realized is the fair market value of the taxable stock
involved.
‘‘(3) CERTAIN
ITEMS
NOT
TAKEN
INTO
AC-
COUNT.—The following amounts shall not be taken
into account in computing the amount realized from
any taxable stock transfer:
‘‘(A) The tax imposed by this section.
‘‘(B) Any brokerage or similar fees or com-
missions.
‘‘(C) Any State, local or foreign tax im-
posed on the taxable stock transfer.
‘‘(c) TAX PAID BY TRANSFEROR.—The tax imposed
by subsection (a) shall be paid by the transferor of the
taxable stock.
‘‘SEC. 4302. COLLECTION OF TAX.
‘‘(a) COLLECTED BY BROKER.—Every broker who—
‘‘(1) acts on behalf of the transferor in any tax-
able stock transfer, and
‘‘(2) receives any payment on behalf of the
transferor for such transfer,
shall collect the amount of the tax imposed by section
4301 by deducting and withholding such tax from the
amount of any such payment. Any person required to de-
duct and withhold any tax under the preceding sentence
is hereby made liable for such tax and is hereby indem-
100
nified against the claims and demands of any person for
the amount of any payment so deducted and withheld.
‘‘(b) PAYMENT
BY
TRANSFEROR
WHERE
NO
BROKER.—In any case in which there is no broker re-
quired to collect the tax under subsection (a), the trans-
feror shall pay such tax in such manner as the Secretary
shall by regulations prescribe.
‘‘SEC. 4303. TAXABLE STOCK TRANSFER.
‘‘(a) GENERAL RULE.—For purposes of this sub-
chapter, the term ‘taxable stock transfer’ means any
transfer of a taxable stock if such transfer is made
through an established securities market in the United
States.
‘‘(b) EXEMPTIONS.—For purposes of this subchapter,
the term ‘taxable stock transfer’ does not include—
‘‘(1) DEATH.—Any transfer at death.
‘‘(2) GIFT.—Any transfer to the extent such
transfer is a gift.
‘‘(3) BETWEEN SPOUSES OR INCIDENT TO DI-
VORCE.—Any transfer described in section 1041(a).
‘‘SEC. 4304. TAXABLE STOCK DEFINED.
‘‘(a) TAXABLE STOCK.—For purposes of this sub-
chapter, the term ‘taxable stock’ means any stock in a cor-
poration or interest in a partnership which is publicly
101
traded on an established securities market in the United
States.
‘‘SUBCHAPTER B—POLICIES ISSUED BY FOREIGN
INSURERS’’.
(b) CONFORMING AMENDMENTS.—
(1) The table of chapters for subtitle D of such
Code is amended by striking the item relating to
chapter 34 and inserting the following:
‘‘Chapter 34. Tax on certain financial transactions.’’
(2) Sections 4372(c) and 4374 of such Code
are each amended by striking ‘‘this chapter’’ and in-
serting ‘‘this subchapter’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers after December 31,
1996.
SEC. 3102. REPEAL OF PREFERENTIAL RATE OF TAX ON
CAPITAL GAINS.
(a) IN GENERAL.— Section 1 of the Internal Revenue
Code of 1986 is amended by striking subsection (h).
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (4) of section 691(c) of such
Code is amended by striking ‘‘1(h),’’.
(2)(A) Subparagraph (B) of section 904(b)(2)
of such Code is amended by striking ‘‘In the case of
any taxable year’’ and inserting ‘‘In the case of a
corporation with respect to any taxable year’’.
102
(B) Subparagraph (D) of section 904(b)(3) of
such Code is amended by striking ‘‘if—’’ and all
that follows through ‘‘(ii) in the case of a corpora-
tion,’’ and inserting ‘‘if’’.
(C) Subparagraph (E) of section 904(b)(3) of
such Code is amended to read as follows:
‘‘(E) RATE DIFFERENTIAL PORTION.—The
rate differential portion of foreign source net
capital gain, net capital gain, or the excess of
net capital gain from sources within the United
States over net capital gain, as the case may
be, is the same proportion of such amount as—
‘‘(i) the excess of—
‘‘(I) the highest rate of tax speci-
fied in section 11(b), over
‘‘(II) the alternative rate of tax
under section 1201(a), bears to
‘‘(ii) the highest rate of tax specified
in section 11(b).’’
(3) Paragraph (1) of section 1445(e) of such
Code is amended by striking ‘‘(or, to the extent pro-
vided in regulations, 28 percent)’’.
(4)(A) 
The 
second 
sentence 
of 
section
7518(g)(6)(A) of such Code is amended—