which it
paid the dividend—
‘‘(A) such dividend shall be treated as in-
terest if the aggregate interest received by the
real estate investment trust for the taxable year
equals or exceeds 75 percent of its gross in-
come, or
‘‘(B) if subparagraph (A) does not apply,
the portion of such dividend which bears the
same ratio to the amount of such dividend as
the aggregate interest received bears to gross
income shall be treated as interest.
‘‘(3) ADJUSTMENTS TO GROSS INCOME AND AG-
GREGATE
INTEREST
RECEIVED.—For purposes of
paragraph (2)—
‘‘(A) gross income does not include the net
capital gain,
‘‘(B) gross income and aggregate interest
received shall each be reduced by so much of
the deduction allowable by section 163 for the
taxable year (other than for interest on mort-
gages on real property owned by the real estate
investment trust) as does not exceed aggregate
interest received by the taxable year, and
‘‘(C) gross income shall be reduced by the
sum of the taxes imposed by paragraphs (4),
(5), and (6) of section 857(b).
‘‘(4) NOTICE TO SHAREHOLDERS.—The amount
of any distribution by a real estate investment trust
which may be taken into account as interest for pur-
poses of the exclusion under section 116 shall not
exceed the amount so designated by the trust in a
written notice to its shareholders mailed not later
than 45 days after the close of its taxable year.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to amounts received
after December 31, 1994, in taxable years ending after
such date.
SEC. 3. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF
DETERMINING GAIN OR LOSS.
(a) IN GENERAL.—Part II of subchapter O of chap-
ter 1 (relating to basis rules of general application) is
amended by inserting after section 1021 the following new
section:
‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS FOR PURPOSES
OF DETERMINING GAIN OR LOSS.
‘‘(a) GENERAL RULE.—
‘‘(1) INDEXED
BASIS
SUBSTITUTED
FOR
AD-
JUSTED BASIS.—Except as provided in paragraph
(2), if an indexed asset which has been held for
more than 1 year is sold or otherwise disposed of,
then, for purposes of this title, the indexed basis of
the asset shall be substituted for its adjusted basis.
‘‘(2) EXCEPTION
FOR
DEPRECIATION, ETC.—
The deduction for depreciation, depletion, and amor-
tization shall be determined without regard to the
application of paragraph (1) to the taxpayer or any
other person.
‘‘(b) INDEXED ASSET.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘indexed asset’ means—
‘‘(A) stock in a corporation,
‘‘(B) tangible property (or any interest
therein), which is a capital asset or property
used in the trade or business (as defined in sec-
tion 1231(b)), and
‘‘(C) the principal residence of the tax-
payer (within the meaning of section 1034).
‘‘(2) CERTAIN
PROPERTY
EXCLUDED.—For
purposes of this section, the term ‘indexed asset’
does not include—
‘‘(A) CREDITOR’S INTEREST.—Any interest
in property which is in the nature of a credi-
tor’s interest.
‘‘(B) OPTIONS.—Any option or other right
to acquire an interest in property.
‘‘(C) NET LEASE PROPERTY.—In the case
of a lessor, net lease property (within the mean-
ing of subsection (h)(1)).
‘‘(D) CERTAIN PREFERRED STOCK.—Stock
which is preferred as to dividends and does not
participate in corporate growth to any signifi-
cant extent.
‘‘(E) STOCK IN CERTAIN CORPORATIONS.—
Stock in—
‘‘(i) an S corporation (within the
meaning of section 1361),
‘‘(ii) a personal holding company (as
defined in section 542), and
‘‘(iii) a foreign corporation.
‘‘(3) EXCEPTION FOR STOCK IN FOREIGN COR-
PORATION WHICH IS REGULARLY TRADED ON NA-
TIONAL OR REGIONAL EXCHANGE.—Clause (iii) of
paragraph (2)(E) shall not apply to stock in a for-
eign corporation the stock of which is listed on the
New York Stock Exchange, the American Stock Ex-
change, or any domestic regional exchange for which
quotations are published on a regular basis other
than—
‘‘(A) stock of a foreign investment com-
pany (within the meaning of section 1246(b)),
and
‘‘(B) stock in a foreign corporation held by
a United States person who meets the require-
ments of section 1248(a)(2).
‘‘(c) INDEXED BASIS.—For purposes of this sec-
tion—
‘‘(1) INDEXED BASIS.—The indexed basis for
any asset is—
‘‘(A) the adjusted basis of the asset, multi-
plied by
‘‘(B) the applicable inflation ratio.
‘‘(2) APPLICABLE INFLATION RATIO.—The ap-
plicable inflation ratio for any asset is the percent-
age arrived at by dividing—
‘‘(A) the CPI for the calendar year preced-
ing the calendar year in which the disposition
takes place, by
‘‘(B) the CPI for the calendar year preced-
ing the calendar year in which the asset was ac-
quired by the taxpayer (or, in the case of an
asset acquired before 1995, the CPI for 1993).
The applicable inflation ratio shall not be taken into
account unless it is greater than 1. The applicable
inflation ratio for any asset shall be rounded to the
nearest one-tenth of 1 percent.
‘‘(3) CPI.—The CPI for any calendar year shall
be determined under section 1(f)(4).
‘‘(4) SECRETARY
TO
PUBLISH
TABLES.—The
Secretary shall publish tables specifying the applica-
ble inflation ratio for each calendar year.
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) TREATMENT AS SEPARATE ASSET.—In the
case of any asset, the following shall be treated as
a separate asset:
‘‘(A) A substantial improvement to prop-
erty.
‘‘(B) In the case of stock of a corporation,
a substantial contribution to capital.
‘‘(C) Any other portion of an asset to the
extent that separate treatment of such portion
is appropriate to carry out the purposes of this
section.
‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS
THROUGHOUT HOLDING PERIOD.—
‘‘(A) IN GENERAL.—The applicable infla-
tion ratio shall be appropriately reduced for cal-
endar months at any time during which the
asset was not an indexed asset.
‘‘(B) CERTAIN
SHORT
SALES.—For pur-
poses of applying subparagraph (A), an asset
shall be treated as not an indexed asset for any
short sale period during which the taxpayer or
the taxpayer’s spouse sells short property sub-
stantially identical to the asset. For purposes of
the preceding sentence, the short sale period be-
gins on the day after the substantially identical
property is sold and ends on the closing date
for the sale.
‘‘(3) TREATMENT
OF
CERTAIN
DISTRIBU-
TIONS.—A distribution with respect to stock in a
corporation which is not a dividend shall be treated
as a disposition.
‘‘(4) SECTION
CANNOT
INCREASE
ORDINARY
LOSS.—To the extent that (but for this paragraph)
this section would create or increase a net ordinary
loss to which section 1231(a)(2) applies or an ordi-
nary loss to which any other provision of this title
applies, such provision shall not apply. The taxpayer
shall be treated as having a long-term capital loss in
an amount equal to the amount of the ordinary loss
to which the preceding sentence applies.
‘‘(5) ACQUISITION
DATE
WHERE
THERE
HAS
BEEN
PRIOR
APPLICATION
OF
SUBSECTION
(a)(1)
WITH RESPECT TO THE TAXPAYER.—If there has
been a prior application of subsection (a)(1) to an
asset while such asset was held by the taxpayer, the
date of acquisition of such asset by the taxpayer
shall be treated as not earlier than the date of the
most recent such prior application.
‘‘(6) COLLAPSIBLE CORPORATIONS.—The appli-
cation of section 341(a) (relating to collapsible
corporations) shall be determined without regard to
this section.
‘‘(e) CERTAIN CONDUIT ENTITIES.—
‘‘(1) REGULATED
INVESTMENT
COMPANIES;
REAL ESTATE INVESTMENT TRUSTS; COMMON TRUST
FUNDS.—
‘‘(A) IN GENERAL.—Stock in a qualified
investment entity shall be an indexed asset for
any calendar month in the same ratio as the
fair market value of the assets held by such en-
tity at the close of such month which are in-
dexed assets bears to the fair market value of
all assets of such entity at the close of such
month.
‘‘(B) RATIO OF 90 PERCENT OR MORE.—If
the ratio for any calendar month determined
under subparagraph (A) would (but for this
subparagraph) be 90 percent or more, such
ratio for such month shall be 100 percent.
‘‘(C) RATIO OF 10 PERCENT OR LESS.—If
the ratio for any calendar month determined
under subparagraph (A) would (but for this
subparagraph) be 10 percent or less, such ratio
for such month shall be zero.
‘‘(D) VALUATION OF ASSETS IN CASE OF
REAL ESTATE INVESTMENT TRUSTS.—Nothing
in this paragraph shall require a real estate in-
vestment trust to value its assets more fre-
quently than once each 36 months (except
where such trust ceases to exist). The ratio
under subparagraph (A) for any calendar
month for which there is no valuation shall be
the trustee’s good faith judgment as to such
valuation.
‘‘(E) QUALIFIED INVESTMENT ENTITY.—
For purposes of this paragraph, the term
‘qualified investment entity’ means—
‘‘(i) a regulated investment company
(within the meaning of section 851),
‘‘(ii) a real estate investment trust
(within the meaning of section 856), and
‘‘(iii) a common trust fund (within the
meaning of section 584).
‘‘(2) PARTNERSHIPS.—In the case of a partner-
ship, the adjustment made under subsection (a) at
the partnership level shall be passed through to the
partners.
‘‘(3) SUBCHAPTER
S
CORPORATIONS.—In the
case of an electing small business corporation, the
adjustment under subsection (a) at the corporate
level shall be passed through to the shareholders.
‘‘(f) DISPOSITIONS BETWEEN RELATED PERSONS.—
‘‘(1) IN GENERAL.—This section shall not apply
to any sale or other disposition of property between
related persons except to the extent that the basis
of such property in the hands of the transferee is a
substituted basis.
‘‘(2) RELATED PERSONS DEFINED.—For pur-
poses of this section, the term ‘related persons’
means—
‘‘(A) persons bearing a relationship set
forth in section 267(b), and
‘‘(B) persons treated as single employer
under subsection (b) or (c) of section 414.
‘‘(g) TRANSFERS TO INCREASE INDEXING ADJUST-
MENT OR DEPRECIATION ALLOWANCE.—If any person
transfers cash, debt, or any other property to another per-
son and the principal purpose of such transfer is—
‘‘(1) to secure or increase an adjustment under
subsection (a), or
‘‘(2) to increase (by reason of an adjustment
under subsection (a)) a deduction for depreciation,
depletion, or amortization,
the Secretary may disallow part or all of such adjustment
or increase.
‘‘(h) DEFINITIONS.—For purposes of this section:
‘‘(1) NET
LEASE
PROPERTY
DEFINED.—The
term ‘net lease property’ means leased real property
where—
‘‘(A) the term of the lease (taking into ac-
count options to renew) was 50 percent or more
of the useful life of the property, and
‘‘(B) for the period of the lease, the sum
of the deductions with respect to such property
which are allowable to the lessor solely by rea-
son of section 162 (other than rents and reim-
bursed amounts with respect to such property)
is 15 percent or less of the rental income pro-
duced by such property.
‘‘(2) STOCK INCLUDES INTEREST IN COMMON
TRUST FUND.—The term ‘stock in a corporation’ in-
cludes any interest in a common trust fund (as de-
fined in section 584(a)).
‘‘(i) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section.’’
(b) ADJUSTMENT TO APPLY FOR PURPOSES OF DE-
TERMINING EARNINGS AND PROFITS.—Subsection (f) of
section 312 (relating to effect on earnings and profits of
gain or loss and of receipt of tax-free distributions) is
amended by adding at the end thereof the following new
paragraph:
‘‘(3) EFFECT ON EARNINGS AND PROFITS OF
INDEXED BASIS.—
‘‘For substitution of indexed basis for adjusted
basis in the case of the disposition of certain assets
after December 31, 1994, see section 1022(a)(1).’’
(c) CLERICAL AMENDMENT.—The table of sections
for part II of subchapter O of such chapter 1 is amended
by inserting after the item relating to section 1021 the
following new item:
‘‘Sec. 1022. Indexing of certain assets for purposes of determining
gain or loss.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to dispositions after December 31,
1994.
SEC. 4. REDUCTION IN CAPITAL GAINS TAX FOR INDIVID-
UALS.
(a) GENERAL RULE.—Part I of subchapter P of
chapter 1 (relating to treatment of capital gains) is
amended by adding at the end thereof the following new
section:
‘‘SEC. 1203. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.
‘‘(a) IN GENERAL.—In the case of an individual,
there shall be allowed as a deduction for the taxable year
an amount equal to the annual capital gains deduction (if
any) determined under subsection (b).
‘‘(b) ANNUAL CAPITAL GAINS DEDUCTION.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the annual capital gains deduction determined
under this subsection is the lesser of—
‘‘(A) the net capital gain for the taxable
year, or
‘‘(B) $50,000 ($100,000 in the case of a
joint return).
‘‘(2) COORDINATION
WITH
EXCLUSION
FOR
GAIN FROM SMALL BUSINESS STOCK.—For purposes
of paragraph (1)(A), net capital gain shall be deter-
mined without regard to any gain from the sale or
exchange of qualified small business stock (as de-
fined in section 1202(c)) held for more than 5 years.
‘‘(3) CERTAIN INDIVIDUALS NOT ELIGIBLE.—
This subsection shall not apply to any individual
with respect to whom a deduction under section 151
is allowable to another taxpayer for a taxable year
beginning in the calendar year in which such individ-
ual’s taxable year begins.
‘‘(4) ANNUAL DEDUCTION NOT AVAILABLE FOR
SALES TO RELATED PERSONS.—The amount of the
net capital gain taken into account under paragraph
(1)(A) shall not exceed the amount of the net capital
gain determined by not taking into account gains
and losses from sales and exchanges to any related
person (as defined in section 267(f)).
‘‘(5) INDEXING FOR INFLATION.—In the case of
any taxable year beginning after 1995—
‘‘(A) the $50,000 amount under paragraph
(1)(B) shall be increased by an amount equal
to—
‘‘(i) $50,000, multiplied by
‘‘(ii) the cost-of-living adjustment
under section 1(f)(3) for the calendar year
in which the taxable year begins, except
that subparagraph (B) thereof shall be ap-
plied by substituting ‘1994’ for ‘1992’, and
‘‘(B) the $100,000 amount under para-
graph (1)(B) shall be increased to an amount
equal to twice the amount determined under
subparagraph (A) for the taxable year.
If the dollar amount determined after the increase
under this paragraph is not a multiple of $1,000,
such dollar amount shall be rounded to the next low-
est multiple of $1,000.
‘‘(c) SECTION NOT TO APPLY
TO ESTATES
OR
TRUSTS.—No deduction shall be allowed under this sec-
tion to an estate or trust.
‘‘(d) SPECIAL RULES.—
‘‘(1) DEDUCTION AVAILABLE ONLY FOR SALES
OR EXCHANGES AFTER DECEMBER 31, 1994.—The
amount of the net capital gain taken into account
under subsection (b)(1)(A) shall not exceed the
amount of the net capital gain determined by only
taking into account gains and losses from sales and
exchanges after December 31, 1994.
‘‘(2) SPECIAL
RULE
FOR
PASS-THRU
ENTI-
TIES.—
‘‘(A) IN GENERAL.—In applying this sec-
tion with respect to any pass-thru entity, the
determination of when the sale or exchange oc-
curs 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.’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 62 is amended by
inserting after paragraph (15) the following new
paragraph:
‘‘(16) CAPITAL GAINS DEDUCTION.—The deduc-
tion allowed by section 1203.’’
(2) Paragraph (2) of section 172(d) is amended
by inserting ‘‘and the deduction provided by section
1203’’ after ‘‘1202’’.
(3)(A) Section 220 (relating to cross reference)
is amended to read as follows:
‘‘SEC. 220. CROSS REFERENCES.
‘‘(1) For deduction for net capital gains in the case
of a taxpayer other than a corporation, see section
1203.
‘‘(2) For deductions in respect of a decedent, see
section 691.’’
(B) The table of sections for part VII of sub-
chapter B of chapter 1 is amended by striking ‘‘ref-
erence’’ in the item relating to section 220 and in-
serting ‘‘references’’.
(4) Paragraph (4) of section 691(c) is amended
by inserting ‘‘1203,’’ after ‘‘1202,’’.
(5) The second sentence of paragraph (2) of
section 871(a) is amended by inserting ‘‘or 1203’’
after ‘‘1202’’.
(c) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter P of chapter 1 is amended by
adding at the end thereof the following new item:
‘‘Sec. 1203. Capital gains deduction for individuals.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales or exchanges after Decem-
ber 31, 1994, in taxable years ending after such date.
Æ
HR 4792 IH——2