Teacher:In this task, you are given text for US Congressional and California state bills, your task is to generate a summary for this bill.
Teacher: Now, understand the problem? Solve this instance: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Capital Gains Reform Act of 1997''.

SEC. 2. 70-PERCENT CAPITAL GAINS DEDUCTION FOR TAXPAYERS OTHER THAN
CORPORATIONS.

(a) In General.--Section 1202 of the Internal Revenue Code of 1986
is amended to read as follows:

''SEC. 1202. CAPITAL GAINS DEDUCTION.

''(a) General Rule.--If for any taxable year a taxpayer other than
a corporation has a net capital gain, 70 percent of such gain shall be
a deduction from gross income.
''(b) Estates 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) Coordination With Treatment of Capital Gain Under Limitation
on Investment Interest.--For purposes of this 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).
''(d) Transitional Rule.--
''(1) In general.--In the case of a taxable year which
includes January 1 of the year following the date of enactment
of this section--
''(A) 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 on or after such January 1,
and
''(B) the amount of the net capital gain taken into
account in applying section 1(h) for such year shall be
reduced by the amount taken into account under
subparagraph (A) for such year.
''(2) Special rules for pass-thru entities.--
''(A) In general.--In applying paragraph (1) with
respect to any pass-thru entity, the determination of
when gains and losses are properly taken into account
shall be made at the entity level.
''(B) Pass-thru entity defined.--For purposes of
subparagraph (A), the term 'pass-thru entity' means--
''(i) a regulated investment company,
''(ii) a real estate investment trust,
''(iii) an S corporation,
''(iv) a partnership,
''(v) an estate or trust, and
''(vi) a common trust fund.''.
(b) Deduction Allowable in Computing Adjusted Gross Income.--
Section 62(a) of the Internal Revenue Code of 1986 (defining adjusted
gross income) is amended by inserting after paragraph (15) the
following new paragraph:
''(16) Long-term capital gains.--The deduction allowed by
section 1202.''.
(c) Conforming Amendments.--
(1) Section 1 of the Internal Revenue Code of 1986 is
amended by striking subsection (h).
(2) Section 170(e)(1) of such Code is amended by striking
''the amount of gain'' in the material following subparagraph
(B)(ii) and inserting ''30 percent (100 percent in the case of
a corporation) of the amount of gain''.
(3) Section 172(d)(2)(B) of such Code is amended to read as
follows:
''(B) the deduction under section 1202 shall not be
allowed.''.
(4) The last sentence of section 453A(c)(3) of such Code is
amended by striking all that follows ''long-term capital
gain,'' and inserting ''the maximum rate on net capital gain
under section 1201 or the deduction under section 1202
(whichever is appropriate) shall be taken into account.''.
(5) Section 642(c)(4) 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 1202 (relating
to capital gains deduction). In the case of a trust, the
deduction allowed by this subsection shall be subject to
section 681 (relating to unrelated business income).''.
(6) The last sentence of section 643(a)(3) of such Code is
amended to read as follows: ''The deduction under section 1202
(relating to capital gains deduction) shall not be taken into
account.''.
(7) Section 643(a)(6)(C) of such Code is amended by
inserting ''(i)'' before ''there shall'' and by inserting
before the period '', and (ii) the deduction under section 1202
(relating to capital gains deduction) shall not be taken into
account''.
(8)(A) Section 904(b)(2) of such Code is amended by
striking subparagraph (A), by redesignating subparagraph (B) as
subparagraph (A), and by inserting after subparagraph (A) (as
so redesignated) the following:
''(B) Other taxpayers.--In the case of a taxpayer
other than a corporation, taxable income from sources
outside the United States shall include gain from the
sale or exchange of capital assets only to the extent
of foreign source capital gain net income.''.
(B) Section 904(b)(2)(A) of such Code, as so redesignated,
is amended--
(i) by striking all that precedes clause (i) and
inserting the following:
''(A) Corporations.--In the case of a corporation--
'', and
(ii) in clause (i), by striking ''in lieu of
applying subparagraph (A),''.
(C) Section 904(b)(3) of such Code is amended by striking
subparagraphs (D) and (E) and inserting the following:
''(D) 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 the excess of the highest
rate of tax specified in section 11(b) over the alternative rate of tax
under section 1201(a) bears to the highest rate of tax specified in
section 11(b).''.
(D) Section 593(b)(2)(D)(v) of such Code is amended--
(i) by striking ''if there is a capital gain rate
differential (as defined in section 904(b)(3)(D)) for
the taxable year,'', and
(ii) by striking ''section 904(b)(3)(E)'' and
inserting ''section 904(b)(3)(D)''.
(9) Section 1044(d) of such Code is amended by striking the
last sentence.
(10)(A) Section 1211(b)(2) of such Code is amended to read
as follows:
''(2) 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 section 1212(b)(2) 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) or (2)
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 sum
of--
''(I) the amount allowed for the
taxable year under paragraph (1) or (2)
of section 1211(b) or the adjusted
taxable income for such taxable year,
whichever is the least, plus
''(II) the excess of the amount
described in subclause (I) over the net
short-term capital loss (determined)
without regard to this subsection) for
such year.''.
(C) Section 1212(b) of such Code is amended by adding at
the end of the following:
''(3) Transitional rule.--In the case of any amount which,
under this subsection and section 1211(b) (as in effect for
taxable year beginning before January 1, 1998), is treated as a
capital loss in the first taxable year beginning after December
31, 1997, paragraph (2) and section 1211(b) (as so in effect)
shall apply (and paragraph (2) and section 1211(b) as in effect
for taxable years beginning after December 31, 1997, shall not
apply) to the extent such amount exceeds the total of any
capital gain net income (determined without regard to this
subsection) for taxable years beginning after December 31,
1997.''.
(11) Section 1402(i)(1) of such Code is amended by
inserting'', and the deduction provided by section 1202 shall
not apply'' before the period at the end thereof.
(12) Section 1445(e) of such Code is amended--
(A) in paragraph (1), by striking ''35 percent (or,
to the extent provided in regulations, 28 percent)''
and inserting ''22 percent (or, to the extent provided in regulation,
15.6 percent)'', and
(B) in paragraph (2), by striking ''35 percent''
and inserting ''22 percent''.
(13)(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(h) or 1201(a) applies'', and
(ii) by striking ''28 percent (34 percent'' and
inserting ''15.6 percent (22 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(h) or 1201(a) of such Code applies'', and
(ii) by striking ''28 percent (34 percent'' and
inserting ''15.6 percent (22 percent''.
(14) The item relating to section 1202 in the table of
sections for part I of subchapter P of chapter 1 of such Code
is amended to read as follows:

''Sec. 1202, Capital gains deduction.''.
(d) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments, made by this section apply to
taxable years ending after December 31 of the year which
includes the date of enactment of this Act.
(2) Repeal of section 1(h).--The amendment made by
subsection (c)(1) applies to taxable years beginning on or
after January 1 of the year following the date of enactment of
this Act.
(3) Contributions.--The amendment made by subsection (c)(2)
applies to contributions on or after January 1 of the year
following the date of enactment of this Act.
(4) Use of long-term losses.--The amendments made by
subsection (c)(10) apply to taxable years beginning on or after
January 1 of the second year following the date of enactment of
this Act.
(5) Withholding.--The amendments made by subsection (c)(12)
apply only to amounts paid on or after January 1 of the year
following the date of enactment of this Act.

SEC. 3. REDUCTION OF ALTERNATIVE CAPITAL GAIN TAX FOR CORPORATIONS.

(a) In General.--Section 1201(a)(2) of the Internal Revenue Code of
1986 (relating to alternative tax for corporations) is amended by
striking ''35 percent'' and inserting ''22 percent''.
(b) Transitional Rule.--Section 1201(b) of the Internal Revenue
Code of 1986 is amended to read as follows:
''(b) Transitional Rule.--
''(1) In general.--In applying this section, net capital
gain for any taxable year shall not exceed the net capital gain
determined by taking into account only gains and losses
properly taken into account for the portion of the taxable year
on or after January 1 of the year following the date of
enactment of this subsection.
''(2) Special rule for pass-thru entities.--Section
1202(d)(2) shall apply for purposes of paragraph (1).''.
(c) Conforming Amendment.--Section 852(b)(3)(D)(iii) of the
Internal Revenue Code of 1986 is amended by striking ''65 percent'' and
inserting ''78 percent''.
(d) Effective Date.--The amendments made by this section apply to
taxable years ending after December 31 of the year which includes the
date of enactment of this Act.
Student:
Capital Gains Reform Act of 1997 - Amends the Internal Revenue Code to revise rules concerning capital gain for taxpayers other than corporations to establish a new general rule which provides that if for any taxable year a taxpayer other than a corporation has a capital gain, 70 percent of such gain shall be a deduction from gross income.
Reduces the alternative capital gain tax for corporations.