I 
112TH CONGRESS 
1ST SESSION H. R. 2945 
To amend the Internal Revenue Code of 1986 to provide for the indexing 
of certain assets for purposes of determining gain or loss. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 15, 2011 
Mr. WALSH of Illinois 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 
for the indexing of certain assets for purposes of deter-
mining gain or loss. 
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 ‘‘Capital Gains Inflation 
Relief Act of 2011’’. 
SEC. 2. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF 
DETERMINING GAIN OR LOSS. 
(a) IN GENERAL.—Part II of subchapter O of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
basis rules of general application) is amended by redesig-
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nating section 1023 as section 1024 and by inserting after 
section 1022 the following new section: 
‘‘SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES 
OF DETERMINING GAIN OR LOSS. 
‘‘(a) GENERAL RULE.— 
‘‘(1) INDEXED
BASIS
SUBSTITUTED
FOR
AD-
JUSTED BASIS.—Solely for purposes of determining 
gain or loss on the sale or other disposition by a tax-
payer (other than a corporation) of an indexed asset 
which has been held for more than 3 years, the in-
dexed basis of the asset shall be substituted for its 
adjusted basis. 
‘‘(2) EXCEPTION
FOR
DEPRECIATION, ETC.— 
The deductions for depreciation, depletion, and am-
ortization shall be determined without regard to the 
application of paragraph (1) to the taxpayer or any 
other person. 
‘‘(3) WRITTEN
DOCUMENTATION
REQUIRE-
MENT.—Paragraph (1) shall apply only with respect 
to indexed assets for which the taxpayer has written 
documentation of the original purchase price paid or 
incurred by the taxpayer to acquire such asset. 
‘‘(b) INDEXED ASSET.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘indexed asset’ means— 
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‘‘(A) common stock in a C corporation 
(other than a foreign corporation), or 
‘‘(B) tangible property, 
which is a capital asset or property used in the trade 
or business (as defined in section 1231(b)). 
‘‘(2) STOCK
IN
CERTAIN
FOREIGN
CORPORA-
TIONS INCLUDED.—For purposes of this section— 
‘‘(A) IN
GENERAL.—The term ‘indexed 
asset’ includes common stock in a foreign cor-
poration which is regularly traded on an estab-
lished securities market. 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to— 
‘‘(i) stock of a foreign investment 
company, 
‘‘(ii) stock in a passive foreign invest-
ment company (as defined in section 
1296), 
‘‘(iii) stock in a foreign corporation 
held by a United States person who meets 
the requirements of section 1248(a)(2), 
and 
‘‘(iv) stock in a foreign personal hold-
ing company. 
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‘‘(C) TREATMENT OF AMERICAN DEPOSI-
TORY RECEIPTS.—An American depository re-
ceipt for common stock in a foreign corporation 
shall be treated as common stock in such cor-
poration. 
‘‘(c) INDEXED BASIS.—For purposes of this sec-
tion— 
‘‘(1) GENERAL RULE.—The indexed basis for 
any asset is— 
‘‘(A) the adjusted basis of the asset, in-
creased by 
‘‘(B) the applicable inflation adjustment. 
‘‘(2) APPLICABLE INFLATION ADJUSTMENT.— 
The applicable inflation adjustment for any asset is 
an amount equal to— 
‘‘(A) the adjusted basis of the asset, multi-
plied by 
‘‘(B) the percentage (if any) by which— 
‘‘(i) 
the 
gross 
domestic 
product 
deflator for the last calendar quarter end-
ing before the asset is disposed of, exceeds 
‘‘(ii) the gross domestic product 
deflator for the last calendar quarter end-
ing before the asset was acquired by the 
taxpayer. 
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The percentage under subparagraph (B) shall be 
rounded to the nearest 1⁄10 of 1 percentage point. 
‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.— 
The gross domestic product deflator for any cal-
endar quarter is the implicit price deflator for the 
gross domestic product for such quarter (as shown 
in the last revision thereof released by the Secretary 
of Commerce before the close of the following cal-
endar quarter). 
‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI-
MINISHED
RISK
OF
LOSS; TREATMENT
OF
SHORT 
SALES.— 
‘‘(1) IN GENERAL.—If the taxpayer (or a re-
lated person) enters into any transaction which sub-
stantially reduces the risk of loss from holding any 
asset, such asset shall not be treated as an indexed 
asset for the period of such reduced risk. 
‘‘(2) SHORT SALES.— 
‘‘(A) IN GENERAL.—In the case of a short 
sale of an indexed asset with a short sale period 
in excess of 3 years, for purposes of this title, 
the amount realized shall be an amount equal 
to the amount realized (determined without re-
gard to this paragraph) increased by the appli-
cable inflation adjustment. In applying sub-
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section (c)(2) for purposes of the preceding sen-
tence, the date on which the property is sold 
short shall be treated as the date of acquisition 
and the closing date for the sale shall be treat-
ed as the date of disposition. 
‘‘(B) SHORT SALE PERIOD.—For purposes 
of subparagraph (A), the short sale period be-
gins on the day that the property is sold and 
ends on the closing date for the sale. 
‘‘(e) TREATMENT
OF
REGULATED
INVESTMENT 
COMPANIES AND REAL ESTATE INVESTMENT TRUSTS.— 
‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.— 
‘‘(A) IN GENERAL.—Except as otherwise 
provided in this paragraph, the adjustment 
under subsection (a) shall be allowed to any 
qualified investment entity (including for pur-
poses of determining the earnings and profits of 
such entity). 
‘‘(B) EXCEPTION FOR CORPORATE SHARE-
HOLDERS.—Under regulations— 
‘‘(i) in the case of a distribution by a 
qualified investment entity (directly or in-
directly) to a corporation— 
‘‘(I) the determination of whether 
such distribution is a dividend shall be 
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made without regard to this section, 
and 
‘‘(II) the amount treated as gain 
by reason of the receipt of any capital 
gain dividend shall be increased by the 
percentage by which the entity’s net 
capital gain for the taxable year (de-
termined without regard to this sec-
tion) exceeds the entity’s net capital 
gain for such year determined with re-
gard to this section, and 
‘‘(ii) there shall be other appropriate 
adjustments (including deemed distribu-
tions) so as to ensure that the benefits of 
this section are not allowed (directly or in-
directly) to corporate shareholders of quali-
fied investment entities. 
For purposes of the preceding sentence, any 
amount includible in gross income under section 
852(b)(3)(D) shall be treated as a capital gain 
dividend and an S corporation shall not be 
treated as a corporation. 
‘‘(C) 
EXCEPTION
FOR
QUALIFICATION 
PURPOSES.—This section shall not apply for 
purposes of sections 851(b) and 856(c). 
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‘‘(D) EXCEPTION FOR CERTAIN TAXES IM-
POSED AT ENTITY LEVEL.— 
‘‘(i) TAX ON FAILURE TO DISTRIBUTE 
ENTIRE GAIN.—If any amount is subject to 
tax under section 852(b)(3)(A) for any 
taxable year, the amount on which tax is 
imposed under such section shall be in-
creased by the percentage determined 
under subparagraph (B)(i)(II). A similar 
rule shall apply in the case of any amount 
subject to tax under paragraph (2) or (3) 
of section 857(b) to the extent attributable 
to the excess of the net capital gain over 
the deduction for dividends paid deter-
mined with reference to capital gain divi-
dends only. The first sentence of this 
clause shall not apply to so much of the 
amount subject to tax under section 
852(b)(3)(A) as is designated by the com-
pany under section 852(b)(3)(D). 
‘‘(ii) OTHER
TAXES.—This section 
shall not apply for purposes of determining 
the amount of any tax imposed by para-
graph (4), (5), or (6) of section 857(b). 
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