SECTION 1. CAPITAL GAINS DEDUCTION.

    (a) General Rule.--Part I of subchapter P of chapter 1 of the 
Internal Revenue Code of 1986 (relating to treatment of capital gains) 
is amended to read as follows:

                  ``PART I--TREATMENT OF CAPITAL GAINS

                              ``Sec. 1201. Capital gains deduction.

``SEC. 1201. CAPITAL GAINS DEDUCTION.

    ``(a) General Rule.--If for any taxable year a taxpayer has a net 
capital gain, 30 percent of such gain shall be a deduction from gross 
income.
    ``(b) Estate and Trusts.--In the case of an estate or trust, the 
deduction shall be computed by excluding the portion (if any) of the 
gains for the taxable year from sales or exchanges of capital assets 
which, under sections 652 and 662 (relating to inclusions of amounts in 
gross income of beneficiaries of trusts), is includible by the income 
beneficiaries as gain derived from the sale or exchange of capital 
assets.
    ``(c) Transitional Rule.--In the case of a taxable year in which 
the date of the enactment of this sentence occurs, the amount taken 
into account as the net capital gain under subsection (a) shall not 
exceed the net capital gain determined by only taking into account 
gains and losses properly taken into account for the portion of the 
taxable year after such date of enactment.''
    (b) Deduction Allowable in Computing Adjusted Gross Income.--
Subsection (a) of section 62 of such Code is amended by inserting after 
paragraph (13) the following new paragraph:
            ``(14) Long-term capital gains.--The deduction allowed by 
        section 1201.''
    (c) Technical and Conforming Changes.--
            (1) Section 1 of such Code is amended by striking 
        subsection (j).
            (2) Paragraph (1) of section 170(e) of such Code is amended 
        by striking ``the amount of gain'' in the material following 
        subparagraph (B)(ii) and inserting ``50 percent of the amount 
        of gain''.
            (3)(A) Paragraph (2) of section 172(d) of such Code is 
        amended to read as follows:
            ``(2) Capital gains and losses.--
                    ``(A) Losses of taxpayers other than 
                corporations.--In the case of a taxpayer other than a 
                corporation, the amount deductible on account of losses 
                from sales or exchanges of capital assets shall not 
                exceed the amount includible on account of gains from 
                sales or exchanges of capital assets.
                    ``(B) Deduction under section 1201.--The deduction 
                under section 1201 shall not be allowed.''
            (B) Subparagraph (B) of section 172(d)(4) of such Code is 
        amended by striking ``paragraphs (1) and (3)'' and inserting 
        ``paragraphs (1), (2)(B), and (3)''.
            (4) Paragraph (4) of section 642(c) of such Code is amended 
        to read as follows:
            ``(4) Adjustments.--To the extent that the amount otherwise 
        allowable as a deduction under this subsection consists of gain 
        from the sale or exchange of capital assets held for more than 
        1 year, proper adjustment shall be made for any deduction 
        allowable to the estate or trust under section 1201 (relating 
        to deduction for excess of capital gains over capital losses). 
        In the case of a trust, the deduction allowed by this 
        subsection shall be subject to section 681 (relating to 
        unrelated business income).''
            (5) Paragraph (3) of section 643(a) of such Code is amended 
        by adding at the end thereof the following new sentence: ``The 
        deduction under section 1201 (relating to deduction of excess 
        of capital gains over capital losses) shall not be taken into 
        account.''
            (6) Paragraph (4) of section 691(c) of such Code is amended 
        by striking ``sections 1(j), 1201, and 1211'' and inserting 
        ``sections 1201 and 1211''.
            (7) The second sentence of section 871(a)(2) of such Code 
        is amended by inserting ``such gains and losses shall be 
        determined without regard to section 1201 (relating to 
        deduction for capital gains) and'' after ``except that''.
            (8)(A) Subsection (b) of section 1211 of such Code is 
        amended by striking ``the lower of'' and all that follows down 
        through the period at the end thereof and inserting ``whichever 
        of the following is the smallest--
            ``(1) $3,000 ($1,500 in the case of a married individual 
        filing a separate return),
            ``(2) the excess of such losses over such gains, or
            ``(3) the sum of--
                    ``(A) the excess of the net short-term capital loss 
                over the net long-term capital gain, and
                    ``(B) one-half of the excess of the net long-term 
                capital loss over the net short-term capital gain.''
            (B) So much of paragraph (2) of section 1212(b) of such 
        Code as precedes subparagraph (B) thereof is amended to read as 
        follows:
            ``(2) Special rules.--
                    ``(A) Adjustments.--
                            ``(i) For purposes of determining the 
                        excess referred to in paragraph (1)(A), there 
                        shall be treated as short-term capital gain in 
                        the taxable year an amount equal to the lesser 
                        of--
                                    ``(I) the amount allowed for the 
                                taxable year under paragraph (1), (2), 
                                or (3) of section 1211(b), or
                                    ``(II) the adjusted taxable income 
                                for such taxable year.
                            ``(ii) For purposes of determining the 
                        excess referred to in paragraph (1)(B), there 
                        shall be treated as short-term capital gain in 
                        the taxable year an amount equal to the lesser 
                        of--
                                    ``(I) the sum of the amount allowed 
                                for the taxable year under paragraph 
                                (1), (2), or (3) of section 1211(b), 
                                and the excess of the amount so allowed 
                                over the net short-term capital loss 
                                (determined without regard to this 
                                subsection) for such year, or
                                    ``(II) the adjusted taxable income 
                                for such taxable year.''
            (C) Clause (i) of section 1211(b)(2)(B) of such Code is 
        amended by striking ``paragraph (1) or (2)'' and inserting 
        ``paragraph (1), (2), or (3)''.
            (D) In the case of a taxable year in which the date of the 
        enactment of this Act occurs, proper adjustments in the 
        application of the provisions amended by this paragraph shall 
        be made to take into account the provisions of section 1201(c) 
        of such Code (as amended by subsection (a)).
            (9) Paragraph (1) of section 1402(i) of such Code is 
        amended by inserting ``, and the deduction provided by section 
        1201 shall not apply'' before the period at the end thereof.
            (10) Section 12 of such Code is amended by striking 
        paragraph (4) and redesignating the following paragraphs 
        accordingly.
            (11) Paragraph (2) of section 527(b) of such Code is hereby 
        repealed.
            (12) Paragraph (2) of section 801(a) of such Code is hereby 
        repealed.
            (13) Subsection (c) of section 831(c) of such Code is 
        amended by striking paragraph (1) and redesignating the 
        following paragraphs accordingly.
            (14)(A) Subparagraph (A) of section 852(b)(3) of such Code 
        is amended by striking ``, determined as provided in section 
        1201(a), on'' and inserting ``of 17 percent of''.
            (B) Clause (iii) of section 852(b)(3)(D) of such Code is 
        amended--
                    (i) by striking ``66 percent'' and inserting ``83 
                percent'', and
                    (ii) by striking ``section 1201(a)'' and inserting 
                ``subparagraph (A)''.
            (15) Clause (ii) of section 857(b)(3)(A) of such Code is 
        amended by striking ``determined at the rate provided in 
        section 1201(a) on'' and inserting ``of 17 percent of''.
            (16) Paragraph (1) of section 882(a) of such Code is 
        amended by striking ``section 11, 55, or 1201(a)'' and 
        inserting ``section 11 or 55''.
            (17) Subsection (b) of section 904 of such Code is amended 
        by striking paragraphs (2)(B), (3)(B), (3)(D), and (3)(E).
            (18) Subsection (b) of section 1374 of such Code is amended 
        by striking paragraph (4).
            (19) Subsection (b) of section 1381 is amended by striking 
        ``or 1201''.
            (20) Clause (i) of section 6425(c)(1)(A) of such Code is 
        amended by striking ``or 1201(a)''.
            (21) Clause (i) of section 6655(g)(1)(A) of such Code is 
        amended by striking ``or 1201(a)''.
            (22)(A) The second sentence of section 7518(g)(6)(A) of 
        such Code is amended--
                    (i) by striking ``during a taxable year to which 
                section 1(j) or 1201(a) applies'', and
                    (ii) by striking ``28 percent (34 percent'' and 
                inserting ``14 percent (17 percent''.
            (B) The second sentence of section 607(h)(6)(A) of the 
        Merchant Marine Act, 1936 is amended--
                    (i) by striking ``during a taxable year to which 
                section 1(j) or 1201(a) of such Code applies'', and
                    (ii) by striking ``28 percent (34 percent'' and 
                inserting ``14 percent (17 percent''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act; except that the amendment made by subsection (c)(2) shall apply 
only to contributions after such date of enactment.
Output: Amends the Internal Revenue Code to allow a 30 percent income tax deduction for the net capital gain of both corporate and noncorporate taxpayers.