‘‘(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
or loss under section 1256(a)(3) shall be
treated as attributable to property held for
more than 18 months.
‘‘(6) COLLECTIBLES GAIN AND LOSS.—For pur-
poses of this subsection—
‘‘(A) IN GENERAL.—The terms ‘collectibles
gain’ and ‘collectibles loss’ mean gain or loss
(respectively) from the sale or exchange of a
collectible (as defined in section 408(m) without
regard to paragraph (3) thereof) which is a
capital asset held for more than 18 months but
only to the extent such gain is taken into ac-
count in computing gross income and such loss
is taken into account in computing taxable in-
come.
‘‘(B) PARTNERSHIPS, ETC.—For purposes
of subparagraph (A), any gain from the sale of
an interest in a partnership, S corporation, or
trust which is attributable to unrealized appre-
ciation in the value of collectibles shall be treat-
ed as gain from the sale or exchange of a col-
lectible. Rules similar to the rules of section
751 shall apply for purposes of the preceding
sentence.
‘‘(7) UNRECAPTURED SECTION 1250 GAIN.—For
purposes of this subsection—
‘‘(A) 
IN
GENERAL.—The 
term
‘unrecaptured section 1250 gain’ means the ex-
cess (if any) of—
‘‘(i) the amount of long-term capital
gain (not otherwise treated as ordinary in-
come) which would be treated as ordinary
income if—
‘‘(I) section 1250(b)(1) included
all depreciation and the applicable
percentage under section 1250(a)
were 100 percent, and
‘‘(C) 20 percent of the adjusted net capital
gain (or, if less, taxable excess) in excess of the
amount on which tax is determined under sub-
paragraph (B), plus
‘‘(D) 25 percent of the amount of taxable
excess in excess of the sum of the amounts on
which tax is determined under the preceding
subparagraphs of this paragraph.
In the case of taxable years beginning after Decem-
ber 31, 2000, rules similar to the rules of section
1(h)(2) shall apply for purposes of subparagraphs
(B) and (C). Terms used in this paragraph which
are also used in section 1(h) shall have the respec-
tive meanings given such terms by section 1(h) but
computed with the adjustments under this part.’’.
(3) Section 57(a)(7) of the 1986 Code is
amended by adding at the end the following new
sentence: ‘‘In the case of stock the holding period of
which begins after December 31, 2000 (determined
with the application of the last sentence of section
1(h)(2)(B)), the preceding sentence shall be applied
by substituting ‘28 percent’ for ‘42 percent’.’’.
(4) Paragraphs (11) and (12) of section 1223,
and section 1235(a), of the 1986 Code are each