ing the taxable year by reason of an improvement to 
such property or a contribution to capital of such 
corporation— 
‘‘(A) such addition shall never be taken 
into account under subsection (c)(1)(A) if the 
aggregate amount thereof during the taxable 
year with respect to such property or stock is 
less than $1,000, and 
‘‘(B) such addition shall be treated as a 
separate asset acquired at the close of such tax-
able year if the aggregate amount thereof dur-
ing the taxable year with respect to such prop-
erty or stock is $1,000 or more. 
A rule similar to the rule of the preceding sentence 
shall apply to any other portion of an asset to the 
extent that separate treatment of such portion is ap-
propriate to carry out the purposes of this section. 
‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS 
THROUGHOUT HOLDING PERIOD.—The applicable in-
flation adjustment shall be appropriately reduced for 
periods during which the asset was not an indexed 
asset. 
‘‘(3) TREATMENT
OF
CERTAIN
DISTRIBU-
TIONS.—A distribution with respect to stock in a 
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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. 
‘‘(j) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section. 
‘‘(k) TERMINATION.—For purposes of this section, 
the term ‘indexed asset’ shall not include any asset ac-
quired after December 31, 2008.’’. 
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(b) CLERICAL AMENDMENT.—The table of sections 
for part II of subchapter O of chapter 1 is amended by 
striking the item relating to section 1023 and by inserting 
after the item relating to section 1022 the following new 
item: 
‘‘Sec. 1022. Indexing of certain assets for purposes of determining gain or loss. 
‘‘Sec. 1023. Cross references.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales and other dispositions of 
indexed assets after the date of the enactment of this Act, 
in taxable years ending after such date. 
SEC. 5. REDUCED CAPITAL GAINS RATE FOR CORPORA-
TIONS. 
(a) IN GENERAL.—Section 1201 of the Internal Rev-
enue Code of 1986 is amended by striking ‘‘35 percent’’ 
both places it appears and inserting ‘‘15 percent’’. 
(b) ALTERNATIVE MINIMUM TAX.—Section 55(b) of 
such Code is amended by adding at the end the following 
new paragraph: 
‘‘(4) MAXIMUM RATE OF TAX ON NET CAPITAL 
GAIN OF CORPORATIONS.—The amount determined 
under paragraph (1)(B)(i) shall not exceed the sum 
of— 
‘‘(A) the amount determined under such 
paragraph computed at the rates and in the 
same manner as if this paragraph had not been 
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enacted on the taxable excess reduced by the 
net capital gain, plus 
‘‘(B) the amount determined under section 
1201.’’. 
(c) TECHNICAL AMENDMENTS.— 
(1) Section 1445(e)(1) of such Code is amended 
by striking ‘‘35 percent (or, to the extent provided 
in regulations, 15 percent)’’ and inserting ‘‘15 per-
cent’’. 
(2) Section 1445(e)(2) of such Code is amended 
by striking ‘‘35 percent’’ and inserting ‘‘15 per-
cent’’. 
(3) Section 7518(g)(6)(A) of such Code is 
amended by striking ‘‘(34 percent in the case of a 
corporation)’’. 
(4) Section 607(h)(6)(A) of the Merchant Ma-
rine Act, 1936 is amended by striking ‘‘(34 percent 
in the case of a corporation)’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after Decem-
ber 31, 2007. 
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(2) WITHHOLDING.—The amendment made by 
subsection (c)(2) shall apply to amounts paid after 
the date of the enactment of this Act. 
Æ 
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