118 S3367 IS: Billionaires Income Tax Act
U.S. Senate
2023-11-30
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.Short title; amendment of 1986 Code; table of contents(a)This Act may be cited as the Billionaires Income Tax Act
.(b)Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.(c)The table of contents of this Act is as follows:Sec. 1. Short title; amendment of 1986 Code; table of contents.Sec. 2. Purpose.TITLE I—Elimination of deferral for applicable taxpayersSec. 101. Elimination of deferral of tax.Sec. 102. Carryback of capital losses attributable to mark-to-market rules.TITLE II—Application of other provisions to applicable taxpayers and entitiesSubtitle A—IndividualsSec. 201. Applicable taxpayers not eligible for adjusted gross income limitation on net investment tax.Sec. 202. Treatment of covered expatriates.Subtitle B—Rules for applicable entities and trustsSec. 211. Treatment of like-kind exchanges by applicable entities.Sec. 212. Treatment of transfers by applicable entities in exchange for stock.Sec. 213. Special rules for applicable trusts.Subtitle C—Treatment of deferred compensation and certain life insurance and annuity contractsSec. 221. Elimination of deferral of tax on certain compensation.Sec. 222. Rules relating to certain life insurance and annuity contracts of applicable taxpayers.Subtitle D—Repeal of special treatment for certain investments Sec. 231. Treatment of exclusion for certain small business stock.Sec. 232. Modifications for investments in qualified opportunity funds.2.The purpose of this Act is to require billionaires to pay taxes annually by eliminating the ability of high income and high net worth taxpayers to use tax planning strategies such as buy, borrow, die
to defer paying taxes indefinitely, specifically by—(1)under the provisions of title I of this Act—(A)requiring high income and high net worth taxpayers to pay tax on the income they earn on an annual basis, just like working people do on their income from wages, through mark-to-market taxation, and(B)shutting down the ability of the ultra wealthy to buy and hold appreciating assets and borrow against those assets to support their lavish lifestyles, all completely tax-free, and(2)under the provisions of title II of this Act, closing loopholes in the tax code that allow high income and high net worth taxpayers to shield their income from taxation, including the loophole that allows ultra wealthy taxpayers to transfer untaxed appreciated assets to their heirs at death and such heirs to sell such assets completely tax-free. <enum>I</enum><header>Elimination of deferral for applicable taxpayers</header><section id="id26394F31C2DE4A6EAC30A1D92676CA69"><enum>101.</enum><header>Elimination of deferral of tax</header><subsection id="id2D2CBE5A72A84AF787DA17B1D838BF9E"><enum>(a)</enum><header>In general</header><text>Subchapter E of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by adding at the end the following new part:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id1E130F6113584DAF873CAE4C0733B9BA"><part id="id2635360C299E4E70A24F9059F9FB162C" style="OLC"><enum>IV</enum><header>Elimination of deferral for applicable taxpayers</header><toc><toc-entry level="section" bold="off">Subpart A. General provisions.</toc-entry><toc-entry level="section" bold="off">Subpart B. Definitions and rules relating to applicable taxpayers.</toc-entry><toc-entry level="section" bold="off">Subpart C. Other definitions and rules.</toc-entry></toc><subpart id="idF74BBCFDC55141648D00AD97F4286F11" style="OLC"><enum>A</enum><header>General provisions</header><toc><toc-entry level="section" bold="off">Sec. 490. Elimination of deferral of tax for applicable taxpayers.</toc-entry><toc-entry level="section" bold="off">Sec. 491. Treatment of tradable covered assets.</toc-entry><toc-entry level="section" bold="off">Sec. 492. Deferral recapture amount on applicable transfers of nontradable covered assets.</toc-entry><toc-entry level="section" bold="off">Sec. 493. Special rules for application of nondeferral rules to certain pass-through entities.</toc-entry><toc-entry level="section" bold="off">Sec. 494. Treatment of gifts, bequests, and transfers in trust.</toc-entry></toc><section id="id11E2E244B034469FB08705B6BEB562E0"><enum>490.</enum><header>Elimination of deferral of tax for applicable taxpayers</header><text display-inline="no-display-inline">In the case of an applicable taxpayer for any taxable year—</text><paragraph id="id44DC424ABE0B49FC85FEE724F62A397F"><enum>(1)</enum><text>if there is a taxable event with respect to any tradable covered asset of the taxpayer during the taxable year, gain or loss shall be recognized as provided in section 491, </text></paragraph><paragraph id="id4A0BE826CBBD4977B7663F501E0FC901"><enum>(2)</enum><text>if there is an applicable transfer by the taxpayer during the taxable year of any nontradable covered asset—</text><subparagraph id="id770FFBB7799E42258DF44C8FF2161D39" commented="no"><enum>(A)</enum><text>if such applicable transfer is a disregarded nonrecognition event, gain or loss shall be recognized as provided in section 492(a)(1), and </text></subparagraph><subparagraph id="idF4047210A23F463E8E56F2BE7143EDCD"><enum>(B)</enum><text>the tax imposed by this chapter for the taxable year shall be increased as provided in section 492 with respect to any gain from any such transfer,</text></subparagraph></paragraph><paragraph id="id979208B94E3C4307A5A8278CFC4F4CF6" commented="no" display-inline="no-display-inline"><enum>(3)</enum><text display-inline="yes-display-inline">gain or loss with respect to any applicable entity held by the taxpayer shall be taken into account as provided in section 493, and</text></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id542782446123457AAB84290CF5B263EF"><enum>(4)</enum><text display-inline="yes-display-inline">in the case of any gift, bequest, or transfer in trust by an applicable taxpayer or applicable entity held by an applicable taxpayer, section 494 shall apply.</text></paragraph></section><section id="id642C19004BE749658C93A5FE9D52CAC8"><enum>491.</enum><header>Treatment of tradable covered assets</header><subsection id="id70009E22833E4B728EEE3B539B6865A2"><enum>(a)</enum><header>In general</header><text>For purposes of this title, in the case of a taxable event with respect to any tradable covered asset of an applicable taxpayer—</text><paragraph id="idDE0E67D913A34F7FA81E0D8D3188485D"><enum>(1)</enum><text>notwithstanding any other provision of this title—</text><subparagraph id="id53101D4661644270857D2799F390F8A2"><enum>(A)</enum><text>gain or loss shall be recognized and taken into account in the taxable year in which the taxable event occurs as if the taxpayer had sold the tradable covered asset for its fair market value—</text><clause id="idDA21B7725893480D847B7787CA9699BB"><enum>(i)</enum><text>in the case of a taxable event described in subsection (b)(1), on the date of the taxable event, and</text></clause><clause id="id6EEFBEA5425446548F13446C73D30214" commented="no"><enum>(ii)</enum><text>in the case of a taxable event described in subsection (b)(2), immediately before the taxable event, and</text></clause></subparagraph><subparagraph id="id5E69B64AA58144FB8BFE1F000C62A785"><enum>(B)</enum><text>except as provided in subsection (c)(1), gain or loss taken into account by reason of a taxable event described in subsection (b)(1) with respect to a tradable covered asset which is a capital asset shall be treated as long-term capital gain or long-term capital loss, respectively, and</text></subparagraph></paragraph><paragraph id="id4AF53FADB9994F8C8FF3EE655D7D1F5F"><enum>(2)</enum><text>proper adjustments shall be made in the amount of gain or loss subsequently realized for gain or loss taken into account under paragraph (1).</text></paragraph></subsection><subsection id="id214838C1BAEF4F24A4F6693E1F6E367D"><enum>(b)</enum><header>Taxable event</header><text>For purposes of this part, the term <term>taxable event</term> means, with respect to any tradable covered asset— </text><paragraph id="idF13FDB105A6C4455BC7B0BD41637CAE4"><enum>(1)</enum><text>the holding of such asset as of the close of any taxable year with respect to which a taxpayer is an applicable taxpayer, and</text></paragraph><paragraph id="id89811FEF6A9E45409A221070511F91CF" commented="no"><enum>(2)</enum><text>any disregarded nonrecognition event.</text></paragraph></subsection><subsection id="id485BC29EF84445BF8154C412AAC28A13"><enum>(c)</enum><header>Special rules</header><paragraph id="id3AFFE146956C4E7D86B7B9FB325CC5BA"><enum>(1)</enum><header>Characterization as ordinary income or loss</header><text>Except as provided by the Secretary, subsection (a)(1)(B) shall not apply to any gain or loss from a tradable covered asset if, under any other provision of this title, such gain or loss—</text><subparagraph id="id05C8DDEAF82141BC8C4BF134B47D113A"><enum>(A)</enum><text>is treated as gain or loss from the sale or exchange of an asset which is not a capital asset, or</text></subparagraph><subparagraph id="id47970F19143743D791198533DD790CDA"><enum>(B)</enum><text>is treated as ordinary income or loss on a basis other than the taxpayer’s holding period in such asset. </text></subparagraph></paragraph><paragraph id="idE97C853E77C943E0B60D45CF2DECEB68"><enum>(2)</enum><header>Holding period</header><text>For purposes of this title, any taxable event described in subsection (b)(1) with respect to any tradable covered asset shall not be taken into account in determining the holding period of the taxpayer with respect to such tradable covered asset.</text></paragraph><paragraph id="idAC698AF4BABC41DDB31526F55B4EA768"><enum>(3)</enum><header>Proper adjustments for subsequent gain or loss</header><text>For purposes of subsection (a)(2), section 492(a)(1)(B), section 493(c)(1)(A)(ii), and section 493(c)(3)(C), the proper adjustments required under such provisions shall include such adjustments in basis of property, or such other adjustments in respect of property, as the Secretary determines necessary or appropriate.</text></paragraph></subsection></section><section id="idF9E2FEB6B3834D5AB2225EB7B0EDD46D"><enum>492.</enum><header>Deferral recapture amount on applicable transfers of nontradable covered assets</header><subsection id="idC66346E5DA1C48C89D5DE77E9948BAE0"><enum>(a)</enum><header>In general</header><text>If there is an applicable transfer during a taxable year of a nontradable covered asset of an applicable taxpayer—</text><paragraph id="idF5928D7103084259B2287161CFC2DBAA"><enum>(1)</enum><text>in the case of an applicable transfer which is a disregarded nonrecognition event—</text><subparagraph id="id348C2C9B1D8F4137A3A7570194BB4F72" commented="no"><enum>(A)</enum><text>notwithstanding any other provision of this title, gain or loss shall be recognized and taken into account by the taxpayer (including for purposes of paragraph (2) and subsection (c)) in the taxable year in which the transfer occurs as if the taxpayer had sold the nontradable covered asset for its fair market value immediately before such transfer, and</text></subparagraph><subparagraph id="id4E26DF33BBE1415AA535C2B666689D34" commented="no"><enum>(B)</enum><text>proper adjustments shall be made in the amount of gain or loss subsequently realized for gain or loss taken into account under subparagraph (A), and </text></subparagraph></paragraph><paragraph id="id8AE886A72EE64029973875A6B17AEDBD"><enum>(2)</enum><text>if there is gain from the applicable transfer, the tax imposed by this chapter for the taxable year (determined without regard to this section) shall be increased by the sum of the deferral recapture amounts determined under subsection (b) for each such transfer.</text></paragraph></subsection><subsection id="id5EAB10719DA943F2B57083B97DEC7F49"><enum>(b)</enum><header>Deferral recapture amount</header><paragraph id="id891189CCD105485BB180410D386FCE3D"><enum>(1)</enum><header>In general</header><text>For purposes of this part—</text><subparagraph id="id211A74BA088B46A287DF3637A5F401E4"><enum>(A)</enum><header>In general</header><text>The term <term>deferral recapture amount</term> means, with respect to any applicable transfer of any nontradable covered asset, the aggregate amount of interest (determined in the manner provided under paragraph (3)) on the deemed tax amount determined under paragraph (2) for each taxable year to which gain is allocated under paragraph (2)(A) and which precedes the taxable year of the applicable transfer.</text></subparagraph><subparagraph id="id2EE88FCE963447C3ACC8E835B589AFD7"><enum>(B)</enum><header>Limitation on amount</header><text>The amount determined under subparagraph (A) with respect to any applicable transfer shall not exceed the applicable percentage of the gain from such transfer. For purposes of this subparagraph, the applicable percentage is the excess of—</text><clause id="id6FFAB4AD4112434C897F14D24CF8A6C1"><enum>(i)</enum><text>49 percent, over</text></clause><clause id="id45255588234F4E41B9AED0DDE4F6EE2D"><enum>(ii)</enum><text>in the case of the transfer of a nontradable covered asset which—</text><subclause id="id939053D88BAB4E94AC034156CA842FD5"><enum>(I)</enum><text>is a capital asset, the rate of tax in effect under section 1(h)(1)(D) for the taxable year of the transfer, or</text></subclause><subclause id="id0A659115FEDF416B86EB529BA985CF5B"><enum>(II)</enum><text>is not a capital asset, the highest rate of tax in effect under section 1 for such taxable year.</text></subclause></clause></subparagraph></paragraph><paragraph id="idF46581ACEB6D4EDCA4046AE7650BB761"><enum>(2)</enum><header>Deemed tax amount</header><text>For purposes of paragraph (1)—</text><subparagraph id="idA2BFA08D05434B3D8CCD558060C37530"><enum>(A)</enum><header>In general</header><text>The deemed tax amount for any taxable year preceding the taxable year of any applicable transfer of a nontradable covered asset shall be the amount determined—</text><clause id="idCEC5233FA89F44B58A0B6C94148D7FD8"><enum>(i)</enum><text>first, except as provided in subparagraph (B), by allocating the amount of gain from such transfer ratably to each day in the taxpayer's holding period of such asset, and</text></clause><clause id="idB56C54EC517A4AF7AEAAB3B6C231BB38"><enum>(ii)</enum><text>then by multiplying the amount allocated under clause (i) to days in such preceding taxable year by—</text><subclause id="id9B8A3E0077E74413BF7FA060FBA9FE80"><enum>(I)</enum><text>if such asset is a capital asset, the rate of tax in effect under section 1(h)(1)(D) for the taxable year of such transfer, or</text></subclause><subclause id="id63A36AA4F1274F5894E7186AEF540F3F"><enum>(II)</enum><text>if such asset is not a capital asset, the highest rate of tax in effect under section 1 for such taxable year. </text></subclause></clause></subparagraph><subparagraph id="id0E527BD299D74BBEBBD84C3283928D33"><enum>(B)</enum><header>Special rule for periods before becoming applicable taxpayer</header><text>Notwithstanding subparagraph (A)(i), any gain allocated under such subparagraph to any taxable year preceding the first taxable year for which the taxpayer is treated as an applicable taxpayer shall be allocated to such first taxable year.</text></subparagraph><subparagraph id="idacd387546b1e4dc9903e5d2337ab9910"><enum>(C)</enum><header>Increase in deemed tax amount by tax on net investment income</header><text>If gain from a transfer to which this section applies for any taxable year is of a type taken into account in computing net investment income (as defined in section 1411), the deemed tax amount under this paragraph for any preceding taxable year to which such gain is allocated under subparagraph (A)(i) shall be increased by an amount equal to the amount of such allocated gain multiplied by the rate of tax in effect under section 1411(a)(1) for the taxable year of such transfer. </text></subparagraph></paragraph><paragraph id="id582a5add-1502-11ea-882b-fc1aa8c2c625"><enum>(3)</enum><header>Computation of interest</header><subparagraph id="id582a5ade-1502-11ea-882b-fc1aa8c2c625"><enum>(A)</enum><header>In general</header><text>The amount of interest referred to in paragraph (1) on any deemed tax amount determined under paragraph (2) for any preceding taxable year shall be determined for the period—</text><clause id="id582a81ef-1502-11ea-882b-fc1aa8c2c625"><enum>(i)</enum><text>beginning on the due date for such preceding taxable year, and</text></clause><clause id="id582a81f0-1502-11ea-882b-fc1aa8c2c625"><enum>(ii)</enum><text>ending on the date on which the applicable transfer occurs,</text></clause><continuation-text continuation-text-level="subparagraph">by using the rates determined under section 6621(b) (plus 1 percentage point), and the method applicable under section 6621, for underpayments of tax for such period.</continuation-text></subparagraph><subparagraph id="id852FFB416F3E44A88B91A9ED47FF3CB8"><enum>(B)</enum><header>Due date</header><text>For purposes of this paragraph, the term <term>due date</term> means, with respect to any preceding taxable year, the date prescribed by law (determined without regard to extensions) for filing the return of the tax imposed by this chapter for such taxable year.</text></subparagraph></paragraph></subsection><subsection id="idB6ABA49903734F479AF888960E71FB69" commented="no"><enum>(c)</enum><header>Special rule for taxpayers with net capital losses</header><paragraph id="id47FB803E08994A8B9341549C8794FDA7" commented="no"><enum>(1)</enum><header>In general</header><text>If a taxpayer has a net capital loss for any taxable year for which there is an increase in tax under subsection (a)(2), such increase in tax shall be reduced (but not below zero) by the credit equivalent of such net capital loss.</text></paragraph><paragraph id="idD920492BE8EE4DAFB5E3D052F22A307B" commented="no"><enum>(2)</enum><header>Credit equivalent</header><text>For purposes of this subsection, the term <term>credit equivalent</term> means, with respect to any net capital loss for any taxable year, an amount equal to such loss multiplied by the rate of tax in effect under section 1(h)(1)(D) for such taxable year.</text></paragraph><paragraph id="id2EC9B6935A5E445196DECA9064EBD636" commented="no"><enum>(3)</enum><header>Coordination with carryovers of loss</header><text>For purposes of subsection (b) of section 1212, the net capital loss for a taxable year to which paragraph (1) applies (determined without regard to this subsection) shall be reduced (but not below zero) by an amount equal to the amount of the reduction under paragraph (1) for such taxable year divided by the rate of tax in effect under section 1(h)(1)(D) for such taxable year.</text></paragraph></subsection><subsection commented="no" id="id832ED1EE0D9D445FA3BF94ECC144C768"><enum>(d)</enum><header>Special rules for certain dividend distributions</header><paragraph commented="no" id="idBAE9D2239F3D4B0B8B6C6A26092B5210"><enum>(1)</enum><header>Excess dividend distributions</header><subparagraph commented="no" id="idF03DDA22138B44FAA52303B16E3CEFB1"><enum>(A)</enum><header>In general</header><text>For purposes of applying this section, any excess dividend shall be treated as gain from an applicable transfer of a nontradable covered asset occurring on the date such dividend is received.</text></subparagraph><subparagraph commented="no" id="id34043951C45042E99256FB8BEA1224AE"><enum>(B)</enum><header>Excess dividend</header><text>For purposes of this part, the term <term>excess dividend</term> means, with respect to any nontradable covered asset which consists of stock in a C corporation, any dividend in respect of such stock received during any taxable year to the extent such dividend does not exceed its ratable portion of the total excess dividends (if any) for such taxable year.</text></subparagraph><subparagraph id="idE611D8E67E4248488C20DAF641EA36B8"><enum>(C)</enum><header>Total excess dividends</header><text>For purposes of this paragraph—</text><clause id="idD180EF18D56D4D5E91DF8481595C86F3"><enum>(i)</enum><header>In general</header><text>The term <term>total excess dividends</term> means, with respect to stock in a C corporation described in subparagraph (B), the excess (if any) of—</text><subclause id="id5D92EB58535C45649311177AB6694C9C"><enum>(I)</enum><text>the amount of the dividends in respect of such stock received by the taxpayer during the taxable year, over</text></subclause><subclause id="idC6AAAEC2599E44FDA7FA2E415D20459F"><enum>(II)</enum><text>125 percent of the average amount of dividends received in respect of such stock by the taxpayer during the 3 preceding taxable years (or, if shorter, the portion of the taxpayer’s holding period before the taxable year).</text></subclause></clause><clause id="id5EEB0C86997F4CD299AE41DBE2F27B21"><enum>(ii)</enum><header>No excess for 1st year</header><text>Except as provided by the Secretary, the total excess dividends with respect to any stock shall be zero for the taxable year in which the taxpayer’s holding period in such stock begins.</text></clause></subparagraph><subparagraph id="idFE7FE36D0DBE4EFA823B9E4E63B7E9DB"><enum>(D)</enum><header>Adjustments</header><text>Under regulations prescribed by the Secretary—</text><clause id="id5E129B104F774007BFB2B189D9E895B5"><enum>(i)</enum><text>determinations under this paragraph shall be made on a share-by-share basis, except that shares with the same holding period may be aggregated and other shares may be aggregated to the extent provided by the Secretary,</text></clause><clause id="id14E8EEB363CA47CC81310B7C0F00A56A"><enum>(ii)</enum><text>proper adjustments shall be made for stock splits and stock dividends,</text></clause><clause id="id564B69342CBB493F9F847D079980F2A9"><enum>(iii)</enum><text>if the taxpayer does not hold the stock during the entire taxable year, dividends received during such year shall be annualized, and</text></clause><clause id="id161219E74B1748D889AA3911EA7BBFD9"><enum>(iv)</enum><text>if the taxpayer’s holding period includes periods during which the stock was held by 1 or more other persons, dividends with respect to such stock received by such other person shall be taken into account as if received by the taxpayer.</text></clause></subparagraph></paragraph><paragraph id="idB60D2B12BEBB4FFFBFB00537C5104D7F"><enum>(2)</enum><header>Capital gain dividends of certain REITS</header><subparagraph id="id4C3E8AE4526E40E3B5B141B6DBBF8420"><enum>(A)</enum><header>In general</header><text>For purposes of applying this section, if an applicable taxpayer holds directly (or indirectly through 1 or more nontradable interests) stock in a real estate investment trust which is a nontradable covered asset, any capital gain dividend received by such taxpayer from such entity shall be treated as gain from an applicable transfer of a nontradable covered asset occurring on the date such dividend is received.</text></subparagraph><subparagraph id="id7E3EF7F9B5044767ACA0E38C776C6C41"><enum>(B)</enum><header>Reporting</header><text>A real estate investment trust shall include in the written notice for a capital gain dividend under section 857(b)(3)(B) its holding period in the asset giving rise to the capital gain dividend. The Secretary shall provide rules for the determination of holding periods in cases where the dividend is properly allocable to gain from more than 1 asset.</text></subparagraph></paragraph><paragraph id="idB80C79E5DF864266BF549F8078717B58"><enum>(3)</enum><header>Holding period</header><text>Except as prescribed by the Secretary, if an applicable taxpayer is treated under this subsection as receiving gain from an applicable transfer of a nontradable covered asset, the taxpayer's holding period for purposes of computing the deferral recapture amount under this section shall be the taxpayer's holding period with respect to the stock or ownership interest in the entity to which paragraph (1) or (2) applies (or, if shorter, the holding period included in the notice described in paragraph (2)(B) in the case of a capital gain dividend).</text></paragraph></subsection><subsection id="id37D2EDF849F2478EB9CF4EBA2A0774E4" commented="no"><enum>(e)</enum><header>Holding period</header><text>For purposes of this section—</text><paragraph commented="no" id="idA3BCAAF674C84C74B821ADA1AB67232C"><enum>(1)</enum><header>In general</header><text>The taxpayer's holding period shall be determined under section 1223, except that if a tradable covered asset of an applicable taxpayer is converted to, or exchanged for, a nontradable covered asset, such period shall only include the period after the most recent taxable event under this part with respect to such tradable covered asset.</text></paragraph><paragraph id="id1904DC502208428287E55300F365FD9D"><enum>(2)</enum><header>Secretarial authority</header><text>The Secretary shall prescribe such regulations, rules, or guidance providing for other modifications to holding periods as may be necessary to carry out the purposes of this section.</text></paragraph></subsection></section><section id="id23237A386E7B49E9903E4258FCC98127"><enum>493.</enum><header>Special rules for application of nondeferral rules to certain pass-through entities</header><subsection id="id5A09E204B5C64DCD97F88155CF167618"><enum>(a)</enum><header>Treatment of ownership interests in applicable entities</header><text>For purposes of applying this part, except as provided in this section, any ownership interest in an applicable entity held directly (or indirectly through 1 or more nontradable interests) by an applicable taxpayer which is a tradable or nontradable covered asset shall be treated in the same manner as any other such asset.</text></subsection><subsection id="id69952404FED44CD3981117878E92E5CF"><enum>(b)</enum><header>Additional requirements for applicable taxpayers who are significant owners</header><text>For purposes of this part—</text><paragraph id="idCAECA57C8BC840A59FF1F824485A9AD7"><enum>(1)</enum><header>In general</header><text>In the case of any applicable taxpayer which is a significant owner of an applicable entity— </text><subparagraph id="id11DD8441A6AF4E2F8E62493AD7552BDA"><enum>(A)</enum><text>such taxpayer shall meet the reporting requirements under paragraph (2) with respect to such entity, and</text></subparagraph><subparagraph id="id8B3A18755005417A9A2FDC1B93B9F426"><enum>(B)</enum><text>such taxpayer shall take into account amounts with respect to such entity as required under paragraph (3).</text></subparagraph></paragraph><paragraph id="id86DEDF78D6714D65A987D5C69C167FC9"><enum>(2)</enum><header>Reporting requirements for significant owners</header><subparagraph id="id70CF2F9FF9E440C1BE50B0029FD1A257"><enum>(A)</enum><header>Notice to entity of status</header><clause id="idD7113E6BF5744833A2478EC7A610921D"><enum>(i)</enum><header>In general</header><text>In the case of the first taxable year for which a taxpayer—</text><subclause id="id5D6FE8F6160C4BDCA619E3747F5C1A80"><enum>(I)</enum><text>is an applicable taxpayer,</text></subclause><subclause id="id21A7715BDA074238877F5C57F92DA9FE"><enum>(II)</enum><text>is a significant owner of an applicable entity, and</text></subclause><subclause id="idAA37615973C94D70B56D96A4E767A906"><enum>(III)</enum><text>holds directly a nontradable interest in such applicable entity,</text></subclause><continuation-text continuation-text-level="clause">such taxpayer shall, at such time and in such manner as the Secretary shall prescribe, notify such applicable entity that such taxpayer is a taxpayer meeting the requirements of subclauses (I), (II), and (III) and that the applicable entity is subject to the notice requirements under subsection (c) with respect to such taxpayer. Such taxpayer shall include with such notice such information as the Secretary may prescribe. </continuation-text></clause><clause id="idF2795DEF7BC64E368356E6DDC6B59492"><enum>(ii)</enum><header>Period of notice</header><text>Any notice provided by a taxpayer under clause (i) shall remain in effect, and such entity shall continue to be subject to the reporting requirements under subsection (c) with respect to such taxpayer, for the period specified by the Secretary. The Secretary may require additional reporting by the taxpayer for purposes of carrying out this clause.</text></clause></subparagraph><subparagraph id="id95C41798DD924604AA8D0761577D3F9E"><enum>(B)</enum><header>Reporting of elections to treat nontradable interests as tradable assets</header><text>If—</text><clause id="idAADFDB03FA56436EB6E7CBA4C279A7EA"><enum>(i)</enum><text>section 496(a)(1) applies to an applicable taxpayer for any taxable year for which a notice with respect to such taxpayer is in effect under subparagraph (A), and</text></clause><clause id="id5DD8696256EB433F8259BDBAF73E463B"><enum>(ii)</enum><text>the applicable taxpayer made the election under section 496(a)(3) to treat any nontradable interest in an applicable entity as a tradable covered asset for purposes of section 496(a)(1),</text></clause><continuation-text continuation-text-level="subparagraph">the applicable taxpayer shall, at such times and in such manner as the Secretary shall prescribe, report to such applicable entity notice of such election, the amount of gain described in section 496(c)(1) with respect to such treatment, and the requirement for the entity to make the basis adjustments described in section 496(c)(2).</continuation-text></subparagraph></paragraph><paragraph id="id5BA3685101BF498B8843B6E91E421D60"><enum>(3)</enum><header>Certain gain or loss of applicable entity taken into account by significant owners</header><subparagraph id="id38B9795413B04BEF966732AE6A28166F"><enum>(A)</enum><header>In general</header><text>Each applicable taxpayer for which a notice with respect to such taxpayer is in effect under paragraph (2)(A) or subsection (c)(2) with respect to an applicable entity for any taxable year of the taxpayer shall, in computing the taxpayer's tax liability under this chapter for such taxable year, take into account such taxpayer's share of any gain or loss reported under subsection (c)(1)(A)(i) or (c)(1)(B)(i) to the taxpayer for any taxable year of such entity ending with or within such taxable year of the taxpayer. </text></subparagraph><subparagraph id="idD976C3A5D5194498892114F03AC28576"><enum>(B)</enum><header>Basis adjustments</header><text>Under rules prescribed by the Secretary, if gain or loss is taken into account by an applicable taxpayer under subparagraph (A) with respect to any tradable covered asset by reason of the taxpayer holding a nontradable interest in an applicable entity—</text><clause id="id9A020778D614466D8052F0A25CF2F460"><enum>(i)</enum><text>the applicable entity's adjusted basis of such asset (solely for purposes of computing the taxpayer's share of such adjusted basis), and</text></clause><clause id="id1346E98678464F22BEE0485A12BFAA70"><enum>(ii)</enum><text>the taxpayer's adjusted basis of such nontradable interest,</text></clause><continuation-text continuation-text-level="subparagraph">shall each be appropriately adjusted to reflect gain or loss so taken into account. Such rules shall also provide proper adjustments to adjusted bases where such ownership is held through tiered entities. </continuation-text></subparagraph><subparagraph id="idD63E139805C9482383213D8678130BBE"><enum>(C)</enum><header>Special rules for deferral recapture amount</header><clause id="idEEFC1C3483114D40B5B5F27D2DDDE41B"><enum>(i)</enum><header>Holding period</header><text>Except as prescribed by the Secretary, if an applicable taxpayer takes into account gain under subparagraph (A) for any taxable year from an applicable transfer by such applicable entity of a nontradable covered asset, the taxpayer's holding period with respect to such asset for purposes of computing the deferral recapture amount under section 492 shall be the shorter of—</text><subclause id="idF9070A83C09441C18724E96259440CE7"><enum>(I)</enum><text>the entity's holding period in such asset, or</text></subclause><subclause id="idE34DA5602FA847C1B0D4CD2BA9457B53"><enum>(II)</enum><text>the taxpayer's holding period in such entity.</text></subclause></clause><clause id="id9222C93DB28F45399D2502EC270189DF"><enum>(ii)</enum><header>Other rules</header><text>The Secretary shall prescribe rules for purposes of this section—</text><subclause id="id5A653F0EB7D848158983D1F0C2E3781E"><enum>(I)</enum><text>for the treatment of fragmented holding periods,</text></subclause><subclause id="id2A98684B789F4DD5B5AB61DFB81B32DE"><enum>(II)</enum><text>for the determination of holding periods in the case of tiered structures, and </text></subclause><subclause id="id18DB31096D584D9683E982C6C370A689"><enum>(III)</enum><text>to prevent the shifting of any deferral recapture amount between taxpayers holding ownership interests in an applicable entity.</text></subclause></clause></subparagraph><subparagraph id="id1DCA15D6ED384475A72CF92BA25D259F"><enum>(D)</enum><header>Taxpayers failing to file notice</header><text>Under rules required by the Secretary, if a taxpayer fails to file a notice with any applicable entity as required under paragraph (2)(A), such taxpayer shall take into account, in computing the taxpayer's tax liability under this chapter for any taxable year for which such notice (or a related notice under subsection (c)(2)) would otherwise have been in effect, gain or loss described in subparagraph (A) which would have been reported if such notice had been filed. </text></subparagraph></paragraph><paragraph id="idC7FB9F0FEAE94DF390EBDFEDC917DCED"><enum>(4)</enum><header>Significant owner</header><text>For purposes of this subsection—</text><subparagraph id="id10614C499F6C40DA8BDA3E6CC9F497CD"><enum>(A)</enum><header>In general</header><text>The term <term>significant owner</term> means, with respect to any applicable entity, an applicable taxpayer who, at any time during the applicable taxpayer's taxable year—</text><clause id="id9D92688D59D24FAFBECAADB216FD05E9"><enum>(i)</enum><text> is a 5-percent owner with respect to such entity, or</text></clause><clause id="id476A5EC3511944E4B514AEF0BD77924D"><enum>(ii)</enum><text>holds nontradable interests in such entity with an aggregate applicable value of greater than $50,000,000.</text></clause></subparagraph><subparagraph id="idCF05CA535EF14FD2B5BA52DCEE70B543"><enum>(B)</enum><header>5-percent owner</header><clause id="id141A848DE48F435C86B6E9D73D143895"><enum>(i)</enum><header>In general</header><text>The term <term>5-percent owner</term> mean, with respect to any applicable entity, an applicable taxpayer who owns (or is considered as owning within the meaning of section 318) at least 5 percent of—</text><subclause id="idC85475A6CDF5428D9CB608B1AC0607C7"><enum>(I)</enum><text>in the case of a corporation, the stock (by vote or value) in such corporation, or</text></subclause><subclause id="idF8E8F269990F47B89010E52967C50704"><enum>(II)</enum><text>in the case of an applicable entity other than a corporation, the capital or profits interests in such entity.</text></subclause></clause><clause id="id5F06D243DF3B4313B1CD38E151014D76"><enum>(ii)</enum><header>Constructive ownership rules</header><text>For purposes of this subparagraph—</text><subclause id="idBAC48CDCF6C9461E80BDF185DCB0244A"><enum>(I)</enum><text>subparagraph (C) of section 318(a)(2) shall be applied by substituting <quote>5 percent</quote> for <quote>50 percent</quote>, and</text></subclause><subclause id="id223C4E7ED5184F009C77A286A159F5D9"><enum>(II)</enum><text>in the case of an applicable entity which is not a corporation, ownership in such entity shall be determined in accordance with regulations prescribed by the Secretary which shall be based on principles similar to the principles of section 318 (as modified by subclause (I)).</text></subclause></clause></subparagraph></paragraph></subsection><subsection id="id7954BBB9390B413CBFA6C6B2BC5B54D1"><enum>(c)</enum><header>Additional entity reporting requirements</header><paragraph id="id97EDAEE562B54370ABE6696DE8491098"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (4), an applicable entity for any taxable year shall, at such times and in such manner as the Secretary shall prescribe, report to each applicable taxpayer with respect to which a notice is in effect under subsection (b)(2)(A) or paragraph (2)—</text><subparagraph id="idA1E0307F698141AC9AA9B68149ACC49E"><enum>(A)</enum><text>in the case of tradable covered assets held by such entity, such taxpayer's share of—</text><clause id="id8D35AF3862AA4136B765373313E7346E"><enum>(i)</enum><text>gain or loss determined by the entity under rules similar to the rules under section 491, and</text></clause><clause id="idBFC9626CD30446DE93B7802BF00E5687"><enum>(ii)</enum><text>proper adjustments shall be made in the amount of gain or loss subsequently realized for gain or loss taken into account under clause (i),</text></clause></subparagraph><subparagraph id="idE07E8E2F32FE4FB4B32A824B2FA546BD"><enum>(B)</enum><text>in the case of nontradable covered assets held by such entity—</text><clause id="id9883C6C04970483DA1DEE9198025B6EE"><enum>(i)</enum><text>such person's share of any gain or loss on any applicable transfer during such taxable year of any such asset, and</text></clause><clause id="id9BEF032D180C4BCBA7E10E361BD2D047"><enum>(ii)</enum><text>the holding period in each such asset, and</text></clause></subparagraph><subparagraph id="id08215C38B5C64FA99F8F15326F39478D"><enum>(C)</enum><text>such other information as the Secretary determines necessary to carry out this part.</text></subparagraph></paragraph><paragraph id="id5DC0F7FBD1CA41A3B00297A0147A8F06"><enum>(2)</enum><header>Notice of taxpayers holding indirect interests in other applicable entities</header><subparagraph id="id6AD2A25AD23C45AAADEDED04FF75D839"><enum>(A)</enum><header>In general</header><text>Under rules prescribed by the Secretary, except as provided in subparagraph (B), if an applicable entity in a tier of entities—</text><clause id="id7BB621D4DDA642099D7AC3877EF32328"><enum>(i)</enum><text> receives a notice under subsection (b)(2)(A) with respect to an applicable taxpayer, such entity shall notify each other applicable entity in which such applicable taxpayer holds, by reason of holding a nontradable interest in such entity, a nontradable interest in such other entity that the person holding such interest in such other entity is an applicable taxpayer with respect to which the notice requirements of paragraph (1) apply to such other entity, or</text></clause><clause id="id9C166DA92BF44575B454C780AB901A9D"><enum>(ii)</enum><text>receives a notice under clause (i) or this clause, such entity shall notify each other applicable entity in which the applicable taxpayer holds, by reason of holding an interest in the entity receiving such notice, a nontradable interest in such other entity that the person holding such interest in such other entity is an applicable taxpayer with respect to which the notice requirements of paragraph (1) apply to such other entity.</text></clause><continuation-text continuation-text-level="subparagraph">Any such notice shall remain in effect, and any entity receiving such notice shall treat such taxpayer as an applicable taxpayer, for the period specified by the Secretary. The Secretary may require additional reporting by such entities for purposes of carrying out this clause.</continuation-text></subparagraph><subparagraph id="idDFC15F5F9830429E8F24E6620482E360"><enum>(B)</enum><header>Requirement only applies if applicable taxpayer is significant owner</header><text>An applicable entity shall be required to report under subparagraph (A) to another applicable entity only if the applicable taxpayer is a significant owner (within the meaning of subsection (b)(4)) of such other entity, determined only by taking into account interests in such other entity which such applicable taxpayer holds by reason of its ownership interests in the entity otherwise required to report and such other ownership interests in such other entity as the Secretary may require to be taken into account to prevent the avoidance of the purposes of this part.</text></subparagraph></paragraph><paragraph id="idDA9409347F264BA881B665F3D5EEFD7F" commented="no"><enum>(3)</enum><header>Special rules for disregarded nonrecognition events</header><text>In the case of an applicable transfer of a nontradable covered asset of an applicable entity which is a disregarded nonrecognition event—</text><subparagraph id="idDE4F7BA3522B48A184934E0355C17288" commented="no"><enum>(A)</enum><text>notwithstanding any other provision of this title, gain or loss shall be recognized and taken into account in the taxable year in which the transfer occurs as if the entity had sold the nontradable covered asset for its fair market value immediately before such transfer (or such other value as is determined as of such time under rules prescribed by the Secretary),</text></subparagraph><subparagraph commented="no" id="idA8220D4092954B2BA4CFFC2A28AD31E6"><enum>(B)</enum><text>such entity shall report the amount of gain or loss required to be taken into account under subparagraph (A) to—</text><clause commented="no" id="id8B76C530327745E88702B21628C3AE84"><enum>(i)</enum><text>each applicable taxpayer with respect to which a notice is in effect which such entity has received under subsection (b)(1), and</text></clause><clause commented="no" id="id80540ABF6160454EA3FA49B2627CF461"><enum>(ii)</enum><text>each other applicable entity from which it has received a notice under paragraph (2) with respect to such an applicable taxpayer, and</text></clause></subparagraph><subparagraph id="idAD2B02783C834A75B3EEBA2423E1A66B" commented="no"><enum>(C)</enum><text>proper adjustments shall be made in the amount of gain or loss subsequently realized for gain or loss taken into account under subparagraph (A).</text></subparagraph></paragraph><paragraph id="id9A422B9D01B94CB1A1F6568E6F0AB6AE"><enum>(4)</enum><header>Delay in reporting requirement</header><text>If—</text><subparagraph id="id081954257C2C4253B8E82EAAC3416BEC"><enum>(A)</enum><text>a notice is received by an applicable entity under subsection (b)(2)(A) or paragraph (2) for any taxable year of the entity with respect to any person holding directly (or indirectly through 1 or more nontradable interests) a nontradable interest in such entity, and</text></subparagraph><subparagraph id="idF6269AAE29504AC19CB08F128CBC2A49"><enum>(B)</enum><text>no notice is in effect with respect to such person or any other person for the preceding taxable year,</text></subparagraph><continuation-text continuation-text-level="paragraph">then, except as provided by the Secretary, such notice shall be treated as first taking effect for purposes of this subsection, section 351(h), and section 1031(i) for the taxable year immediately following the taxable year in which the notice is received. This paragraph shall not apply to a notice described in subparagraph (A) received by an applicable entity from a person who was a significant owner (within the meaning of subsection (b)(4)) of such entity (or any predecessor entity) on the date of the enactment of this part. </continuation-text></paragraph><paragraph id="idE98B5F47AB38471F888B80B6DCFFE402"><enum>(5)</enum><header>Secretarial authority</header><text>In prescribing rules for the application of this subsection, the Secretary may provide—</text><subparagraph id="id49728F642B4C45FE97B5CE6DB32B706C"><enum>(A)</enum><text>simplified methods for applicable entities to meet the requirements of this subsection, including the aggregation of gains and losses where appropriate,</text></subparagraph><subparagraph id="idCAD13CCA6FEC4DEF91E5E4E8195BAC07"><enum>(B)</enum><text>rules for determining a holder's share of amounts required to be reported by an applicable entity under paragraph (1), and</text></subparagraph><subparagraph id="id43CA4823773C4DEC9F84AF8EF5C9BD53"><enum>(C)</enum><text> any rules necessary to prevent the avoidance of the purposes of this section, including through the delay in the reporting requirement under paragraph (4).</text></subparagraph></paragraph></subsection><subsection id="idE2935036949C4F54A2E73FB5499A587E"><enum>(d)</enum><header>Definitions and rules relating to application of section</header><text>For purposes of this part—</text><paragraph id="idB041C79D095748B4A1BF4542A1FDFFB6"><enum>(1)</enum><header>Applicable entity</header><text>The term <term>applicable entity</term> means any— </text><subparagraph id="id9D75F9F23FD84CA19590742FF38C69C3"><enum>(A)</enum><text>partnership,</text></subparagraph><subparagraph id="id66FFA28A11F04E7794F2836BA1DFA4EE"><enum>(B)</enum><text>S corporation, or</text></subparagraph><subparagraph id="id5BB6B7326D984F03973E345AC612F420"><enum>(C)</enum><text>other pass-through entity specified in regulations or guidance prescribed by the Secretary.</text></subparagraph></paragraph><paragraph id="id03929562E922471CA90C487A50479B3D"><enum>(2)</enum><header>Election to treat entity as applicable taxpayer for taxable events involving tradable assets</header><text>If an applicable entity elects the application of this paragraph for any taxable year—</text><subparagraph id="ide4447d0fd6d64faca2998d3b1a725f03"><enum>(A)</enum><text>this section shall not apply with respect to any gain or loss in connection with a taxable event involving any tradable covered asset held directly (or indirectly through 1 or more nontradable interests) by such entity, and</text></subparagraph><subparagraph id="ida4211b5e05604dc0b1e7d03da054d99d"><enum>(B)</enum><text>such entity shall be treated as an applicable taxpayer for purposes of applying sections 490(1) and 491 to such taxable event.</text></subparagraph><continuation-text continuation-text-level="paragraph">Such an election shall be made at such time and in such manner as the Secretary may prescribe and, once made, shall be irrevocable without the consent of the Secretary.</continuation-text></paragraph></subsection><subsection id="id4FB09A5B123345B286AC434FBE9BF7F9"><enum>(e)</enum><header>Nontradable interest</header><text>For purposes of this part, the term <term>nontradable interest</term> means any ownership interest in an applicable entity which is a nontradable covered asset.</text></subsection><subsection id="id131F38DD0B7647919C2F6F336EB4E1F1"><enum>(f)</enum><header>Regulations and guidance</header><text>The Secretary shall prescribe such regulations and guidance as are necessary to carry out the provisions of this section, including regulations or guidance necessary—</text><paragraph id="idCC4BDA10A8384DE197C4C8859186B8EB"><enum>(1)</enum><text>to prevent the use of pass-through entities to avoid the purposes of this part, and</text></paragraph><paragraph id="idF51E25FBBBF54A8D86916E8970F5F6CF"><enum>(2)</enum><text>to simplify the application of this part.</text></paragraph></subsection></section><section id="id3F57F206F3A94B4BBAF157EB01613A40" commented="no"><enum>494.</enum><header>Treatment of gifts, bequests, and transfers in trust</header><subsection commented="no" id="id1E7B33743B394DF69A800383AEA30718"><enum>(a)</enum><header>In general</header><paragraph commented="no" id="id625DFFBA53CC4B9A848D922351CE6D23"><enum>(1)</enum><header>Deemed sale</header><text>If any person described in paragraph (3) transfers any covered asset by gift, upon death, or in trust, such covered asset shall be treated as sold by such person for its fair market value to the transferee on the date of such gift, death, or transfer.</text></paragraph><paragraph commented="no" id="id89D033BED65C4E0E95F2AE6EAA5763C1"><enum>(2)</enum><header>No recognition for losses on transfers by gift or in trust</header><subparagraph commented="no" id="idB5F5915285124F409ED6D74C12D50E14"><enum>(A)</enum><header>In general</header><text>No loss shall be recognized with respect to any covered asset which is treated as sold under subsection (a) by reason of a transfer by gift or in trust.</text></subparagraph><subparagraph commented="no" id="id7C11B465899841E48CDBC59117FE38A6"><enum>(B)</enum><header>Amount of gain for transferee</header><text>If a loss is not recognized by the transferor by reason of subparagraph (A) and the transferee sells or otherwise disposes of the covered asset (or of other property the basis of which in the taxpayer's hands is determined directly or indirectly by reference to such property) at a gain, then such gain shall be recognized only to the extent that it exceeds so much of such loss as is properly allocable to the covered asset sold or otherwise disposed of by the transferee. </text></subparagraph></paragraph><paragraph commented="no" id="id4607AEA23A4B45B7807F3A9D37AE4F39"><enum>(3)</enum><header>Person described</header><text>A person is described in this section if such person is—</text><subparagraph commented="no" id="idE0CA0379707943F3B12F8C7935053E31"><enum>(A)</enum><text>an individual who is an applicable taxpayer for the taxable year in which the transfer is made, or</text></subparagraph><subparagraph commented="no" id="idF67233F59449457EAEE7E2B0E2464EE6"><enum>(B)</enum><text>an applicable entity with respect to which a notice received by the entity under subsection (b)(2)(A) or (c)(2) of section 493 is in effect at the time of such transfer.</text></subparagraph></paragraph></subsection><subsection commented="no" id="id31AAEDF832F14BE5B3FDA645AC299B15"><enum>(b)</enum><header>Special rules for certain grantor trusts</header><paragraph id="idbab3037a3a9048b885b9dadde74db39a"><enum>(1)</enum><header>Transfers of nontradable covered assets into certain grantor trusts</header><text>For purposes of applying this section to any transfer in trust, except as otherwise provided in this paragraph, any transfer of a nontradable covered asset from the person treated as the owner of an applicable grantor trust (other than a grantor trust which is a wholly revocable trust) to such trust shall be treated as a transfer to which subsection (a) applies.</text></paragraph><paragraph commented="no" id="id2D98C1785C874BA49D03480D66471DEA"><enum>(2)</enum><header>Deemed distributions</header><text>In the case of any applicable grantor trust, any property held by such trust shall be treated as transferred by the owner in a transfer to which subsection (a) applies—</text><subparagraph commented="no" id="idCE23789280A84CB0B9B6420D3B64D42B"><enum>(A)</enum><text>on any date that—</text><clause commented="no" id="idE34C2E1321E844DE90E2B223E4CA7149"><enum>(i)</enum><text>the owner ceases to be treated as the owner under this chapter, </text></clause><clause commented="no" id="idD826D56AEDE14A8AAC7A9673B869ADB4"><enum>(ii)</enum><text>such property is distributed to any person other than the owner, or</text></clause><clause commented="no" id="idEB245E2CDC6E4780AAEBDF23E322E1A8"><enum>(iii)</enum><text>the property would no longer be included in the owner’s gross estate under chapter 11, or</text></clause></subparagraph><subparagraph commented="no" id="id6421466647F1412E920FA9BCACBE840D"><enum>(B)</enum><text>on the date of the death of the owner.</text></subparagraph></paragraph><paragraph commented="no" id="id56B4539F1C5641EE92F8F85EFF3FA246"><enum>(3)</enum><header>Applicable grantor trust</header><text>For purposes of this subsection—</text><subparagraph commented="no" id="id243A00A7A4BF4CCDBA43A6C24B25F1A2"><enum>(A)</enum><header>In general</header><text>The term <term>applicable grantor trust</term> means the portion of any trust with respect to which an applicable taxpayer is considered the owner under subpart E of part I of subchapter J.</text></subparagraph><subparagraph id="id6b7f36aae2af4588815520b87aea2abe"><enum>(B)</enum><header>Exceptions</header><text>The Secretary shall provide for appropriate exceptions to the treatment of categories of trusts as applicable grantor trusts under subparagraph (A), including arrangements which are ordinarily used in the course of a trade or business, employee benefit arrangements, and arrangements for securitization transactions. </text></subparagraph></paragraph></subsection><subsection commented="no" id="idE7E598C13062483E8A74D5568AD73FCD"><enum>(c)</enum><header>Exceptions</header><paragraph commented="no" id="idF9121C92D8D9411AB7B5F8896DCAA87D"><enum>(1)</enum><header>Spousal exception</header><subparagraph commented="no" id="id63CF3E41039C43F0B54D7EBFC4114EF4"><enum>(A)</enum><header>In general</header><text>Subsection (a) shall not apply to any transfer if such transfer—</text><clause commented="no" id="id4EB15BA1FF7049F687E7B0B432A136DC"><enum>(i)</enum><text>is—</text><subclause commented="no" id="id25E7C8AD09D948C095A391BCEB8596E0"><enum>(I)</enum><text>made to the spouse or the surviving spouse of the transferor, or</text></subclause><subclause commented="no" id="idED6CB108FD374F278CA8115378F06DEA"><enum>(II)</enum><text>made to a former spouse of the transferor if the transfer is incident to divorce, or</text></subclause></clause><clause commented="no" id="id5F88EC5E060141ACB1CD50936AD9E9F9"><enum>(ii)</enum><text>is a transfer of qualified terminable interest property or of property to which section 2056(b)(5) or 2523(e) applies.</text></clause></subparagraph><subparagraph commented="no" id="id14C227B1119B413A885624A413BA1A24"><enum>(B)</enum><header>Certain remainder interests treated as transferred by spouse</header><text>Property described in subparagraph (A)(ii) shall be treated as sold by the spouse or surviving spouse on the earlier of the date of the disposition of such property by such spouse or surviving spouse or the date of the death of such spouse or surviving spouse.</text></subparagraph><subparagraph commented="no" id="idDF659448D2664B96969B932EEA6CD572"><enum>(C)</enum><header>Qualified terminable interest property</header><text>For purposes of this paragraph, the term <term>qualified terminable interest property</term> means any property described in section 2056(b)(7) or 2523(f)(2).</text></subparagraph><subparagraph id="idED90830D89E5497997F7D47DEDE406F3" commented="no"><enum>(D)</enum><header>Disallowance of spousal exception where spouse or surviving spouse not United States citizen or long-term resident</header><clause commented="no" id="idFF6D9A30C54A4E6DAFC01371429AAEFD"><enum>(i)</enum><header>In general</header><text>Subparagraph (A) shall not apply if the spouse or surviving spouse of the decedent is not a citizen or long-term resident of the United States.</text></clause><clause commented="no" id="idEB93542E9C45468EB056BCBF0F4E0559"><enum>(ii)</enum><header>Long-term resident</header><text>For purposes of clause (i), the term <term>long-term resident</term> means any individual (other than a citizen of the United States) who is a lawful permanent resident of the United States—</text><subclause commented="no" id="idA25E6F94E8834E389F23E7DBF03BC3BA"><enum>(I)</enum><text>for the taxable year in which the transfer described in subsection (a) occurs, and</text></subclause><subclause commented="no" id="id84EC395F601F43A19524FEACB32F8FC1"><enum>(II)</enum><text>in at least 8 taxable years during the period of 15 taxable years ending with the taxable year during which the transfer described in subsection (a) or (b)(1) occurs. </text></subclause><continuation-text continuation-text-level="clause" commented="no">For purposes of the preceding sentence, an individual shall not be treated as a lawful permanent resident for any taxable year if such individual is treated as a resident of a foreign country for the taxable year under the provisions of a tax treaty between the United States and the foreign country and does not waive the benefits of such treaty applicable to residents of the foreign country. </continuation-text></clause></subparagraph></paragraph><paragraph commented="no" id="id3E97EBE4AACD43A5AE83D2976E3E1584"><enum>(2)</enum><header>Gifts and bequests to charity</header><subparagraph commented="no" id="idEF807B6D6CA84E3BA5AC70BB4C743619"><enum>(A)</enum><header>In general</header><text>Subsection (a) shall not apply to any transfer if such transfer is made to or for the use of an organization described in section 170(c).</text></subparagraph><subparagraph commented="no" id="id9ED571B47D1E452784C816FBCC98271C"><enum>(B)</enum><header>Special rule for split-interest trusts</header><text>In the case of any transfer—</text><clause id="idA672603D02314D72AA60D024C7C11F3F" commented="no"><enum>(i)</enum><text>to a charitable remainder annuity trust (as defined in section 664) or a charitable remainder unitrust (as defined in section 664), or</text></clause><clause commented="no" id="id1B7E3CB1C0DB4B06B09E871878AD9A9C"><enum>(ii)</enum><text>of an interest described in section 170(f)(2)(B), </text></clause><continuation-text continuation-text-level="subparagraph" commented="no">subsection (a) shall not apply to the portion of such transfer which is to or for the use of an organization described in section 170(c).</continuation-text></subparagraph><subparagraph id="id00D04B4FA383460B82ED27D482FB0DDE"><enum>(C)</enum><header>Special rule for pooled income funds</header><text>In the case of any transfer to a pooled income fund (as defined in section 642(c)(5)), subsection (a) shall not apply to the portion of such transfer which is to or for the use of an organization described in section 170(b)(1)(A) (other than in clauses (vii) or (viii)).</text></subparagraph></paragraph><paragraph commented="no" id="id852440DE9F6D466C9ECFD5F0C2FE4E63"><enum>(3)</enum><header>Qualified disability trusts and cemetery perpetual care funds</header><text>Subsection (a) shall not apply to transfers to any qualified disability trust (as defined in section 642(b)(2)(C)(ii)) or to transfers to any cemetery perpetual care fund described in section 642(i).</text></paragraph></subsection><subsection commented="no" id="id1CD01E546DA044A48BB4F0FD95A9EDA9"><enum>(d)</enum><header>Basis of transferee</header><paragraph commented="no" id="idC987DDEBBA034B5F8D5CCEBEBCF4D150"><enum>(1)</enum><header>In general</header><text>Notwithstanding sections 1014 and 1015, to the extent that subsection (a) applies to any transfer of property—</text><subparagraph commented="no" id="id53234B8DDE5E449DB70A8163D38A9E5F"><enum>(A)</enum><text>except as provided in subparagraph (B), the basis of the property in the hands of the transferee shall be the fair market value of the property (consistent with the amount taken into account by the transferor under subsection (a)), and</text></subparagraph><subparagraph commented="no" id="id1C354858A8E14FA09B00EADE905B8857"><enum>(B)</enum><text>in the case such transfer is a transfer upon death to any individual described in subsection (c)(1)(A)(i), the basis of the property in the hands of the transferee shall be the same as it would be in the hands of the transferor, except that if such basis (adjusted for the period before the date of the transfer as provided in section 1016) is greater than the fair market value of the property at the time of death, then for the purpose of determining loss the basis shall be such fair market value.</text></subparagraph></paragraph><paragraph commented="no" id="id53FB0EAC33764D318999DE119D76450A"><enum>(2)</enum><header>Consistent basis rules for transfers by death</header><text>In the case of any transfer upon death, rules similar to section 1014(f) shall apply for purposes of this section.</text></paragraph></subsection><subsection commented="no" id="idE5477507AE764077BC8F7051939C199A"><enum>(e)</enum><header>Application of depreciation recapture rules</header><text>Paragraphs (1) and (2) of section 1245(b) and paragraphs (1) and (2) of section 1250(d) shall not apply to any property treated as sold by reason of subsection (a). </text></subsection></section></subpart><subpart id="idE65B6CA810FD4A099B8C99367775CE20" style="OLC"><enum>B</enum><header>Definitions and rules relating to applicable taxpayers</header><toc><toc-entry level="section" bold="off">Sec. 495. Applicable taxpayer defined.</toc-entry><toc-entry level="section" bold="off">Sec. 496. Special rules for taxpayers entering or changing status as applicable taxpayers.</toc-entry></toc><section id="id701F1DEC116440D09E0363C3B33767C0"><enum>495.</enum><header>Applicable taxpayer defined</header><subsection id="idA6E33B06479E468FBF6AE25E916A2AFB"><enum>(a)</enum><header>In general</header><text>For purposes of this part—</text><paragraph id="id0b5bad08658a45b2a54377960c7e2def"><enum>(1)</enum><header>In general</header><text>The term <term>applicable taxpayer</term> means, with respect to any taxable year, any taxpayer—</text><subparagraph id="id86ae474eeec44f45a585ffed2836b243"><enum>(A)</enum><text>which is an individual who met either the income test of paragraph (2) or the asset test of paragraph (3) for each of the 3 immediately preceding taxable years (including taxable years beginning before the date of the enactment of this part which are included in any such 3-taxable year period), or</text></subparagraph><subparagraph id="id9C51A731C51C4A9F86ADE2F0DFCAF39B" commented="no"><enum>(B)</enum><text>which is—</text><clause id="idD81FFA267D834137B6857D8C13C097E7" commented="no"><enum>(i)</enum><text>an applicable trust, or</text></clause><clause id="idA29FD70C04DE4D2889F77417256A5257" commented="no"><enum>(ii)</enum><text>the estate of an individual who was an applicable taxpayer for any taxable year during the 4-taxable year period ending with the taxable year in which the individual died.</text></clause></subparagraph></paragraph><paragraph id="id9D1779F381A94FDB8E022B35FFA3097C"><enum>(2)</enum><header>Income test</header><text>The requirements of this paragraph are met for any taxable year if the applicable adjusted gross income of the taxpayer for the taxable year exceeds $100,000,000 ($50,000,000 in the case of a married individual filing separately).</text></paragraph><paragraph id="idA969277AF69C4375927F736B1E5A7E74"><enum>(3)</enum><header>Asset test</header><text>The requirements of this paragraph are met for any taxable year if the aggregate applicable value of all tradable and nontradable covered assets held by the taxpayer as of the close of the taxable year exceeds $1,000,000,000 ($500,000,000 in the case of a married individual filing separately).</text></paragraph><paragraph id="idF821E763291842E39E5D754BC1470541"><enum>(4)</enum><header>Special rules relating to applicable taxpayer status</header><subparagraph id="id454A022794444D718F21D9CB6B26FDB8"><enum>(A)</enum><header>Termination of status of individual taxpayers</header><text>A taxpayer who is treated as an applicable taxpayer under paragraph (1)(A) for any taxable year shall continue to be so treated until the first taxable year with respect to which—</text><clause id="id0BD4E891899942B0A3706A6B409D65B8"><enum>(i)</enum><text>the taxpayer does not, for each of the 3 taxable years immediately preceding such taxable year, meet either—</text><subclause id="id6D106A08C2224E31A1A8C88308A80FD5"><enum>(I)</enum><text>the income test of paragraph (2) in effect for such preceding taxable year, or</text></subclause><subclause id="idC993CB2280B7460D94B29D972941F84E"><enum>(II)</enum><text>the asset test of paragraph (3) in effect for such preceding taxable year,</text></subclause><continuation-text continuation-text-level="clause">except that each such paragraph shall be applied for purposes of this clause by substituting an amount equal to one-half of the dollar amount otherwise in effect for such taxpayer under such paragraph for each such preceding taxable year for such dollar amount, and</continuation-text></clause><clause id="id9E7F1AC5F13549BE9E9BEDB6039E8CC2"><enum>(ii)</enum><text>the taxpayer elects, in such manner and form and at such time as the Secretary may prescribe, not to be so treated for such first taxable year.</text></clause></subparagraph><subparagraph id="idA80E0765E2904A828E7FABC40866FC45"><enum>(B)</enum><header>Earlier termination election of applicable taxpayer status for divorced individuals</header><text>If— </text><clause id="id43B355DD4D6749CCB13FE0A219326273"><enum>(i)</enum><text>an applicable taxpayer ceases to be a married individual by reason of a decree of divorce or separate maintenance issued during any taxable year, and</text></clause><clause id="id55A8E99B991E4193A00924A943BABE2D"><enum>(ii)</enum><text>such taxpayer, for the first taxable year following the taxable year described in clause (i), does not meet either—</text><subclause id="id7FA8D9AE7C5A4186A19FA125E0AA65C6"><enum>(I)</enum><text>the income test of paragraph (2), except that such paragraph shall be applied for purposes of this subclause by substituting <quote>$1,000,000</quote> for the dollar amount otherwise in effect for such taxpayer under such paragraph, or</text></subclause><subclause id="id733CD4852F734B52A837F7BA4C32FE61"><enum>(II)</enum><text>the asset test of paragraph (3), except that such paragraph shall be applied for purposes of this subclause by substituting <quote>$10,000,000</quote> for the dollar amount otherwise in effect for such taxpayer under such paragraph, </text></subclause></clause><continuation-text continuation-text-level="subparagraph">then such taxpayer may elect, in such manner and form and at such time as the Secretary may prescribe, not to be treated as an applicable taxpayer beginning with such first taxable year.</continuation-text></subparagraph><subparagraph id="id9FC5C414450040538C4CD28C67731A27"><enum>(C)</enum><header>Election</header><text>An election under subparagraph (A) or (B)—</text><clause id="id503B3582923A4178B54217CC4FB800A2"><enum>(i)</enum><text>shall be made with the taxpayer's return of tax for the taxable year to which such election first applies (or such other time as the Secretary shall prescribe) and shall be in such form and manner as the Secretary may prescribe, and</text></clause><clause id="id93A8B350541F4E009B5DCD061F663EAA"><enum>(ii)</enum><text>shall apply to such first taxable year and all subsequent taxable years until the first taxable year for which the taxpayer is again treated as an applicable taxpayer by reason of meeting the requirements of paragraph (1)(A).</text></clause></subparagraph></paragraph><paragraph id="id0710DF04C8D54AB480461F84A49CDFB0"><enum>(5)</enum><header>Special rules for married individuals</header><subparagraph id="idC3530C58601D4057918C4F17CA5C17DE"><enum>(A)</enum><header>Applicable taxpayers becoming married individuals</header><text>If an individual was an applicable taxpayer for the taxable year before the individual became a married individual (within the meaning of section 7703), such individual and the individual's spouse shall be treated as applicable taxpayers for such taxable year of marriage and subsequent taxable years until such status is otherwise terminated under this section.</text></subparagraph><subparagraph id="idE7F86489F39A462988FD11B61111029C"><enum>(B)</enum><header>Married individuals filing separately</header><text>If a married individual filing separately is treated as an applicable taxpayer for any taxable year, such individual's spouse shall be treated as an applicable taxpayer for such taxable year.</text></subparagraph><subparagraph id="id539515B6D43748CDBE3C1282B8EC8A8D"><enum>(C)</enum><header>First-year elections</header><text>Under rules prescribed by the Secretary, if an individual is first treated as an applicable taxpayer for a taxable year by reason of the application of subparagraph (A) or (B), section 496 shall apply to such taxpayer for such first taxable year only with respect to assets held separately by such individual unless such taxable year is also the first taxable year for which the individual's spouse is an applicable taxpayer. </text></subparagraph></paragraph><paragraph id="id05CFB0A3524442889717133A218423EC"><enum>(6)</enum><header>Regulatory authority</header><text>The Secretary shall prescribe such regulations and guidance as may be necessary to carry out the provisions of this subsection, including—</text><subparagraph id="id85C0CAD43085491ABFE123CB5B329362"><enum>(A)</enum><text>rules waiving the application of paragraph (5)(B) in cases where the Secretary determines equitable relief is appropriate,</text></subparagraph><subparagraph id="idC08CFAED38F54A918C7C4B1C5569C90C"><enum>(B)</enum><text>rules providing for the application of this subsection in cases where the filing status of a taxpayer changes between any taxable year and any of the 3 immediately preceding taxable years, including the first taxable year in which a taxpayer files a joint return after becoming married, and</text></subparagraph><subparagraph id="id84D7652EDA8D4E5495F3EA4AD5DC497C"><enum>(C)</enum><text>rules requiring such information reporting as the Secretary determines necessary to determine whether a taxpayer is an applicable taxpayer.</text></subparagraph></paragraph></subsection><subsection id="id2D3AAA8510FC422384F8DC5E708A7EFF"><enum>(b)</enum><header>Applicable adjusted gross income</header><text>For purposes of this section, the term <term>applicable adjusted gross income</term> means modified adjusted gross income as defined in section 36B(d)(2)(B), except that—</text><paragraph id="id11402891805E4F4F8D01A68506643E84"><enum>(1)</enum><text>clause (i) thereof shall be applied by substituting <quote>sections 911, 931, and 933</quote> for <quote>section 911</quote>, and</text></paragraph><paragraph id="id8A7A1B6045034E59ACE7999CDA6884BF"><enum>(2)</enum><text>in the case of a trust, no deduction under section 651 or 661 shall be allowed.</text></paragraph></subsection><subsection id="id0BAAF7758BE5468DB63E37E70D35334C"><enum>(c)</enum><header>Applicable trust</header><text>For purposes of this section—</text><paragraph id="id69A51E774B5A44AB908DAC9DD322F8E6"><enum>(1)</enum><header>In general</header><text>The term <term>applicable trust</term> means a trust (other than a grantor trust) which, for each of the 3 taxable years immediately preceding such taxable year (including taxable years beginning before the date of the enactment of this part which are included in any such 3-taxable year period), meets either— </text><subparagraph id="id5A96833C1CE9430D82DCF7BBE6C52690"><enum>(A)</enum><text>the income test of subsection (a)(2), except that such subsection shall be applied for purposes of this subparagraph by substituting <quote>$10,000,000</quote> for the dollar amount otherwise in effect for such taxable year under such paragraph, or</text></subparagraph><subparagraph id="id3764C002EC534D5BBCEFDB4721E8508A"><enum>(B)</enum><text>the asset test of subsection (a)(3), except that such subsection shall be applied for purposes of this subparagraph by substituting <quote>$100,000,000</quote> for the dollar amount otherwise in effect for such taxable year under such paragraph.</text></subparagraph></paragraph><paragraph id="idDE0B60E1365E45079580255F2415BD01"><enum>(2)</enum><header>Exceptions</header><text>Such term shall not include—</text><subparagraph id="id7a1b2dd31832433fb67978cae9477a37"><enum>(A)</enum><text>a qualified disability trust (as defined in section 642(b)(2)(C)(ii)),</text></subparagraph><subparagraph id="iddb5e4500d1e748f79b3cc2767e19b919"><enum>(B)</enum><text>any portion of a trust which consists of property permanently set aside for the exclusive use of an organization described in section 170(c),</text></subparagraph><subparagraph id="id98453e1e90fc451a948150eab8eed634"><enum>(C)</enum><text>a pooled income fund (as defined in section 642(c)(5)) or a cemetery perpetual care fund (as described in section 642(i)),</text></subparagraph><subparagraph id="idC0340E643BEE49BA9AC040EFC2BB07E2"><enum>(D)</enum><text>a settlement trust (as defined in section 646), </text></subparagraph><subparagraph id="id3D3B39765C2C436BBAEEC76ADDEA1B57" commented="no"><enum>(E)</enum><text>any charitable remainder annuity trust (as defined in section 664),</text></subparagraph><subparagraph id="id516B01DA38AB463492456E04352391B8"><enum>(F)</enum><text>any charitable remainder unitrust (as defined in section 664), or</text></subparagraph><subparagraph id="id77f740981b8e4eeaa237c3c84838dab6"><enum>(G)</enum><text>any other category of trust identified in regulations or guidance provided by the Secretary.</text></subparagraph></paragraph><paragraph id="idDB429D7B2BCF46A8BEDDC0CC5D8F409A"><enum>(3)</enum><header>Grantor trusts</header><subparagraph id="id9E1DD6F530084AE7A626A2C613A1CBED"><enum>(A)</enum><header>Grantor trust defined</header><text>For purposes of this section, the term <term>grantor trust</term> means any portion of a trust with respect to which the grantor or any other person is considered the owner under subpart E of part I of subchapter J.</text></subparagraph><subparagraph id="id4AD4CCE0A38F4826AAE6557C459F6E15"><enum>(B)</enum><header>Assets of grantor trust taken into account</header><text>For purposes of subsection (a)(1)(A), the assets of a grantor trust shall be included in the assets of—</text><clause commented="no" display-inline="no-display-inline" id="idce7f75ee6e53441e84f5ad4ea3bbd5c3"><enum>(i)</enum><text display-inline="yes-display-inline">the grantor of such trust if the grantor is considered the owner of such assets, and</text></clause><clause commented="no" display-inline="no-display-inline" id="id5bb3868e3ca64a8faea464660675e5b5"><enum>(ii)</enum><text>if a person other than the grantor is considered the owner of such assets, both the grantor and such person.</text></clause></subparagraph></paragraph></subsection><subsection id="idbf07cc3aff6a47d7b89e13c76faba6bf"><enum>(d)</enum><header>Special rules for foreign persons and expatriates</header><text>For purposes of this part—</text><paragraph commented="no" display-inline="no-display-inline" id="ide1702bb851574065bf257c1ede15334b"><enum>(1)</enum><header>Nonresident alien individuals</header><text display-inline="yes-display-inline">The following rules shall apply in determining whether a nonresident alien individual is an applicable taxpayer:</text><subparagraph commented="no" display-inline="no-display-inline" id="id3f749b86595e4e6eace40855b0d0c2e0"><enum>(A)</enum><header>Income test</header><text display-inline="yes-display-inline">For purposes of the income test under subsection (a)(2)—</text><clause commented="no" display-inline="no-display-inline" id="id09900e72df5d4c16b2941509476e630f"><enum>(i)</enum><text>such subsection shall be applied for purposes of this subparagraph by substituting <quote>$50,000,000</quote> for the dollar amount otherwise in effect for such taxable year under such paragraph, and</text></clause><clause commented="no" display-inline="no-display-inline" id="ide68e39446eb040a1b93cf0404c1eecfd"><enum>(ii)</enum><text display-inline="yes-display-inline">the applicable adjusted gross income of such individual shall be equal to the taxable income of such individual, determined by only taking into account items of income, gain, deduction, and loss which are effectively connected with the conduct of trades or businesses within the United States.</text></clause></subparagraph><subparagraph id="id7be4cea4e1314a178114231bfaa279b2"><enum>(B)</enum><header>Asset test</header><text>For purposes of the asset test under subsection (a)(3)—</text><clause commented="no" display-inline="no-display-inline" id="ide44f9a4067404db98237ce50081d778e"><enum>(i)</enum><text>such subsection shall be applied for purposes of this subparagraph by substituting <quote>$500,000,000</quote> for the dollar amount otherwise in effect for such taxable year under such paragraph, and</text></clause><clause commented="no" display-inline="no-display-inline" id="idefdc11adf06b454a80d29fa43c5fef66"><enum>(ii)</enum><text display-inline="yes-display-inline">only assets which produce income described in subparagraph (A) shall be taken into account.</text></clause></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="ida61464ee84b3444295c138acb0be7614"><enum>(2)</enum><header>Expatriates</header><subparagraph commented="no" display-inline="no-display-inline" id="id8abacd35c6ff45e595c5d4ccd6fcc4cb"><enum>(A)</enum><header display-inline="yes-display-inline">In general</header><text>If, for the taxable year which includes a covered expatriate's expatriation date, such expatriate—</text><clause commented="no" display-inline="no-display-inline" id="id37c3a75e719c4ccd8a84b202f311d8b3"><enum>(i)</enum><text display-inline="yes-display-inline">was an applicable taxpayer (without regard to this paragraph), or</text></clause><clause commented="no" display-inline="no-display-inline" id="id0563d086d7b34831994d599ae3d86843"><enum>(ii) </enum><text>is an applicable taxpayer under the rules of subparagraph (B),</text></clause><continuation-text continuation-text-level="subparagraph">such expatriate shall be treated as an applicable taxpayer during each of the taxable years during the 10-taxable-year period beginning with such taxable year (and such status shall not be terminated during such period by reason of any other provision of this part).</continuation-text></subparagraph><subparagraph id="id65606a37276a43e5bd75997d1e6b5510"><enum>(B)</enum><header>Special rules for determining status</header><text>For purposes of subparagraph (A)(ii), a covered expatriate not otherwise treated as an applicable taxpayer shall be treated as an applicable taxpayer if, during any of the 5 taxable years immediately preceding the taxable year which includes the covered expatriate's expatriation date (including taxable years beginning before the date of the enactment of this part which are included in any such 5-taxable year period), the expatriate meets either—</text><clause id="id44E32AE5620B4F7C9FABC0D22EB35E98"><enum>(i)</enum><text>the income test of subsection (a)(2), except that such subsection shall be applied for purposes of this subparagraph by substituting <quote>$50,000,000</quote> for the dollar amount otherwise in effect for such taxable year under such paragraph, or</text></clause><clause id="id3580BFD5A03745F8A175D82A1216AFC4"><enum>(ii)</enum><text>the asset test of subsection (a)(3), except that such subsection shall be applied for purposes of this subparagraph by substituting <quote>$500,000,000</quote> for the dollar amount otherwise in effect for such taxable year under such paragraph.</text></clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idd0441730a7d84b1f9b92ab6b780bac21"><enum>(C)</enum><header>Definitions</header><text display-inline="yes-display-inline">Any term used in this paragraph which is also used in section 877A shall have the same meaning as when used in such section.</text></subparagraph></paragraph></subsection></section><section id="idC7891D0C940A4502A82D5B10EB65B88F"><enum>496.</enum><header>Special rules for taxpayers entering or changing status as applicable taxpayers</header><subsection id="id259EA3B80923468EB68C832C2F80B8B6"><enum>(a)</enum><header>Initial treatment as applicable taxpayer</header><paragraph id="id4FC64EC9E85448A3B326F53C3B784586"><enum>(1)</enum><header>In general</header><text>In the case of the first taxable year for which a taxpayer is an applicable taxpayer—</text><subparagraph id="idE6DB176211F2473B80926358BE9527B9"><enum>(A)</enum><text>the taxpayer may make the election under paragraph (3) with respect to nontradable covered assets, and</text></subparagraph><subparagraph id="id1206863DCB3C41F9929A88EF827C38B0"><enum>(B)</enum><text>if the taxpayer elects the application of this subparagraph, the net first-year tax liability of the taxpayer for such taxable year shall be payable in 5 equal annual installments over the 5-taxable year period beginning with such taxable year.</text></subparagraph></paragraph><paragraph id="idDA6F5B00679848F19E7832CF0E55A746"><enum>(2)</enum><header>Net first-year tax liability</header><text>For purposes of this section—</text><subparagraph id="id9A2C5A0B13264A39A3C8BBFA719C6345"><enum>(A)</enum><header>In general</header><text>The term <term>net first-year tax liability</term> means, with respect to the first taxable year described in paragraph (1), the excess (if any) of— </text><clause id="id26F9979030CB44EA9740B5DDF57D471A"><enum>(i)</enum><text>such taxpayer’s net income tax for such taxable year, over</text></clause><clause id="id0E2BD5EB927D451A959AB6F073CCE148"><enum>(ii)</enum><text>such taxpayer’s net income tax for such taxable year determined without regard to gain or loss of the taxpayer taken into account for such taxable year by reason of a taxable event described in section 491(b)(1).</text></clause></subparagraph><subparagraph id="id06C0514266C748EAA807427D4D98CA89"><enum>(B)</enum><header>Net income tax</header><text>The term <term>net income tax</term> means the regular tax liability reduced by the credits allowed under subparts A, B, and D of part IV of subchapter A. </text></subparagraph></paragraph><paragraph id="id93D64C828DAA4501AEADB8D854922EE6"><enum>(3)</enum><header>Election to pay and defer tax on nontradable assets</header><subparagraph id="idA4CD3C10B1CE4CE38B7068AD07F5C8A7"><enum>(A)</enum><header>In general</header><text>Except as provided in subparagraph (C), a taxpayer may elect to treat any nontradable covered asset held by the taxpayer as of the end of the first taxable year described in paragraph (1) as a tradable covered asset for purposes of applying section 491(b)(1) and this subsection.</text></subparagraph><subparagraph id="idC167C6710D9C4598AA4CF4106882CC68"><enum>(B)</enum><header>Determination of gain</header><clause id="id01E56E8A18D84B1EAF7EDB680A631DFF"><enum>(i)</enum><header>In general</header><text>For purposes of applying section 491(a)(1)(A), the fair market value of any asset with respect to which an election is in effect under subparagraph (A) shall be the amount specified by the taxpayer in such election, except that such value may not, unless otherwise provided by the Secretary, be less than the taxpayer's adjusted basis in such asset as of the end of the first taxable year described in paragraph (1).</text></clause><clause id="id8ED4A82B020C437E9CF0853AC0EB1651"><enum>(ii)</enum><header>No deductions or credits for basis increases</header><text>If there is any increase under this part in the taxpayer's adjusted basis of any asset by reason of an election under this paragraph, no deduction or credit shall be allowed under this title with respect to the portion of such adjusted basis attributable to such increase.</text></clause></subparagraph><subparagraph id="id121D5E693F08448E84E99E0BA304FB87"><enum>(C)</enum><header>Only significant owner of applicable entity may elect</header><text>In the case of a nontradable covered asset which is a nontradable interest in an applicable entity, an applicable taxpayer may make an election under subparagraph (A) with respect to such asset only if such taxpayer is a significant owner (as defined in section 493(b)(4)(A)) of such entity with respect to whom a notice is in effect under section 493(b)(2)(A) for the taxable year for which the election is being made.</text></subparagraph></paragraph><paragraph id="idD4C011AA54BE4213AB1E8ED1ADD7249A"><enum>(4)</enum><header>Special rule where delay in reporting by applicable entity</header><subparagraph id="id77A34398FBCA456CAB5BD1688CE4BCEF"><enum>(A)</enum><header>In general</header><text>If—</text><clause id="idF55F83A8222A4363BFF0525F04F2A5B7"><enum>(i)</enum><text>there is a delay in reporting to an applicable taxpayer by 1 or more applicable entities by reason of section 493(c)(4), and</text></clause><clause id="id19F750C0898F4A73B5D8DA7561B19802"><enum>(ii)</enum><text>any gain or loss is reported by such entities to such taxpayer under section 493(c)(1)(A)(i) and is taken into account in such taxpayer's taxable year immediately succeeding the first taxable year described in paragraph (1),</text></clause><continuation-text continuation-text-level="subparagraph">then, subject to such rules as the Secretary may prescribe, the taxpayer may elect under paragraph (1)(B) to treat the net tax liability described in subparagraph (B) as net first-year tax liability payable in 5 equal annual installments beginning with such succeeding taxable year. The rules of paragraph (5) shall apply to such installments in the same manner as such rules apply to installments for such first taxable year.</continuation-text></subparagraph><subparagraph id="idA35CC8C2E609462D9E4D624ACB3F91B2"><enum>(B)</enum><header>Net tax liability</header><text>For purposes of subparagraph (A), the net tax liability described in this subparagraph is, with respect to the taxable year described in such subparagraph, the excess (if any) of—</text><clause id="id8ABE30F1B0EE497B86521AD4EB9152EC"><enum>(i)</enum><text>such taxpayer’s net income tax for such taxable year, over</text></clause><clause id="idC7234A25FF8D4CE98CD5D4909AC2EB66"><enum>(ii)</enum><text>such taxpayer’s net income tax for such taxable year determined without regard to gain or loss of the taxpayer described in subparagraph (A)(ii). </text></clause></subparagraph></paragraph><paragraph id="idE187FF26C7C9416898D72156828B39FF"><enum>(5)</enum><header>Rules relating to installment payments</header><subparagraph id="id0532A0A457EA4BED9315F0C9AD97B261"><enum>(A)</enum><header>Date for payment of installments</header><text>If an election is made under paragraph (1), the first installment shall be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the first taxable year described in paragraph (1) and each succeeding installment shall be paid on the due date (as so determined) for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made.</text></subparagraph><subparagraph id="id32C4107D86E6475697C5018D16DE7CC8" commented="no"><enum>(B)</enum><header>Acceleration of payment</header><clause commented="no" id="id870420A12E06434AA7AC0A5948999887"><enum>(i)</enum><header>Disposition of assets</header><subclause id="idCABEA0E764C2402B8C12CE8686F46300" commented="no"><enum>(I)</enum><header>In general</header><text>If, before the close of the 5-year period described in paragraph (1), a taxpayer sells or exchanges, transfers, or otherwise disposes of an asset with respect to which an election is in effect under paragraph (1)(B), then the applicable percentage of the unpaid portion of all remaining installments described in paragraph (1)(B) shall be due on the date of such disposition (or such later date as the Secretary may prescribe).</text></subclause><subclause id="id4966869292344F7492C197813A153823" commented="no"><enum>(II)</enum><header>Applicable percentage</header><text>For purposes of this subparagraph, the applicable percentage is the percentage determined by dividing the gain not taken into account in determining net income tax under paragraph (2)(A)(ii) with respect to the asset described in subclause (I) by the aggregate amount of all gain not so taken into account. </text></subclause></clause><clause id="idD7BBACA47A564C9E8A35204B892E4984"><enum>(ii)</enum><header>Failure to pay, etc</header><text>In the case of an addition to tax for failure to timely pay any installment required under this subsection, the death of the taxpayer, or the filing of a petition by the taxpayer in a title 11 or similar case, then the unpaid portion of all remaining installments shall be due on the date of such event (or in the case of a title 11 or similar case, the day before the petition is filed).</text></clause></subparagraph><subparagraph id="idE5B24F1F3FB5465E8ED48CAA64BFB5C9"><enum>(C)</enum><header>Proration of deficiency to installments</header><text>If an election is made under paragraph (1) to pay the net first-year tax liability under this section in installments and a deficiency has been assessed with respect to such net tax liability, the deficiency shall be prorated to the installments payable under paragraph (1). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. This subsection shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud.</text></subparagraph><subparagraph id="idd04b986cec7c4dcb9c2e4d8877854288"><enum>(D)</enum><header>Installments not to prevent credit or refund of overpayments or increase estimated taxes</header><text>If an election is made under paragraph (1) to pay the net first-year tax liability under this subsection in installments—</text><clause id="id2e8012fd456f40a1b267c533e3225a50"><enum>(i)</enum><text>no installment of such liability shall—</text><subclause id="id3d24d6dd073a48949ba421a916d4dbce"><enum>(I)</enum><text>in the case of a request for credit or refund, be taken into account as a liability for purposes of determining whether an overpayment exists for purposes of section 6402 before the date on which such installment is due, or</text></subclause><subclause id="id95c909d0f4b94d24b4814e3dad51488a"><enum>(II)</enum><text>be treated as a tax imposed by section 1 for purposes of section 6654, and</text></subclause></clause><clause id="idbb74baa03c7c4449ad224c9aa4123789"><enum>(ii)</enum><text>the first sentence of section 6403 shall not apply with respect to any such installment. </text></clause></subparagraph></paragraph><paragraph id="id571F39ACF6C046A4862C7DEAAE3BAD4E"><enum>(6)</enum><header>Elections</header><subparagraph id="idD539BE0DA1A3494EB4AF7B1997A55E84"><enum>(A)</enum><header>In general</header><text>Any election under paragraph (1), (3)(A), or (4)(A) shall be made not later than the due date for the return of tax for the first taxable year described in paragraph (1) and shall be made in such manner as the Secretary shall provide.</text></subparagraph><subparagraph id="idB74A8D0BBBC14DCDBCF26554E94E1442"><enum>(B)</enum><header>Extensions</header><text>The Secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make any election under paragraph (1), (3)(A), or (4)(A). In determining whether to grant relief under this subparagraph, the Secretary shall take into account all relevant circumstances and the time for making the election shall be treated as not expressly provided by statute.</text></subparagraph></paragraph></subsection><subsection id="idE58C9782E42244C3ACCCD60D174D3C5B"><enum>(b)</enum><header>Treatment of taxpayers leaving and reentering applicable status</header><text>If a taxpayer's status as an applicable taxpayer is terminated under section 495(a)(4) and the taxpayer is again treated as an applicable taxpayer for a subsequent taxable year by reason of meeting the requirements of section 495(a)(1)(A), the following rules shall apply:</text><paragraph id="id4269F8FF30C14B039F520ECC714535A1"><enum>(1)</enum><header>Subsequent year not treated as first year of applicable taxpayer status</header><text>Subsection (a) shall not apply to any taxable year in which the taxpayer is again treated as an applicable taxpayer and such subsequent taxable year shall not be treated as the first taxable year for which the taxpayer is an applicable taxpayer for any other purpose of this part.</text></paragraph><paragraph id="id8ABB9FC4AA5E405F9E647BBDB6CBBE4C"><enum>(2)</enum><header>Nontradable assets</header><text>If there is an applicable transfer by a taxpayer of a nontradable covered asset after the taxpayer is again treated as an applicable taxpayer, the taxpayer's holding period of such asset for purposes of section 492 shall include all periods during which the taxpayer's status as an applicable taxpayer was previously terminated and the taxpayer held such asset.</text></paragraph></subsection><subsection id="id8F004B0B117C49EC9EAD4A495FC14433"><enum>(c)</enum><header>Special rules relating to ownership of nontradable interests in applicable entities</header><paragraph id="id7A8524DE52F443ECB8236CA9D25A1AAE"><enum>(1)</enum><header>In general</header><text>For purposes of subsection (a), if an applicable taxpayer elects under subsection (a)(3) to treat a nontradable interest in an applicable entity held directly as a tradable covered asset for the first taxable year described in subsection (a)(1), the amount of the gain taken into account under subsection (a) with respect to such interest shall be equal to the excess (if any) of— </text><subparagraph id="idF7C8DB72294F40C98362968C3B7CD55D"><enum>(A)</enum><text>the value of such interest specified by the taxpayer under subsection (a)(3)(B), over</text></subparagraph><subparagraph id="id8792071A507347C7A56C123C246408FA"><enum>(B)</enum><text>the taxpayer's adjusted basis in such interest as of the close of such taxable year.</text></subparagraph></paragraph><paragraph id="id9AADCB85C7F346749C37B1DF61D9C584"><enum>(2)</enum><header>Adjustments to bases of entity's nontradable assets</header><subparagraph id="id4F46EE3DF1494701B7164C5E7514AE65"><enum>(A)</enum><header>Partnerships</header><clause id="idB662C9AB015643CF87B7D38BDAF14A8C"><enum>(i)</enum><header>In general</header><text>If the applicable entity is a partnership, the partnership shall increase the adjusted bases of the partnership’s assets by the amount described in paragraph (1). Such increase shall constitute an adjustment to the bases of partnership assets solely for determining the applicable taxpayer's share of such bases.</text></clause><clause id="id6FF39A5E74DE4D3C8D4ED1BD0032B8D3"><enum>(ii)</enum><header>Allocation</header><text>The Secretary shall prescribe rules for the allocation of the increase in adjusted bases among partnership assets in a manner which has the effect of reducing the difference between the value and such adjusted bases. Such rules shall also provide proper adjustments to adjusted bases where ownership is held through tiered entities.</text></clause></subparagraph><subparagraph id="id6515649D07A74A5D9F9F7B2565E2C49B"><enum>(B)</enum><header>Other applicable entities</header><text>Rules similar to the rules of clause (i) shall apply to applicable entities other than partnerships.</text></subparagraph><subparagraph id="id453A1C2B01B04D3BBF3FF14CFCD5E3E9"><enum>(C)</enum><header>No deductions or credits for basis increases</header><text>If there is any increase in the applicable entity's adjusted basis of any asset by reason of subparagraph (A), no deduction or credit shall be allowed under this title with respect to the portion of such adjusted basis attributable to such increase. </text></subparagraph></paragraph><paragraph id="idF61B03984C8940FA8688E5C2057FCE79"><enum>(3)</enum><header>Definitions</header><text>Any term used in this subsection which is also used in section 493 shall have the same meaning as when used in such section. </text></paragraph></subsection><subsection id="id13A0C3CC341D42DC85B878C1D849F79E"><enum>(d)</enum><header>Special election for certain tradable assets of applicable taxpayers</header><paragraph id="id845F6D08441C4A26815685B74534DCE1"><enum>(1)</enum><header>In general</header><text>If a qualified taxpayer makes an election under this subsection, then any stock held by such qualified taxpayer which would (but for such election) be a tradable covered asset and which is specified in such election shall be treated as a nontradable capital asset of the taxpayer for purposes of this part.</text></paragraph><paragraph id="id021A5CABE4E54B31B230A99A3F7E5760"><enum>(2)</enum><header>Limitations</header><subparagraph id="idB12B379971874B35AAD81318647D56E2"><enum>(A)</enum><header>Only stock of a single entity taken into account</header><text>An election made under this subsection may not specify stock in more than one C corporation or specify more than one class of stock in such corporation.</text></subparagraph><subparagraph id="id4E7B669559884E99B419118F6FBB17A4"><enum>(B)</enum><header>Value</header><clause id="idFFDE3C7316DE431084B5686F0649888A"><enum>(i)</enum><header>In general</header><text>The aggregate value of stock specified in an election made under this subsection shall not exceed $1,000,000,000.</text></clause><clause id="idFAA0A70B1557456FA708B896D60FEA66"><enum>(ii)</enum><header>Determination</header><text>For purposes of clause (i), the value of any stock specified in an election made under this section shall be determined as of the last day of the first taxable year for which the taxpayer is an applicable taxpayer.</text></clause></subparagraph></paragraph><paragraph id="idB3BD579C48844EAD9423EFFF11E240C5"><enum>(3)</enum><header>Qualified taxpayer</header><text>For purposes of this subsection, the term <term>qualified taxpayer</term> means any taxpayer—</text><subparagraph id="id35E4F7CF76AC42A58CE43AA77F20E0F0"><enum>(A)</enum><text>which is not an estate or trust, and</text></subparagraph><subparagraph id="idEB88A0499AE1419EBC29AFA83085120F"><enum>(B)</enum><text>for which the first taxable year for which such taxpayer is an applicable taxpayer is a taxable year that begins before January 1, 2025.</text></subparagraph></paragraph><paragraph id="id82D29FEBA11E45D684D7577B86669E75"><enum>(4)</enum><header>Election</header><subparagraph id="id76BB10FE0BF74EF8B652E08D6297BCF1"><enum>(A)</enum><header>In general</header><text>Any election under this subsection shall be made not later than the due date for the return of tax for the first taxable year for which the taxpayer is an applicable taxpayer and shall be made in such manner as the Secretary shall provide.</text></subparagraph><subparagraph id="id8548766EBA5743F4A47499873866A9EF"><enum>(B)</enum><header>Extensions</header><text>The Secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make any election under this subsection. In determining whether to grant relief under this subparagraph, the Secretary shall take into account all relevant circumstances and the time for making the election shall be treated as not expressly provided by statute. </text></subparagraph></paragraph></subsection></section></subpart><subpart id="id5F2F27DF939348DA9A74E003F1C70A2C" style="OLC"><enum>C</enum><header>Other definitions and rules</header><toc><toc-entry level="section" bold="off">Sec.497. Terms and rules relating to covered assets.</toc-entry><toc-entry level="section" bold="off">Sec.498. Other definitions; coordination with title.</toc-entry></toc><section id="id21C4D75B4D2744CB872903B760B3831F"><enum>497.</enum><header>Terms and rules relating to covered assets</header><subsection id="id2DC1676CADF04E4DB29C1E2214FB5C84"><enum>(a)</enum><header>Covered asset</header><text>For purposes of this part, except as otherwise provided in this part, the term <term>covered asset</term> means any asset other than— </text><paragraph id="idFB5CB73C3BA9471ABCB58BA71E10ECCE"><enum>(1)</enum><text>any interest of the taxpayer in an applicable savings plan or in a defined benefit plan,</text></paragraph><paragraph id="idFB6C702AADE2449AABC42562972146EE" commented="no"><enum>(2)</enum><text>any cash or cash equivalent, or</text></paragraph><paragraph commented="no" id="id6673A6B782624B33B473D11891E38E74"><enum>(3)</enum><text>any private placement life insurance or annuity contract described in section 72(e)(12)(D).</text></paragraph></subsection><subsection id="id5E7C81656D53481BA75D37FDFCC3FA32"><enum>(b)</enum><header>Tradable covered asset</header><text>For purposes of this part, except as provided in section 496(d), the term <term>tradable covered asset</term> means—</text><paragraph id="id6BAD7D0B4CA74E08B20E4D523F40D725"><enum>(1)</enum><text>any covered asset if—</text><subparagraph id="id52cc57a17503441fb15331b39f9beb7c"><enum>(A)</enum><text>interests in such asset are traded on an established securities market,</text></subparagraph><subparagraph id="id6f9803b64d8741b784d9dde9a4c1a271"><enum>(B)</enum><text>interests in such assets are readily tradable on a secondary market (or the substantial equivalent thereof),</text></subparagraph><subparagraph id="idbd507ff1dc1b4c0bb3bb5e2054d683d1"><enum>(C)</enum><text>interests in such assets are available on an online or electronic platform that regularly matches, or facilitates the matching of, buyers and sellers of such assets, or</text></subparagraph><subparagraph id="idcf24c1b1fe3849fbbd29a9914162f164"><enum>(D)</enum><text>such asset is an asset for which the Secretary determines there is a reasonable basis to determine the asset’s fair market value annually, and</text></subparagraph></paragraph><paragraph id="idbdd876c1cc9f48b9bd5e7b0af7c0fbc0"><enum>(2)</enum><text>any derivative with respect to an underlying investment which—</text><subparagraph id="id815C8183887F4F71BCB89F631DB8E0DD"><enum>(A)</enum><text>is an asset described in paragraph (1), or </text></subparagraph><subparagraph id="id4AED8A49FCFB4BF6B3E440DDDBD85757"><enum>(B)</enum><text>is a nontradable covered asset which is identified in regulations or other guidance provided by the Secretary.</text></subparagraph></paragraph></subsection><subsection id="idF4AB76D65A934F6398C2239522B61F17"><enum>(c)</enum><header>Nontradable covered asset</header><text>For purposes of this part—</text><paragraph id="id4866E4807E9348E8AC932E550451E314"><enum>(1)</enum><header>In general</header><text>The term <term>nontradable covered asset</term> means any covered asset which is not a tradable covered asset.</text></paragraph><paragraph id="id7259F37B185A4A0D88BC77413D969371"><enum>(2)</enum><header>Certain assets only counted for determining aggregate value of assets</header><subparagraph id="id4CE7F6AD72AA401A970C168AE38EE055"><enum>(A)</enum><header>In general</header><text>Any asset excluded from treatment as a covered asset under paragraph (1), (2), or (3) of subsection (a) shall be taken into account as a nontradable covered asset in computing the aggregate applicable value of all tradable and nontradable covered assets held by the taxpayer as of the close of any taxable year for purposes of section 495(a)(3).</text></subparagraph><subparagraph id="idDAF6B096B03744F1AF8943CFD2B1E629"><enum>(B)</enum><header>Private placement life insurance and annuity contracts</header><text>For purposes of subparagraph (A)—</text><clause id="idBB7527C2B03743B985F640A38C3CA0BD"><enum>(i)</enum><header>In general</header><text>The applicable value of a private placement life insurance or annuity contract (as defined in section 72(e)(12)(D)) as of any date shall be its cash surrender value (as determined under section 7702(f)(2)(A)) on such date.</text></clause><clause id="idBB5F8018343E416993BB4A48299FF8DD" commented="no"><enum>(ii)</enum><header>Adjustments</header><text>The Secretary shall by regulation provide for adjustments to the cash surrender value determined under clause (i) with respect to any contract to the extent necessary to prevent the avoidance of the purposes of this part, including regulations which ensure that such value as of any time properly reflects the value of any underlying investments with respect to such contract as of such time. </text></clause></subparagraph></paragraph><paragraph id="id6F0CC6430AF943549E6EC741C6553140" commented="no" display-inline="no-display-inline"><enum>(3)</enum><header display-inline="yes-display-inline">Investments in qualified opportunity funds</header><text display-inline="yes-display-inline">Notwithstanding subsection (b), any investment in a qualified opportunity fund (as defined in section 1400Z–2(d)) shall be treated as a nontradable covered asset.</text></paragraph></subsection><subsection id="idA9620EC644D54F8D8298006E861FD85B"><enum>(d)</enum><header>Applicable value</header><text>For purposes of this part—</text><paragraph id="id84957C48C289436096549FA61FDF681C"><enum>(1)</enum><header>Tradable covered assets</header><text>The applicable value of any tradable covered asset as of any date shall be its fair market value on such date.</text></paragraph><paragraph id="id0BE012CBBA884A709D1E369BB333EEAD"><enum>(2)</enum><header>Nontradable covered assets</header><text>The applicable value of any nontradable covered asset as of any date shall be the greatest of—</text><subparagraph id="id91CEC299163D49D8B7C25C7D3EA8DF58"><enum>(A)</enum><text>the original cost basis of such asset,</text></subparagraph><subparagraph id="id3C3BCEC724674A8EB20A816413686258"><enum>(B)</enum><text>the adjusted basis of such asset,</text></subparagraph><subparagraph id="id1150C4FC8E714893A64FE28BBFB1E9DE" commented="no" display-inline="no-display-inline"><enum>(C)</enum><text display-inline="yes-display-inline">the value determined as of the date of the last event with respect to the asset which establishes such value,</text></subparagraph><subparagraph id="idADBE07E2279D4AA9A4B36DC837BA4B43"><enum>(D)</enum><text>in the case of an asset the value of which is included in an applicable financial statement, the value in the latest available statement,</text></subparagraph><subparagraph id="id316907010FED40BB9ADB5183104FC42A"><enum>(E)</enum><text>the value of such asset determined for purposes of using such asset to secure any indebtedness, and</text></subparagraph><subparagraph id="idD5B6BC2ED49C46D6B1400DB5849884AF"><enum>(F)</enum><text>the value of such asset determined under such other valuation method as the Secretary may prescribe.</text></subparagraph><continuation-text continuation-text-level="paragraph">If a covered asset would, but for subsection (c)(3) or any other provision of this part, be treated as a tradable covered asset, the asset's applicable value shall be determined under paragraph (1). </continuation-text></paragraph><paragraph id="id4DB6C09AE51242A88E713EBF9A7815E4"><enum>(3)</enum><header>Adjustment for debt and other liabilities of the taxpayer</header><text>Except as provided by the Secretary, the aggregate applicable value of all covered assets of the taxpayer as of any date (determined without regard to this paragraph) shall be reduced by the aggregate outstanding amount of—</text><subparagraph id="idD344F6A6432E443289822E5226AEC8F3"><enum>(A)</enum><text>indebtedness of the taxpayer as of such date, and</text></subparagraph><subparagraph id="idC3EB91737461418B9525EDF839826466"><enum>(B)</enum><text>any other liabilities (other than indebtedness) of the taxpayer as of such date which the Secretary determines are appropriate to be taken into account for such purpose.</text></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="idD92B9375A5E84CAEB8F131B23189BB2B"><enum>(4)</enum><header>Reliance on valuation</header><text>In determining the applicable value of any tradable covered asset for purposes of this section, the taxpayer may rely on a valuation which is— </text><subparagraph commented="no" display-inline="no-display-inline" id="id7A681BA116A14E9AB2FD2DD537C3C02F"><enum>(A)</enum><text>provided to the taxpayer by a broker under section 6045(b),</text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idCA027551240546A0A4053F9632636AC5"><enum>(B)</enum><text>provided to the taxpayer by a dealer in securities or a dealer in commodities, within the meaning of section 475,</text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id8FEE855065D8461F97C05F29F6E29543"><enum>(C)</enum><text>determined under an applicable financial statement, or</text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idC3DA9DF65C1C4ED7B55647DB19ED32CF"><enum>(D)</enum><text>provided to the taxpayer by such other persons as may be designated by the Secretary.</text></subparagraph></paragraph><paragraph id="idA8E8C530DD1A42468E3F508833A1B4DD"><enum>(5)</enum><header>Applicable financial statement</header><text>For purposes of this subsection, the term <term>applicable financial statement</term> has the meaning given such term by section 451(b)(3).</text></paragraph><paragraph id="idB33C56DFAF164635A6DE5319CB20EB13"><enum>(6)</enum><header>Special rules for applicable entities</header><text>In the case of an applicable entity—</text><subparagraph id="id40BCB33AC04140F0AFA670D33932F406"><enum>(A)</enum><text>adjustments to basis of any covered asset under section 493(b)(2) shall be taken into account in determining the adjusted basis of such asset for purposes of paragraph (2)(B),</text></subparagraph><subparagraph id="idF3B8316DBEFE4CFA89E0B395A6650AFF"><enum>(B)</enum><text> the value of a partner's ownership interest in such partnership under paragraph (2)(C) shall not be less than the value of the partner's capital account under section 704, and</text></subparagraph><subparagraph id="idD21FAFF06C25480698778B6C3026B546"><enum>(C)</enum><text>the Secretary shall provide rules for determining the share of a holder of an ownership interest in such an entity of amounts included in an applicable financial statement of such entity for purposes of applying paragraph (2)(D). </text></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id49588E7FBAA144DDB89ED5140C4ED3B6"><enum>(7)</enum><header>Secretarial authority</header><text>The Secretary shall prescribe such regulations, rules, and guidance as may be necessary to carry out the purposes of this subsection, including regulations, rules, and guidance which—</text><subparagraph commented="no" display-inline="no-display-inline" id="id89E3AD2BFE8F4A07AF075E04D08EF266"><enum>(A)</enum><text>prevent the avoidance of such purposes,</text></subparagraph><subparagraph display-inline="no-display-inline" commented="no" id="id9617C90C75914A9A8927C0A856C5EBA4"><enum>(B)</enum><text>provide rules for the application of paragraph (2)(C), including in cases of transactions in which gain or loss is not recognized in connection with contributions, distributions, and sales of substantially similar property from which value may be derived, and</text></subparagraph><subparagraph display-inline="no-display-inline" commented="no" id="id2CE39A434C5D412D9A5382222D4CD0BE"><enum>(C)</enum><text>provide rules for determining the applicable value of assets in taxable years beginning before the date of the enactment of this part.</text></subparagraph></paragraph></subsection></section><section id="id11E41B7769DC4F9F9FABECB421FD5F31"><enum>498.</enum><header>Other definitions; coordination with title</header><subsection id="id896c6475baf94c20985481014000ca70"><enum>(a)</enum><header>Applicable transfer</header><text>For purposes of this part—</text><paragraph id="ide47368db3a204f0e98086d189ee3485b" commented="no"><enum>(1)</enum><header>In general</header><text>The term <term>applicable transfer</term> means—</text><subparagraph id="id4C81792CBB33409A811A6934A73EA0BB" commented="no"><enum>(A)</enum><text>any sale, exchange, disposition, or other transfer if—</text><clause commented="no" id="id329D8014DED64BE398D28234DC6A1646"><enum>(i)</enum><text>gain or loss (if any) is, without regard to this part, recognized under this chapter on such sale, exchange, disposition, or other transfer, and</text></clause><clause commented="no" id="idD26B9F6048EA483D9380D52CB765746E"><enum>(ii)</enum><text>such sale, exchange, disposition, or other transfer is not in the ordinary course of a trade or business, and</text></clause></subparagraph><subparagraph id="idEC35A090B7B447F1B9414296ACE4871B" commented="no"><enum>(B)</enum><text>any disregarded nonrecognition event.</text></subparagraph></paragraph><paragraph id="idCD9F2B031957416C844A9E883D959F59" commented="no"><enum>(2)</enum><header>Disregarded nonrecognition event</header><text>The term <term>disregarded nonrecognition event</term> means—</text><subparagraph commented="no" id="id2CA3729657394B77B2FF6F1416E486D1"><enum>(A)</enum><text>any exchange to which section 351 applies,</text></subparagraph><subparagraph id="idD5D88DEC779246FA87E2009205152D54" commented="no"><enum>(B)</enum><text>any exchange to which section 1031 applies,</text></subparagraph><subparagraph id="idA1B68EF556504F5D80C0699A41DDD956" commented="no"><enum>(C)</enum><text>any transfer of an asset which—</text><clause id="idF73D2580B46F43B2A246E51F590CD5AE" commented="no"><enum>(i)</enum><text>is identified by the Secretary, </text></clause><clause id="idE6824075DBAC412DB3FF2CB7329D9BEB" commented="no"><enum>(ii)</enum><text>involves a C corporation, and</text></clause><clause id="idE06C9E5770324E4DBB821F6A248C7114" commented="no"><enum>(iii)</enum><text>is in connection with an asset with respect to which no gain or loss has been recognized by such corporation, or</text></clause></subparagraph><subparagraph commented="no" id="id42C7B31E5F884EF1A5323D2AEAD32AD5"><enum>(D)</enum><text>any other transaction in which gain or loss is not otherwise recognized and which the Secretary determines is necessary to be treated as a disregarded nonrecognition event in order to prevent the avoidance of the purposes of this part.</text></subparagraph></paragraph><paragraph id="id549bc2460f7a4aed8d79c31f79cdec52"><enum>(3)</enum><header>Conversion of assets</header><subparagraph id="id5470E401DE334A3C93921702F6D9E0DE"><enum>(A)</enum><header>Nontradable to tradable</header><text>If a taxpayer holds a nontradable covered asset (other than an investment in a qualified opportunity fund (as defined in section 1400Z–2(d))) which, as part of a transaction or series of transactions, is converted to, or exchanged for, a tradable covered asset, such conversion or exchange shall be treated as a disregarded nonrecognition event if gain or loss (if any) on such conversion or exchange is, without regard to this part, not recognized under this chapter.</text></subparagraph><subparagraph id="ida9ac124ae8d14b558771fb3b4d388828"><enum>(B)</enum><header>Tradable to nontradable</header><text>If a taxpayer holds a tradable covered asset which, as part of a transaction or series of transactions, is converted to, or exchanged for, a nontradable covered asset, such conversion or exchange shall be treated as a taxable event with respect to the asset being converted or exchanged if gain or loss (if any) on such conversion or exchange is, without regard to this part, not recognized under this chapter.</text></subparagraph></paragraph></subsection><subsection id="idE7B3A288BB244C1A817FBDA5619D3594"><enum>(b)</enum><header>Applicable savings plan</header><text>The term <term>applicable savings plan</term> means—</text><paragraph id="ID6b86e6e98152476b9ba0f5a755da53c2"><enum>(1)</enum><text>a defined contribution plan to which section 401(a) or 403(a) applies,</text></paragraph><paragraph id="id55CDE5AD21734C81A713917ABCB515DA"><enum>(2)</enum><text>an annuity contract under section 403(b),</text></paragraph><paragraph id="id133AC23D6F454ABAAA8B9515E77E53AC"><enum>(3)</enum><text>an eligible deferred compensation plan described in section 457(b) which is maintained by an eligible employer described in section 457(e)(1)(A),</text></paragraph><paragraph id="idC6E9C37D3F404292B4F94B12E7CFBC7A"><enum>(4)</enum><text>an individual retirement plan,</text></paragraph><paragraph id="id34055748-c149-11ea-b789-c71643032c3f"><enum>(5)</enum><text>an Archer MSA (within the meaning of section 220(d)),</text></paragraph><paragraph id="id2CD694BB69E44CE797A46A9595316A60"><enum>(6)</enum><text>a qualified tuition program (as defined in section 529(b)),</text></paragraph><paragraph id="id8A3CCA04929945DDA50CAFF4CB27B651"><enum>(7)</enum><text>an ABLE account (as defined in section 529A(e)(6)), </text></paragraph><paragraph id="id3405574a-c149-11ea-b789-c71643032c3f"><enum>(8)</enum><text>a Coverdell education savings account (as defined in section 530), or</text></paragraph><paragraph id="id3405574b-c149-11ea-b789-c71643032c3f"><enum>(9)</enum><text>a health savings account (within the meaning of section 223(d)).</text></paragraph></subsection><subsection id="idC58C21D813504CBCA000B71C92D41F45"><enum>(c)</enum><header>Derivative; underlying investment</header><paragraph id="id625EEB9CC9DA4D6AAC1DD3C3C8861534"><enum>(1)</enum><header>Derivative</header><text>The term <term>derivative</term> has the meaning given such term under section 59A(h)(4).</text></paragraph><paragraph id="id73C35B814199482D834BD7BB56AF9434"><enum>(2)</enum><header>Underlying investment</header><text>The term <term>underlying investment</term> means, with respect to any derivative, any item—</text><subparagraph id="id953EB3EE6A8C4B8091C9066C94B3A188"><enum>(A)</enum><text>which is described in clauses (i) through (v) of section 59A(h)(4)(A) (or any item substantially the same as any such item), and</text></subparagraph><subparagraph id="id90A546C484DC46E0840D537E266D930D"><enum>(B)</enum><text>by reference to which the value of the derivative, or any payment or other transfer with respect to the derivative, is determined either directly or indirectly. </text></subparagraph></paragraph></subsection><subsection commented="no" id="idD6553068010E46CBB8DD923B551B3196"><enum>(d)</enum><header>Regulatory authority To prevent avoidance and To coordinate with other provisions of this title</header><text>The Secretary shall issue such regulations or other guidance as are necessary to—</text><paragraph id="idBBD860F2D71040588F7CD061D4756009"><enum>(1)</enum><text>prevent taxpayers from avoiding the application of this part, and</text></paragraph><paragraph commented="no" id="idED2B75252E1B4197B4FC76CABB0E789E"><enum>(2)</enum><text>coordinate the provisions of this part with other provisions of this title which require taxpayers to take income into account in the absence of a payment or other distribution.</text></paragraph></subsection></section></subpart></part><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection id="id985C5B83B01E4CD49DA646097F117E47"><enum>(b)</enum><header>Clerical amendment</header><text>The table of parts for subchapter E of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by adding at the end the following new item:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id4A80296DF3EE4968B7443A07B88305CE"><toc><toc-entry level="section" bold="off">Part IV. Elimination of deferral for applicable taxpayers.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection id="id7909093A3B914F2DAA40881700BBC3A1"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable events and applicable transfers occurring in taxable years beginning after December 31, 2023. </text></subsection></section><section id="id62E5C62CC6AF4BE48DC3C92AA907D872"><enum>102.</enum><header>Carryback of capital losses attributable to mark-to-market rules</header><subsection id="id560B333C111F4D77AEC131B71A7EBD70"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1212">Section 1212</external-xref> is amended by adding at the end the following new subsection:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id9C6722193D9A4A51BE78B1275F89F740"><subsection commented="no" display-inline="no-display-inline" id="id953d4136-db2e-11eb-bf11-e2f53ffbac53"><enum>(d)</enum><header display-inline="yes-display-inline">Carryback of losses of applicable taxpayers from assets marked to market</header><paragraph commented="no" display-inline="no-display-inline" id="id953d6847-db2e-11eb-bf11-e2f53ffbac53"><enum>(1)</enum><header>In general</header><text>If an applicable taxpayer elects to have this subsection apply to any taxable year in which the taxpayer has a net marked-to-market loss (in this subsection referred to as the <quote>loss year)</quote>, the amount of such net marked-to-market loss—</text><subparagraph id="id953d6848-db2e-11eb-bf11-e2f53ffbac53"><enum>(A)</enum><text>shall be a carryback to each of the 3 taxable years preceding the loss year, and</text></subparagraph><subparagraph id="id953d6849-db2e-11eb-bf11-e2f53ffbac53"><enum>(B)</enum><text>to the extent that, after the application of paragraphs (2) and (3), such loss is allowed as a carryback to any such preceding taxable year, the amount so allowed shall be treated as a long-term capital loss.</text></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id953d684c-db2e-11eb-bf11-e2f53ffbac53"><enum>(2)</enum><header>Amount carried to each taxable year</header><text>The entire amount of the net marked-to-market loss for any loss year shall be carried to the earliest of the taxable years to which such loss may be carried back under paragraph (1). The portion of such loss which shall be carried to each of the 2 other taxable years to which such loss may be carried back shall be the excess (if any) of such loss over the portion of such loss which, after the application of paragraph (3), was allowed as a carryback for any prior taxable year.</text></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id953d684d-db2e-11eb-bf11-e2f53ffbac53"><enum>(3)</enum><header>Amount which may be used in any prior taxable year</header><text>An amount shall be allowed as a carryback under paragraph (1) from a loss year to any prior taxable year only to the extent—</text><subparagraph id="id953d684e-db2e-11eb-bf11-e2f53ffbac53"><enum>(A)</enum><text>such amount does not exceed the net marked-to-market gain for such prior year, and</text></subparagraph><subparagraph id="id953d684f-db2e-11eb-bf11-e2f53ffbac53" commented="no"><enum>(B)</enum><text>the allowance of such carryback does not increase or produce a net operating loss (as defined in section 172(c)) for such year.</text></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id953d6850-db2e-11eb-bf11-e2f53ffbac53"><enum>(4)</enum><header>Net marked-to-market loss</header><text>For purposes of this subsection, the term <term>net marked-to-market loss</term> means, with respect to any taxable year, an amount equal to—</text><subparagraph id="id953d6851-db2e-11eb-bf11-e2f53ffbac53"><enum>(A)</enum><text>the net capital loss for the taxable year determined by taking into account only marked-to-market gains and losses, reduced (but not below zero) by</text></subparagraph><subparagraph id="id953d6852-db2e-11eb-bf11-e2f53ffbac53"><enum>(B)</enum><text>the aggregate amount of gains from the sale or exchange of capital assets which are not marked-to-market gains.</text></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id53B2E1CB81CF4AB490A4F8822FCC2980"><enum>(5)</enum><header>Net marked-to-market gain</header><text>For purposes of this subsection—</text><subparagraph id="id9AFB31BF21DA4257964D4100FF22354B" commented="no"><enum>(A)</enum><header>In general</header><text>The term <term>net marked-to-market gain</term> means, with respect to any taxable year, an amount equal to— </text><clause commented="no" id="idC16B4EFDA562421DB4BC64F742BD7EC4"><enum>(i)</enum><text> the capital gain net income for the taxable year determined by taking into account only marked-to-market gains and losses, reduced (but not below zero) by</text></clause><clause id="id5DFE36EEEC6746A496B240BD5F230CA8" commented="no"><enum>(ii)</enum><text>the aggregate amount of losses from the sale or exchange of capital assets which are not marked-to-market losses.</text></clause></subparagraph><subparagraph id="idB1A0B3ABCEA24213A6081BC03956B436" commented="no"><enum>(B)</enum><header>Special rule</header><text>The net marked-to-market gain for any taxable year before the loss year shall be computed without regard to the net marked-to-market loss for the loss year or for any taxable year thereafter.</text></subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id953d6858-db2e-11eb-bf11-e2f53ffbac53"><enum>(6)</enum><header>Coordination with carryforward provisions of subsection (b)(1)</header><subparagraph id="id953d6859-db2e-11eb-bf11-e2f53ffbac53"><enum>(A)</enum><header>Carryforward amount reduced by amount used as carryback</header><text>For purposes of applying subsection (b)(1)(B), if any portion of the net marked-to-market loss for any taxable year is allowed as a carryback under paragraph (1) to any preceding taxable year, the amount allowed as a carryback shall be treated as a long-term capital gain for the loss year.</text></subparagraph><subparagraph id="id953d685c-db2e-11eb-bf11-e2f53ffbac53"><enum>(B)</enum><header>Carryover loss retains character as attributable to marked-to-market</header><text>Any amount carried forward as a long-term capital loss to any taxable year under subsection (b)(1)(B) (after the application of subparagraph (A)) shall, to the extent attributable to marked-to-market losses, be treated as marked-to-market loss.</text></subparagraph><subparagraph id="idA4B48306EBF14DB5849BF3E35030D3F3"><enum>(C)</enum><header>Coordination with reduction in net capital loss for credit</header><text>For purposes of this paragraph and paragraph (4), any reduction in net capital loss under section 492(c)(3) (relating to reduction for credit against tax attributable to deferral recapture amount) shall, except as provided by the Secretary, be applied before the application of such paragraphs.</text></subparagraph></paragraph><paragraph id="idE403884DEE4441B9ACE904531F221067"><enum>(7)</enum><header>Other definitions and rules</header><text>For purposes of this subsection—</text><subparagraph id="id54DF04BDCC624E4C9ECBD67064838AFA"><enum>(A)</enum><header>Marked-to-market gains and losses</header><clause id="idC83424F40E6E41019D5A99C5A3081039"><enum>(i)</enum><header>In general</header><text>The terms <term>marked-to-market gains</term> and <term>marked-to-market losses</term> means, with respect to any applicable taxpayer for any taxable year, gains or losses which are recognized and taken into account by such taxpayer for such taxable year under section 491 by reason of taxable events described in section 491(b)(1) with respect to tradable covered assets which are capital assets. Such terms shall not include gains and losses from nontradable covered assets which are treated as tradable covered assets (and to which section 491 applies) by reason of an election under section 496(a)(3).</text></clause><clause id="idEF677972BFC74DD985F72991449BE6E9"><enum>(ii)</enum><header>Applicable entities</header><text>In the case of marked-to-market gains or losses of an applicable entity, this subsection shall be applied at the partner or other ownership level.</text></clause></subparagraph><subparagraph id="id35E05DCD3A6D47838FC719E6CEF991F6"><enum>(B)</enum><header>Other terms</header><text>Any term used in this subsection which is also used in part IV of subchapter E shall have the same meaning as when used in such part.</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection commented="no" id="id3279986D35664A0D8C695F01C0D43990"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to loss years beginning after December 31, 2023.</text></subsection></section><enum>II</enum><header>Application of other provisions to applicable taxpayers and entities</header><subtitle id="ida9b345dfdd9e41b684153232be17221e" style="OLC"><enum>A</enum><header>Individuals</header><section id="id9e49ad41680c4a4884f8f5529b296ffe"><enum>201.</enum><header>Applicable taxpayers not eligible for adjusted gross income limitation on net investment tax</header><subsection commented="no" display-inline="no-display-inline" id="id7a8dbd10b1eb4351b97be08af9cf2b83"><enum>(a)</enum><header display-inline="yes-display-inline">In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1411">Section 1411(a)</external-xref> is amended by adding at the end the following new paragraph:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id4C5412F8CE2141C5AB609278EE312A12"><paragraph commented="no" display-inline="no-display-inline" id="idc2cba6f7e4ce4bfc968b2ce58ba9ff0b"><enum>(3)</enum><header>No adjusted gross income limit for applicable taxpayers</header><text>In the case of an applicable taxpayer (as defined in section 495) for any taxable year, notwithstanding paragraph (1) or (2), the tax under this subsection for such taxable year shall be equal to the product of—</text><subparagraph commented="no" display-inline="no-display-inline" id="id9e251c464ad84ea3a29ff80b50941015"><enum>(A)</enum><text display-inline="yes-display-inline"> in the case of an individual, the rate of tax in effect under paragraph (1) multiplied by the amount determined under paragraph (1)(A), and</text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idca51a82e97404ec497abfdef81bd5a26"><enum>(B)</enum><text display-inline="yes-display-inline">in the case of an estate or trust, the rate of tax in effect under paragraph (2) multiplied by the amount determined under paragraph (2)(A).</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection commented="no" display-inline="no-display-inline" id="idcfcdb91c9c944a669ef7397cd6b2f363"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to taxable years beginning after December 31, 2023.</text></subsection></section><section id="idE00A8C20FC514EBA9E0745712132994E"><enum>202.</enum><header>Treatment of covered expatriates</header><subsection commented="no" display-inline="no-display-inline" id="idb7e176c0dac14719829d4f343a51bd22"><enum>(a)</enum><header display-inline="yes-display-inline">Application of expatriate rules to applicable taxpayers</header><text display-inline="yes-display-inline"><external-xref legal-doc="usc" parsable-cite="usc/26/877A">Section 877A</external-xref> is amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id58AEFAC47C7947C286FAAEAB1992817B"><subsection id="idF897387FF6E94912BE2D97186765052A"><enum>(i)</enum><header>Special rules for applicable taxpayers</header><paragraph commented="no" display-inline="no-display-inline" id="id6c71f9a30a0d4f67ac83136edac01662"><enum>(1)</enum><header display-inline="yes-display-inline">In general</header><text>In the case of a covered expatriate who is an applicable taxpayer (as defined in section 495) for the taxable year which includes the expatriation date—</text><subparagraph commented="no" display-inline="no-display-inline" id="idbfcf9b63170b4a5882a9691abeb62240"><enum>(A)</enum><text display-inline="yes-display-inline">no election may be made under subsection (b) with respect to any property treated as sold by reason of subsection (a) (after application of subparagraph (B)), and</text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id69d673867540439faf0569eb87c539d7"><enum>(B)</enum><text display-inline="yes-display-inline">the covered expatriate shall, for purposes of subsection (a)(1), also be treated as having sold on the last day of the 10-taxable year period described in section 495(d)(2)(A) all property held by the covered expatriate as of the close of such day which is not otherwise treated as sold under part IV of subchapter E as of such time.</text></subparagraph></paragraph><paragraph id="id8a2ea6359deb4a03a9393afea5b8a4d4"><enum>(2)</enum><header>Application of section 877</header><text>Notwithstanding section 877(h)—</text><subparagraph commented="no" display-inline="no-display-inline" id="idfb6d1141d63e42f0bc708a161bd7b2f8"><enum>(A)</enum><text display-inline="yes-display-inline">a covered expatriate described in paragraph (1) shall be treated as an individual to whom section 877 applies, and</text></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id598ef3a49d6a4b0b91e5d9183f5a9af7"><enum>(B)</enum><text>such individual shall be taxable as provided in such section for each of the taxable years in the 10-taxable year period described in section 495(d)(2)(A).</text></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection commented="no" display-inline="no-display-inline" id="idF828577E3EB74927B34FA8F1FF11DA6D"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2023.</text></subsection></section></subtitle><subtitle id="id09F4F284DA364C4985707269206ED19F" style="OLC"><enum>B</enum><header>Rules for applicable entities and trusts</header><section commented="no" id="id87AB2BCD8DCE43D68B220815AEAFCF92"><enum>211.</enum><header>Treatment of like-kind exchanges by applicable entities</header><subsection commented="no" id="idD11DA850539E4B15ACE7F79B33E4FA3F"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1031">Section 1031</external-xref> is amended by adding at the end the following new subsection: </text><quoted-block style="OLC" display-inline="no-display-inline" id="id4D051914159749BB86C256DD979FFEB9"><subsection commented="no" id="idA4CEED156544423EB9EB558DDBF89941"><enum>(i)</enum><header>Special rules for applicable entities</header><text>Subsection (a) shall not apply to an exchange by an applicable entity if a notice received by the entity under subsection (b)(2)(A) or (c)(2) of section 493 is in effect at the time of such exchange.</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection commented="no" id="idDC3D9D69AAEE43838CBD3CD5D04AF724"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this section shall apply to exchanges completed after December 31, 2023.</text></subsection></section><section commented="no" id="id03E034654326414486FC0F50F0B8B484"><enum>212.</enum><header>Treatment of transfers by applicable entities in exchange for stock</header><subsection commented="no" id="id7F16730459514D028428943BE538D694"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/351">Section 351</external-xref> is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection: </text><quoted-block style="OLC" display-inline="no-display-inline" id="id20AD51277FF748A88AE664685DE1F264"><subsection commented="no" id="idE7A3BAE8881342E6B5D0AA783685BCDD"><enum>(h)</enum><header>Special rules for applicable entities</header><paragraph commented="no" id="id45EF51FF09364EE980CFD1A08B0C4AE8"><enum>(1)</enum><header>In general</header><text>Subsection (a) shall not apply to an exchange by an applicable entity if an applicable notice received by the entity is in effect at the time of such exchange.</text></paragraph><paragraph commented="no" id="id0659C1A434634F0BA2309EBF15B7566F"><enum>(2)</enum><header>Applicable notice</header><text>For purposes of paragraph (1)—</text><subparagraph commented="no" id="id44D43BB87A954512AE44B03D5223B041"><enum>(A)</enum><header>In general</header><text>The term <term>applicable notice</term> means, with respect to any applicable entity, a notice—</text><clause commented="no" id="idEE5D27FB597A430396AC41E02232129D"><enum>(i)</enum><text> which is received by the entity under subsection (b)(2)(A) or (c)(2) of section 493, and</text></clause><clause commented="no" id="id2400F03102624C3596963B267D7C4506"><enum>(ii)</enum><text>which relates to an applicable taxpayer who is a 20-percent owner with respect to such entity.</text></clause></subparagraph><subparagraph id="id93BD9782536F4D069E25F7721B809FE7"><enum>(B)</enum><header>20-percent owner</header><text>For purposes of subparagraph (A), a 20-percent owner shall be determined in the same manner as a 5-percent owner under section 493(b)(4)(B), except that <quote>20 percent</quote> shall be substituted for <quote>5 percent</quote> in applying clauses (i) and (ii)(I) thereof.</text></subparagraph></paragraph><paragraph id="id0FC1E5749E2C4B8387B7EB56DBA685B9"><enum>(3)</enum><header>Applicable entity</header><text>For purposes of this subsection, the term <term>applicable entity</term> has the meaning given such term by section 493.</text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection commented="no" id="idC9881783DB244E6883C45E044022E31D"><enum>(b)</enum><header>Effective date</header><text>The amendments made by this section shall apply to exchanges completed after December 31, 2023.</text></subsection></section><section id="idC76A1E1A651C4E3DABD17116C6C4F24B"><enum>213.</enum><header>Special rules for applicable trusts</header><subsection id="idC22402F1B0D043379EC9B44C29475D54"><enum>(a)</enum><header>In-Kind distributions</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/643">Section 643(e)(3)</external-xref> is amended—</text><paragraph id="idBCF69F0531B646A481A3A651C959494B"><enum>(1)</enum><text>in subparagraph (A), by striking <quote>to which an election under this paragraph applies</quote> and inserting <quote>to which this paragraph applies</quote>, and</text></paragraph><paragraph id="id500A4BEB42024EB0A7A9FB9A5B5D1583"><enum>(2)</enum><text>by striking subparagraph (B) and inserting the following:</text><quoted-block id="id8B3B055E87C64DC5B5D4E6AB42CF2073" display-inline="no-display-inline" style="OLC"><subparagraph id="id39E094C875514837AD812E21A04B5993"><enum>(B)</enum><header>Distributions to which this paragraph applies</header><text>This paragraph shall apply to—</text><clause id="id25CBD68F387C4267A13DC04E63B2233F"><enum>(i)</enum><text>any distribution of property by an estate which is described in section 495(a)(1)(B)(ii) or by an applicable trust (as defined in section 495(c)), and</text></clause><clause id="id482A80181BCA4BCB8A915A8976D1CC4D"><enum>(ii)</enum><text>any distribution during the taxable year of any other estate or trust which makes an election under this paragraph. </text></clause><continuation-text commented="no" continuation-text-level="subparagraph">Any election made under clause (ii) shall be made on the return of such estate or trust for such taxable year, and, once made, may be revoked only with the consent of the Secretary. </continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph></subsection><subsection id="id803E279A835E42C08DA8549744C2464D"><enum>(b)</enum><header>Treatment of loans</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/643">Section 643(i)</external-xref> is amended—</text><paragraph id="id8E59A952C2D549899F6B74594A7403A4"><enum>(1)</enum><text>by inserting <quote>or an applicable trust (as defined in section 495(c))</quote> after <quote>foreign trust</quote> in paragraph (1),</text></paragraph><paragraph id="idAF209F4B32904C0097410C11848B7901"><enum>(2)</enum><text>by striking <quote>who is a United States person</quote> in paragraph (1)(A) and inserting <quote>who is not exempt from tax under this chapter</quote>,</text></paragraph><paragraph id="id465980B72C5E49C7980ADA80EA64128E"><enum>(3)</enum><text>by striking <quote>United States person</quote> in paragraph (1)(B) and inserting <quote>person (other than a person who is exempt from tax under this chapter)</quote>, </text></paragraph><paragraph id="idF6F7ACE73F7F4B42889EA5629C3DB31B"><enum>(4)</enum><text>by striking paragraph (2)(C), and</text></paragraph><paragraph id="id0BC52177E95B43E59858E388B7929B99"><enum>(5)</enum><text>by striking <quote><header-in-text style="OLC" level="subsection">foreign</header-in-text></quote> in the heading thereof and inserting <quote><header-in-text style="OLC" level="subsection">certain</header-in-text></quote>.</text></paragraph></subsection><subsection id="id542C6CDA85E746C396D0EEE3A5030F42"><enum>(c)</enum><header>Treatment of multiple trusts</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/643">Section 643(f)(2)</external-xref> is amended by inserting <quote>or the rules of part IV of subchapter E</quote> after <quote>this chapter</quote>.</text></subsection><subsection id="id8A4665BAEBF74E44A5BE4AB409182E94"><enum>(d)</enum><header>Foreign trusts</header><paragraph id="id7908B0A09DD7419CA61B8B26921E5104"><enum>(1)</enum><header>In general</header><text>Subpart F of part I of subchapter J is amended by adding at the end the following new section:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id65871FD35B824F4C910F2214AA5C985C"><section id="idECD454E6BE3040A4B58E0D29A72E953E"><enum>686.</enum><header>Special rules for applicable foreign trusts</header><subsection id="idF8D86E3CA455402EAA74F4F6E34FE022"><enum>(a)</enum><header>In general</header><text>For purposes of this part, in the case of any beneficiary of an applicable foreign trust who is required to include in income any amount attributable to gain on an applicable transfer of any covered asset, the amount of tax imposed under this chapter shall be increased by the amount which bears the same ratio to the amount of the deferral recapture amount which would be determined on such applicable transfer under section 492(a) (determined as if such trust were an applicable taxpayer and section 492 applied to any covered asset of the trust) as—</text><paragraph id="id5F75A2D3F6704B7B8F656B3379FFA2FF"><enum>(1)</enum><text>the amount required to be included in income attributable to the gain on such applicable transfer, bears to</text></paragraph><paragraph id="id1787C1BCFB254A048831FA4F7F697262"><enum>(2)</enum><text>the total amount of the gain on such applicable transfer. </text></paragraph></subsection><subsection id="id264146040464472391D71827AABBC52A"><enum>(b)</enum><header>Exception</header><text>Subsection (a) shall not apply to any amount to the extent that the applicable foreign trust pays (at such time and in such manner as provided by the Secretary) the tax which would be imposed under section 492(a) (determined as if such trust were an applicable taxpayer and section 492 applied to any covered asset of the trust) with respect to the applicable transfer described in subsection (a).</text></subsection><subsection id="id55E2F3547A7E4272AA833549F81A7F38"><enum>(c)</enum><header>Applicable foreign trust</header><text>For purposes of this section, the term <term>applicable foreign trust</term> means any foreign trust which would be an applicable trust if such trust were a domestic trust.</text></subsection><subsection id="id66BB301DCD4E447D82B33708A9C232F0"><enum>(d)</enum><header>Other terms</header><text>Any term used in this section which is also used in part IV of subchapter E shall have the same meaning as when used in such part.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph id="id33E832B7E405464E886E27B04658DBFD"><enum>(2)</enum><header>Reporting</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/6048">Section 6048(c)(1)</external-xref> is amended by striking <quote>and</quote>, at the end of subparagraph (B), by redesignating subparagraph (C) as subparagraph (D), and by inserting after subparagraph (B) the following new subparagraph: </text><quoted-block style="OLC" display-inline="no-display-inline" id="id96EFF87A54A244D3962DA6D4AADFE61A"><subparagraph id="id049882D7FC5F453482598AD1D98D34F9"><enum>(C)</enum><text>such information as the Secretary shall require for purposes of determining the increase (if any) in tax under section 686, and</text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph id="idD819EA195BF84AFD93EDD84E78ECEA46"><enum>(3)</enum><header>Clerical amendment</header><text>The table of sections for subpart F of part I of subchapter J is amended by adding at the end the following new item:</text><quoted-block style="OLC" id="id8a6e427c-79a2-4344-9871-831c8a9e141c"><toc><toc-entry level="section" idref="idECD454E6BE3040A4B58E0D29A72E953E">Sec. 686. Special rules for applicable foreign trusts.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block></paragraph></subsection><subsection id="idF04A3DD6FFA143F19250D300A20C3B5A" commented="no"><enum>(e)</enum><header>Coordination with throwback rules</header><text>The Secretary of the Treasury (or the Secretary's delegate) shall provide such regulations or other guidance as necessary to coordinate the amendments made by this section with the rules of subpart D of part I of subchapter J.</text></subsection><subsection id="id2F2F5B948B0B460B9E0C59D98733C216" commented="no" display-inline="no-display-inline"><enum>(f)</enum><header>Effective dates</header><paragraph commented="no" display-inline="no-display-inline" id="idF4D876C7175542FE97A240A9AC441676"><enum>(1)</enum><header>In general</header><text>Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2023. </text></paragraph><paragraph display-inline="no-display-inline" commented="no" id="id7AD2293D56E34A27B0FEF4C525866506"><enum>(2)</enum><header>Foreign trusts</header><text>The amendments made by subsection (e) shall apply to applicable transfers occurring in taxable years beginning after December 31, 2023.</text></paragraph></subsection></section></subtitle><subtitle id="id6C4D7DC8A972432D9C53C8E7CFB1FD4A" style="OLC"><enum>C</enum><header>Treatment of deferred compensation and certain life insurance and annuity contracts</header><section id="id0320D9725BFA43DA9B80C9D78AD3C071"><enum>221.</enum><header>Elimination of deferral of tax on certain compensation</header><subsection id="id432BC52D50F142CA90FFC173963008BE"><enum>(a)</enum><header>In general</header><text>Subpart A of part I of subchapter D of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by adding at the end the following new section:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id7D6CF1EFCA884E14A07878C7534FEA9E"><section id="id77D73BDB83394599BEC6E16CD3F83750"><enum>409B.</enum><header>Special rules for certain deferred compensation</header><subsection id="id44B0F32BF54D478A918683A3D7FB05A4"><enum>(a)</enum><header>In general</header><text>In the case of an individual who is an applicable taxpayer for any taxable year, the taxpayer's tax under this chapter for the taxable year (determined without regard to this section) shall be increased by an amount equal to the sum of—</text><paragraph id="id7753D645FD584CEA86009DEA895C632E"><enum>(1)</enum><text>the deferral recapture amount determined under subsection (b)(1) for any applicable deferred compensation which is includible in the gross income of the individual for the taxable year, and</text></paragraph><paragraph id="idE930A34F535E4A8D8B3B45FBF283D584"><enum>(2)</enum><text>10 percent of the amount of any severance pay which is includible in the gross income of the individual during the taxable year.</text></paragraph></subsection><subsection id="id0015C6D9881643EE98AEA35BF1DFB207"><enum>(b)</enum><header>Deferral recapture amount</header><text>For purposes of this section—</text><paragraph id="id7CBE4E715E684BA5A81059915ABB036F"><enum>(1)</enum><header>In general</header><text>The term <term>deferral recapture amount</term> means, with respect to any applicable deferred compensation includible in gross income for the taxable year, the aggregate amount of interest (determined in the manner provided under paragraph (3)) on the deemed tax amount determined under paragraph (2) for each preceding taxable year to which compensation is allocated under paragraph (2)(A).</text></paragraph><paragraph id="idCDBF88EB8FB846B8A7BD2511F2413A19"><enum>(2)</enum><header>Deemed tax amount</header><subparagraph id="idD27D3A3BB7AB43929567D518DE973919"><enum>(A)</enum><header>In general</header><text>The deemed tax amount for any taxable year preceding the taxable year in which applicable deferred compensation is includible in gross income shall be the amount determined—</text><clause id="id0C66E7AAC6EA4DE68B93998E85C2FE9A"><enum>(i)</enum><text>first, except as provided in subparagraph (B), by allocating the amount of such compensation ratably to each day in the deferral period with respect to the applicable deferred compensation, and</text></clause><clause id="idADE764A5E5024CD0945A008D1A676276"><enum>(ii)</enum><text>then by multiplying the amount, if any, allocated under clause (i) to such preceding taxable year by the highest rate of tax in effect under section 1 for the taxable year in which the compensation is includible in gross income of the individual.</text></clause></subparagraph><subparagraph id="id7798D8C533C444A7A089591D6F93A8FE"><enum>(B)</enum><header>Special rule for periods before becoming applicable taxpayer</header><text>Notwithstanding subparagraph (A)(i), any compensation which would be otherwise allocated under such subparagraph to any taxable year preceding the first taxable year for which the taxpayer is treated as an applicable taxpayer shall be allocated to such first taxable year. </text></subparagraph></paragraph><paragraph id="idA57BED1BCE4C471E836BBF3704E33D51"><enum>(3)</enum><header>Computation of interest</header><subparagraph id="id89E8758C115240E5AFF1B23BD7C33E8B"><enum>(A)</enum><header>In general</header><text>The amount of interest referred to in paragraph (1) on any deemed tax amount determined under paragraph (2) for any preceding taxable year with respect to applicable deferred compensation shall be determined for the period beginning on the due date for such preceding taxable year and ending on the last day of the deferral period with respect to the applicable deferred compensation, by using the rates determined under section 6621(b) (plus 1 percentage point), and the method applicable under section 6621, for underpayments of tax for such period.</text></subparagraph><subparagraph id="idCC36176B279B43A4904B5F549A6F54C8"><enum>(B)</enum><header>Due date</header><text>For purposes of this paragraph, the term <term>due date</term> means, with respect to any preceding taxable year, the date prescribed by law (determined without regard to extensions) for filing the return of the tax imposed by this chapter for such taxable year.</text></subparagraph></paragraph><paragraph id="idDD59A1BFB6804E578084A8BD3D1D2BFF"><enum>(4)</enum><header>Limitation</header><text>In no case shall the deferral recapture amount determined with respect to any applicable deferred compensation which is includible in gross income for a taxable year exceed an amount equal to 10 percent of the amount of such compensation. </text></paragraph></subsection><subsection id="id49EEFE274BA4490AACA935157D68361D"><enum>(c)</enum><header>Definitions</header><text>For purposes of this section—</text><paragraph id="id5CA56830CFED4AD389780159F6AC79B4"><enum>(1)</enum><header>Applicable taxpayer</header><text>The term <term>applicable taxpayer</term> has the meaning given such term by section 495.</text></paragraph><paragraph id="id112E979954F447BFB9FEE42F44662DB9"><enum>(2)</enum><header>Applicable deferred compensation</header><subparagraph id="id62466AF6CDE545738660B9DF801B821A"><enum>(A)</enum><header>In general</header><text>Except as provided in subparagraph (B), the term <term>applicable deferred compensation</term> means—</text><clause id="idDB0BDD81CF8447F69D5D50596FA98CA0"><enum>(i)</enum><text>any compensation provided under a nonqualified deferred compensation plan, as defined in section 409A(d)(1), except that—</text><subclause id="idD5A6FD907EB64C94A556341A4D2A24ED"><enum>(I)</enum><text>such term shall include stock appreciation rights, and</text></subclause><subclause id="id66C5B9F5BBDA4A05B976A40CA5E78881"><enum>(II)</enum><text>compensation shall not fail to be treated as deferred solely because such compensation is not treated as deferred for purposes of section 409A by reason of such compensation being includible in gross income for the first taxable year after a taxable year in which such compensation is no longer subject to a substantial risk of forfeiture, and </text></subclause></clause><clause id="id1E08296A2DBA4C4E9A8784B5F7903285"><enum>(ii)</enum><text>any other property transferred in connection with the performance of services which is subject to section 83.</text></clause></subparagraph><subparagraph id="idA40C980149054895ADF4AE958DD97610"><enum>(B)</enum><header>Exceptions</header><text>Such term does not include—</text><clause id="id02B67EF8F42E4B5389D0F25C48F56C24"><enum>(i)</enum><text>severance pay, or</text></clause><clause id="idF790E0E5B47C42419518B9EE01F3CEBE"><enum>(ii)</enum><text>any transfer of a profits interest in a partnership.</text></clause></subparagraph><subparagraph id="id81F359EDFB4844C28E0E5982DE01814E"><enum>(C)</enum><header>Earnings and interest</header><text>Any earnings, interest, or similar adjustment included in an amount of applicable deferred compensation shall not be treated as separately deferred from such amount. </text></subparagraph></paragraph><paragraph id="idAA0A6152C6DB44DCA2B4ABB47CE186FA" commented="no"><enum>(3)</enum><header>Severance pay</header><text>The term <term>severance pay</term> means any compensation the payment or vesting of which is contingent, in whole or in part, upon the termination of employment or other services, including cash, property, reimbursement or direct provision of living, travel, and business expenses, and life, health, or other insurance, to the extent otherwise includible in gross income.</text></paragraph><paragraph id="id4CA49B7835DB475580B8A89C1764B7C0"><enum>(4)</enum><header>Deferral period</header><subparagraph id="id84A2BF0C72F345ECAB30F3DD24E826DE"><enum>(A)</enum><header>In general</header><text>Except as provided in subparagraphs (B) and (C), the term <term>deferral period</term>, with respect to any applicable deferred compensation, means the period—</text><clause id="id097E4FEF08624FBA8922296B44E4612C"><enum>(i)</enum><text>beginning on the date the compensation was first deferred, without regard to vesting, transferability, or risk of forfeiture, and</text></clause><clause id="id75C04483D3584106A6FE89888FEA4AC0"><enum>(ii)</enum><text>ending on the date such compensation is includible in gross income or, if applicable, the date described in section 83(a)(1) with respect to such compensation.</text></clause><continuation-text continuation-text-level="subparagraph">For purposes of the preceding sentence, compensation shall be treated as first deferred as of the date the applicable taxpayer first has a legally binding right to the compensation or, in the case of property subject to section 83, the date of transfer of the property.</continuation-text></subparagraph><subparagraph id="idC7BA7E230F5843C7B2F71F5CC1C3923B"><enum>(B)</enum><header>Computation of interest</header><text>Solely for purposes of subsection (b)(3), the deferral period shall end on the last day of the taxable year which includes the date described in subparagraph (A)(ii).</text></subparagraph><subparagraph id="idD28113DED5DE4E53B92E9C7E948F72EB"><enum>(C)</enum><header>Property transferred pursuant to the exercise of an option</header><text>In the case of property acquired pursuant to an option described in section 83(e)(3), the deferral period shall begin on the date of grant of the option pursuant to which the property was acquired.</text></subparagraph></paragraph></subsection><subsection id="idAB720292E15548149E1372B6CE668B91"><enum>(d)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection id="id3D352A268061480880DFFA810FEE649B"><enum>(b)</enum><header>Information reporting with respect to applicable deferred compensation</header><text>Subpart B of part III of subchapter A of chapter 61, as in effect after the amendments made by section 334(d) of the SECURE 2.0 Act of 2022, is amended by adding at the end the following new section:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id3AE1D6D3DE384F798486C54EE371A051"><section id="id7611ADCBED43432BB35D2D06A947FA23"><enum>6050AA.<?LEXA-Enum 6050AA.?></enum><header>Information with respect to applicable deferred compensation</header><subsection id="id11D4671A2E2F40DB9483B2E2ECF4246A"><enum>(a)</enum><header>In general</header><text>Every person making a payment to an individual in excess of $5,000,000 of—</text><paragraph id="idC9804F9599FD4FE2880B529A3516A8D6"><enum>(1)</enum><text>any applicable deferred compensation described in section 409B(c)(2)(A), or</text></paragraph><paragraph id="idFAE1128F188046E8A5AC2C23B158019C"><enum>(2)</enum><text>any severance pay (as defined in section 409B(d)(3)), </text></paragraph><continuation-text continuation-text-level="subsection">shall make a return, not later than January 31 of the first calendar year beginning after the close of the taxable year during which such payment is includible in gross income of the individual.</continuation-text></subsection><subsection id="idACC7E2D15DB84BF4ABA765BAA6856536"><enum>(b)</enum><header>Information required</header><text>The return required by subsection (a) shall include—</text><paragraph id="idC3BC7D77B3C64163B80089CFDF36400D"><enum>(1)</enum><text>the name, taxpayer identification number, and address of the individual to whom the payment of applicable deferred compensation or severance pay is made,</text></paragraph><paragraph id="id574AA4880E294EF2A71C165D475C7940"><enum>(2)</enum><text>the date any applicable deferred compensation was first deferred (the date of the transfer, in the case of property subject to section 83, or the date of grant of the option, in the case of property acquired pursuant to an option described in section 83(e)(3)), without regard to vesting, transferability, or risk of forfeiture, </text></paragraph><paragraph id="idD2DCEE87D1644A51850424CC13A2DBAB"><enum>(3)</enum><text>the amount of such compensation includible in gross income of the individual for the taxable year,</text></paragraph><paragraph id="idA7FCC6152C694D3FAC2E04BD8C122433"><enum>(4)</enum><text>the amount of such severance pay includible in gross income of the individual for the taxable year, and</text></paragraph><paragraph id="id1D078E1ED03843009B2F218CA97D7F85"><enum>(5)</enum><text>such other information as the Secretary may require.</text></paragraph></subsection><subsection id="id74FF0A4BA5A143328BDDE637483C362C"><enum>(c)</enum><header>Special rules</header><paragraph id="id004E43E3FA034B42A0B0B96C65809B26"><enum>(1)</enum><header>Section 83 compensation</header><text>With respect to transfers of property to which section 83 applies, the information required under paragraphs (2) and (3) of subsection (b) shall be reported separately for each item of property transferred, except that property for which the information required by such paragraphs is identical may be aggregated. </text></paragraph><paragraph id="idEEDC0F22C23D441DB4DAA8507301266B"><enum>(2)</enum><header>Other compensation</header><text>With respect to any applicable deferred compensation not described in paragraph (1), if such compensation is paid pursuant to more than 1 plan or arrangement or involves amounts which were first deferred on more than 1 date, the information required under paragraphs (2) and (3) of subsection (b) shall be reported separately with respect to each such plan or arrangement and each such date. </text></paragraph></subsection><subsection id="idD5FF463DF3BB4A13A4C8D89B9D2106AF"><enum>(d)</enum><header>Statements To be furnished to individuals with respect to whom information is reported</header><text>Every person required to make a return under subsection (a) shall furnish to each individual with respect to whom such a return is required a written statement showing—</text><paragraph id="id39491BC90896485189E83A5519FC4309"><enum>(1)</enum><text>the name, address, and phone number of the information contact of the person making such return, and</text></paragraph><paragraph id="idB7BBB10AC2AE4F5B93D36E3BF56A6C3D"><enum>(2)</enum><text>the information required by paragraphs (2) through (5) of subsection (b).</text></paragraph><continuation-text continuation-text-level="subsection">The written statement required under the preceding sentence shall be furnished to the individual on or before January 31 of the first calendar year beginning after the close of the taxable year for which the return under subsection (a) was made.</continuation-text></subsection><subsection id="id4CE8DF09CFBB4400BF261652D411034D"><enum>(e)</enum><header>Adjustments for inflation</header><paragraph id="idB1DECC623ADB44C1A7C35EF0DB9DC1D7"><enum>(1)</enum><header>In general</header><text>In the case of any taxable year beginning after 2024, the $5,000,000 amount under subsection (a) shall be increased by an amount equal to the product of—</text><subparagraph id="id85ED097AC89847ADADF4383CBB73B79C"><enum>(A)</enum><text>such dollar amount, and</text></subparagraph><subparagraph id="id23CEB4600F514D14BA593F032C38F235"><enum>(B)</enum><text>the cost-of-living adjustment under section 1(f)(3) for the calendar year in which such taxable year begins, determined by substituting <quote>calendar year 2023</quote> for <quote>calendar year 1992</quote> in subparagraph (B) thereof.</text></subparagraph></paragraph><paragraph id="id7ED4623A9DB742CEBCBC8B74CF4438BF"><enum>(2)</enum><header>Rounding</header><text>If any amount as adjusted under paragraph (1) is not a multiple of $250,000, such amount shall be rounded to the next lowest multiple of $250,000. </text></paragraph></subsection><subsection id="idB5B52CE19DAB4F4A8F91F5962ECF222D"><enum>(f)</enum><header>Regulations</header><text>The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations specifying what constitutes a payment to an individual of applicable deferred compensation for purposes of subsection (a).</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection id="id4D3B122A74CE4F4E9BAA881BD18DF804"><enum>(c)</enum><header>Penalties</header><paragraph id="id2F7CD1FD5B804B1AB1DD66B7A090F223"><enum>(1)</enum><header>Returns</header><text>Section 6724(d)(1)(B), as in effect after the amendments made by section 334(d) of the SECURE 2.0 Act of 2022, is amended by striking <quote>or</quote> at the end of clause (xxvii), by striking <quote>and</quote> at the end of clause (xxviii) and inserting <quote>or</quote>, and by inserting after clause (xxviii) the following new clause:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id160D22751BF44A14BCE505CD9687B4E9"><clause id="idA2119595C52446FA94A86FEA6CA61C39"><enum>(xxix)</enum><text>section 6050AA (a) (relating to returns of information with respect to applicable deferred compensation), and</text></clause><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph id="id5F00DE4FD5FA410AB986475819761CAB"><enum>(2)</enum><header>Statements</header><text>Section 6724(d)(2), as so in effect, is amended—</text><subparagraph id="id8A1A3EDCAC8843FF8686AA6CD4750F3B"><enum>(A)</enum><text>by striking <quote>or</quote> at the end of subparagraph (KK),</text></subparagraph><subparagraph id="idC84F6B04005343BA91E21CD9EF38076C"><enum>(B)</enum><text>by striking the period at the end of subparagraph (LL) and inserting <quote>, or</quote>, and</text></subparagraph><subparagraph id="id94F38F0CAFEC43D6ABAE7FB4FE19AD31"><enum>(C)</enum><text>by inserting after subparagraph (LL) the following new subparagraph:</text><quoted-block style="OLC" display-inline="no-display-inline" id="idF120ABCBD404439D8C0324E55EE33D72"><subitem id="id4566DF4FE5B942FB82D2786DFC272E54"><enum>(MM)</enum><text>section 6050AA(d) (relating to statements of information with respect to applicable deferred compensation).</text></subitem><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph></paragraph></subsection><subsection id="idF62021E73CEC46F68BB2879C23F4C15D"><enum>(d)</enum><header>Clerical amendments</header><paragraph id="id564699E6B74E42F4B1C970206F5AAF80"><enum>(1)</enum><header>In general</header><text>The table of sections for subpart A of part I of subchapter D of <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/26/1">chapter 1</external-xref> is amended by inserting after the item relating to section 409A the following new item:</text><quoted-block style="OLC" id="id9B7B7449889F4D00AD33DFBD71A67DCB"><toc><toc-entry level="section">Sec. 409B. Special rules for certain deferred compensation.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph id="idFD743DEDD47144E4B404C676456ADDD6"><enum>(2)</enum><header>Information reporting</header><text>The table of sections for subpart B of part III of subchapter A of chapter 61, as in effect after the amendments made by section 334(d) of the SECURE 2.0 Act of 2022, is amended by inserting after the item relating to section 6050Z the following new item:</text><quoted-block style="OLC" id="id7C69CB6AD0F1426083C1AC7EC2308E8A"><toc><toc-entry level="section">Sec. 6050AA. Information with respect to applicable deferred compensation.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block></paragraph></subsection><subsection id="idD35DBE5C9D2B470992C49A473C5BAE15"><enum>(e)</enum><header>Effective date</header><text>The amendments made by this section shall apply to taxable years beginning after December 31, 2023. </text></subsection></section><section id="id0A12A292DB844346B29A16D709BF2954"><enum>222.</enum><header>Rules relating to certain life insurance and annuity contracts of applicable taxpayers</header><subsection id="idA0712D4401B246F79858D478EE14F73C"><enum>(a)</enum><header>Treatment of amounts received</header><paragraph id="idAA8C5BB437294150A7E60AC5A57CE08F"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/72">Section 72(e)</external-xref> is amended by redesignating paragraph (12) as paragraph (13) and by inserting after paragraph (11) the following:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id0453BF513B0E46668F1D8CC34A2F25E6"><paragraph id="id575E5AA6AF63400AA6D14CD1FD6C043B"><enum>(12)</enum><header>Treatment of certain amounts received under certain life insurance and annuity contracts of applicable taxpayers</header><subparagraph commented="no" display-inline="no-display-inline" id="id92a0eb6b-db2e-11eb-bf11-e2f53ffbac53"><enum>(A)</enum><header display-inline="yes-display-inline">In general</header><text display-inline="yes-display-inline">In the case of any applicable amount which is received during any taxable year, notwithstanding paragraph (5)(A) or (5)(E)— </text><clause commented="no" display-inline="no-display-inline" id="id7E7A97077FD24702A4B959CD6C238B1E"><enum>(i)</enum><text>if such amount is received on or after the annuity starting date, paragraph (2)(A) shall apply, and </text></clause><clause display-inline="no-display-inline" commented="no" id="id76E491B8955346DFADF5DBF29CAA7548"><enum>(ii)</enum><text>if such amount is received before the annuity starting date or is received with respect to a life insurance contract to which this section applies, the rules of clauses (i) and (ii) of paragraph (2)(B) shall apply.</text></clause></subparagraph><subparagraph display-inline="no-display-inline" commented="no" id="idAABD2F89EAB5403B9C317006E4C2E9C2"><enum>(B)</enum><header>Applicable amount</header><clause display-inline="no-display-inline" commented="no" id="id32B1D59A879F412186C9CB1DF2B7231D"><enum>(i)</enum><header>In general</header><text>For purposes of this paragraph, the term <term>applicable amount</term> means—</text><subclause display-inline="no-display-inline" commented="no" id="id581668CC3C62410195FA0AA05E6751CB"><enum>(I)</enum><text>any amount to which this subsection applies which is received under an applicable private placement life insurance or annuity contract, and</text></subclause><subclause display-inline="no-display-inline" commented="no" id="id13F4E4BF5F8149C9916F60027D0D15E6"><enum>(II)</enum><text>in the case of an applicable taxpayer, notwithstanding paragraph (5)(A), (5)(E), or (10)(A), any amount or portion described in paragraph (4)(A) with respect to a life insurance or annuity contract, except that <quote>any applicable taxpayer or any related person (as defined in section 144(a)(3)) to an applicable taxpayer</quote> shall be substituted for <quote>an individual</quote> in applying such paragraph. </text></subclause></clause><clause display-inline="no-display-inline" commented="no" id="id33EB721904F146C48871A90EA3B26F90"><enum>(ii)</enum><header>Treatment of refunds, surrenders, redemptions and maturities</header><text>Notwithstanding paragraph (5)(A) or (5)(E), amounts described in clause (i)(I) shall include amounts described in clause (i) or (ii) of paragraph (5)(E) received under an applicable private placement life insurance or annuity contract. </text></clause><clause display-inline="no-display-inline" commented="no" id="id2B06CCCF9504475B9785D9219137FC08"><enum>(iii)</enum><header>Amounts under pre-1982 and qualified plan contracts, etc., excluded</header><text>Such term shall not include amounts received—</text><subclause display-inline="no-display-inline" commented="no" id="id77FF7D9D167D4C5EA4D19232997E0F55"><enum>(I)</enum><text>under a contract which is described in paragraph (5)(B) or (5)(D), or </text></subclause><subclause display-inline="no-display-inline" commented="no" id="id62C6C851FC884EB38D7524F51E697BA7"><enum>(II)</enum><text>under a qualified tuition program (as defined in section 529(b)) or under a Coverdell education savings account (as defined in section 530(b)).</text></subclause></clause></subparagraph><subparagraph id="id2A3F56EA9F3441A6BE8ADD06008241FB"><enum>(C)</enum><header>Applicable private placement life insurance or annuity contract</header><text>For purposes of this paragraph—</text><clause id="id9E6BA236DEE04B7782444DB33D378D78"><enum>(i)</enum><header>In general</header><text>The term <term>applicable private placement life insurance or annuity contract</term> means a private placement life insurance or annuity contract the holder of which (whether directly or indirectly) is an applicable taxpayer.</text></clause><clause id="id32188EB49F5647A58D7B7D0E1687E91D"><enum>(ii)</enum><header>Secretarial authority</header><text>The Secretary shall prescribe regulations or other guidance which treat a private placement life insurance or annuity contract as an applicable private placement life insurance or annuity contract in cases where an applicable taxpayer (or a related person) has an interest in such contract not described in clause (i) if such treatment is necessary to prevent the avoidance of the purposes of this paragraph.</text></clause></subparagraph><subparagraph id="id1F1B00B507914DCFA71B94CA57EA950E"><enum>(D)</enum><header>Private placement life insurance or annuity contract</header><text>For purposes of this paragraph, the term <term>private placement life insurance or annuity contract</term> means any contract—</text><clause id="idE3B5A5A2D9C24A78B241E9BD25C3F526"><enum>(i)</enum><text>which is an annuity contract or a life insurance contract, and</text></clause><clause id="idA16D2400991E43C799237675CA72AF18"><enum>(ii)</enum><text>with respect to which the holder of the contract is required, for purposes of obtaining a registration exemption under securities laws as in effect on the date of enactment of this section (including the Securities Exchange Act of 1934 and the Investment Advisors Act of 1940), to make a representation that such owner— </text><subclause id="idED9983B1FD0B4C3E8DBA0678038A8C59"><enum>(I)</enum><text>has a specified minimum amount of income or assets,</text></subclause><subclause id="idE602EBFACEAA4921B44AA3BC6CFA0E68"><enum>(II)</enum><text>has completed a specified minimum level of education, or</text></subclause><subclause id="id127BF6A353CD4C0C817B002C77F42E92"><enum>(III)</enum><text>holds a specific license or credential. </text></subclause></clause></subparagraph><subparagraph id="id105670D4EFD343CAB76F2E4A71C9787E"><enum>(E)</enum><header>Applicable taxpayer</header><text>For purposes of this paragraph, the term <term>applicable taxpayer</term> has the meaning given such term under section 495.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph id="id6492F4C09D484BC7AEE0D1342F8C4124"><enum>(2)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/72">Section 72(e)(5)(C)</external-xref> is amended by inserting <quote>or (12)</quote> after <quote>(10)</quote>.</text></paragraph><paragraph id="id96E401A087004DC7B22B56FB6D3F8ED5"><enum>(3)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to amounts received in taxable years beginning after December 31, 2023. </text></paragraph></subsection><subsection id="idB0F894BCE15B494D88989343180E7D1D"><enum>(b)</enum><header>10-Percent additional tax for distributions from applicable private placement life insurance or annuity contracts</header><paragraph id="id4659F8B66703481389EE1040ABF69015"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/72">Section 72(v)</external-xref> is amended—</text><subparagraph id="idE18CC74F137C4569A07898F204FF8A5B"><enum>(A)</enum><text>by inserting <quote>or an applicable private placement life insurance or annuity contract (as defined in subsection (e)(12))</quote> after <quote>a modified endowment contract (as defined in section 7702A)</quote> in paragraph(1), and</text></subparagraph><subparagraph id="id67EA4DE75E2245339003411D2DF851B6"><enum>(B)</enum><text>by inserting <quote><header-in-text style="OLC" level="subsection">and applicable private placement life insurance or annuity contracts</header-in-text></quote> after <quote><header-in-text style="OLC" level="subsection">modified endowment contracts</header-in-text></quote> in the heading thereof.</text></subparagraph></paragraph><paragraph id="id74076831BAB14D02916170C89F426BF1"><enum>(2)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to amounts received in taxable years beginning after December 31, 2023. </text></paragraph></subsection><subsection id="idA8146A4D6FCF4BE49F3FC723E7CDE539"><enum>(c)</enum><header>Repeal of exclusion for death benefits</header><paragraph id="id35ADF06A6BA24E2581A551B13B705963"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/101">Section 101</external-xref> is amended by adding at the end the following new subsection:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id79484314AB6144F69DD831A984F0F819"><subsection id="idC6F958B5F4694BB18395325837E58762"><enum>(k)</enum><header>Exclusion not To apply</header><paragraph id="id1C97B783CE4A4C7EAA570640F58CFC06"><enum>(1)</enum><header>In general</header><text>Subsection (a)(1) shall not apply to amounts received by reason of the death of the insured under an applicable private placement life or annuity contract (within the meaning of section 72(e)(12)).</text></paragraph><paragraph id="idC59A77BF8C234023A85D86DB99EF1E0C"><enum>(2)</enum><header>Amounts previously included</header><text>The Secretary shall prescribe rules to ensure that paragraph (1) shall not apply to any portion of any amount received which was previously included in gross income. </text></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph id="id16668B23AA014113A05D832911003AFC"><enum>(2)</enum><header>Conforming amendment</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/101">Section 101(a)(1)</external-xref> is amended by striking <quote>and subsection (j),</quote> and inserting <quote>subsection (j), and subsection (k),</quote>.</text></paragraph><paragraph id="id7A1A24071682416AB64E78060D332763"><enum>(3)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to amounts received in taxable years beginning after December 31, 2023. </text></paragraph></subsection><subsection id="idF8EEAD8C153842709ABCE79A235F49B9"><enum>(d)</enum><header>Reporting requirements</header><paragraph id="id26C65CE9B5A44008BB3720F121E69CB5"><enum>(1)</enum><header>In general</header><text>Subpart B of part III of subchapter A of chapter 61, as amended by this Act, is amended by adding at the end the following new section: </text><quoted-block style="OLC" display-inline="no-display-inline" id="idCCE7B877C1B54C419E3E0EF8A6326346"><section id="idDE9C54BF7F9F48E1B1E4AC6CFFE2E3DE"><enum>6050BB.<?LEXA-Enum 6050BB.?></enum><header>Returns relating to amounts received under certain life insurance and annuity contracts</header><subsection id="id443C4E592649405B8B0A78D67F5B69F4"><enum>(a)</enum><header>In general</header><text>Every person who issues a life insurance or annuity contract or who reinsures such a contract shall make an annual return (at such time and in such manner as the Secretary shall prescribe) setting forth—</text><paragraph id="id8B9ADC481CBD4DB7A731CDEAE90BB044"><enum>(1)</enum><text>the name, address, and TIN of such person,</text></paragraph><paragraph id="idc038cab8a334403f8480f5332b59c312"><enum>(2)</enum><text>the name, address, and TIN of each person who receives an applicable amount (as defined in section 72(e)(12)) during the year with respect to any life insurance or annuity contract issued or reinsured by such person,</text></paragraph><paragraph id="id806F5834E6F645F49D635D0AA2F80D3F"><enum>(3)</enum><text>the aggregate applicable amounts received by each person identified in paragraph (2), and</text></paragraph><paragraph id="id41239F845850455F9B3560EC84C6849C"><enum>(4)</enum><text>such other information as the Secretary may require.</text></paragraph></subsection><subsection id="id556215dae05443aeba583d298f5b42cb"><enum>(b)</enum><header>Statement To be furnished to taxpayers with respect to whom information is required</header><paragraph id="idc79681babfce4d70a394827c4110d79b"><enum>(1)</enum><header>In general</header><text>Every person that is required to make a return under subsection (a) shall furnish to each person whose identity is required to be set forth under subsection (a)(2) a written statement showing—</text><subparagraph id="id9e60e02e9de945d080dcd5f39a9e3d55"><enum>(A)</enum><text>the name, address, and phone number of the information contact of the person required to make such return, and</text></subparagraph><subparagraph id="id4411b62a240a4a0eb5455877a63df809"><enum>(B)</enum><text>the information required to be shown on such return with respect to the person described in subsection (a)(2) and with respect to applicable amounts received by such person.</text></subparagraph></paragraph><paragraph id="idd8eaea31c58b40f1a002494fd4b3359a"><enum>(2)</enum><header>Furnishing of information</header><text>The written statement required under paragraph (1) shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.</text></paragraph></subsection><subsection id="id24AECF1B39DD4CCE956B62F5EF03C374"><enum>(c)</enum><header>Regulatory authority</header><text>The Secretary may prescribe such regulations and other guidance as necessary for purposes of carrying out this section, including regulations or other guidance to require reporting under this section by such other persons as necessary to carry out the purposes of section 72(e)(12).</text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph id="id15c17326e74647bf91dd2ea09bbed54f"><enum>(2)</enum><header>Penalties</header><subparagraph id="idf51aa749139448499189e5b481617bbf"><enum>(A)</enum><header>Returns</header><text>Section 6724(d)(1)(B), as amended by this Act, is amended by striking <quote>or</quote> at the end of clause (xxviii), by striking <quote>and</quote> at the end of clause (xxix) and inserting <quote>or</quote>, and by inserting after clause (xxix) the following new clause:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id1ef368931c264bc8ae566e43578c4219"><clause id="idef600bf13f8d4b299c78c6f260d02783"><enum>(xxx)</enum><text>section 6050BB(a) (relating to returns of information with respect to private placement life insurance and annuity contracts),</text></clause><after-quoted-block>.</after-quoted-block></quoted-block></subparagraph><subparagraph id="idfa408d55d65942afa5cf44f06eb75457"><enum>(B)</enum><header>Statements</header><text>Section 6724(d)(2), as so amended, is amended—</text><clause id="id8b4cff0cf1a342c08ccd5d8d142519e6"><enum>(i)</enum><text>by striking <quote>or</quote> at the end of subparagraph (LL),</text></clause><clause id="idb567e23b037b4b0382cede5b446c0ed6"><enum>(ii)</enum><text>by striking the period at the end of subparagraph (MM) and inserting <quote>, or</quote>, and</text></clause><clause id="id7e29aee45711480cb45e1510d14d8722"><enum>(iii)</enum><text>by inserting after subparagraph (MM) the following new subparagraph:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id6863ff6b1be741c297a46ecdd9bc1034"><subitem id="id40cbb3abc5464d3a8fd94f2615c57b5c"><enum>(NN)</enum><text>section 6050BB(b) (relating to statements of information with respect to private placement life insurance and annuity contracts).</text></subitem><after-quoted-block>.</after-quoted-block></quoted-block></clause></subparagraph></paragraph><paragraph id="id802221089B47473BB0EFB02E6045C37C"><enum>(3)</enum><header>Clerical amendment</header><text>The table of sections for subpart B of part III of subchapter A of chapter 61, as amended by this Act, is amended by inserting after the item relating to section 6050AA the following new item:</text><quoted-block style="OLC" id="idbf1e96a8-1893-41a3-8ad2-f6dd8e38579f"><toc><toc-entry level="section" idref="idDE9C54BF7F9F48E1B1E4AC6CFFE2E3DE">Sec. 6050BB. Returns relating to amounts received under certain life insurance and annuity contracts.</toc-entry></toc><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph id="id871FFB22C0654F599C5C2AA84946D544"><enum>(4)</enum><header>Effective date</header><text>The amendments made by this subsection shall apply to taxable years beginning after December 31, 2023. </text></paragraph></subsection></section></subtitle><subtitle id="idD42D63F4D67A4345BB2927DDC5B6862D" style="OLC"><enum>D</enum><header>Repeal of special treatment for certain investments </header><section id="idcd7eb20071214fb1a4ab72543ebb764f" commented="no"><enum>231.</enum><header>Treatment of exclusion for certain small business stock</header><subsection id="id4625db84ad8b44d0a9d3224e7a15ac97" commented="no"><enum>(a)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1202">Section 1202(a)</external-xref> is amended by adding at the end the following new paragraph:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id51376e428c6f4755ad8aa9cdf64d1d52"><paragraph id="id7353fc852d604a5c98de662b73e69d96" commented="no"><enum>(5)</enum><header>Special rules for applicable taxpayers</header><subparagraph id="id1cf11e1775bd4c68af4139782ad90ce9" commented="no"><enum>(A)</enum><header>In general</header><text>This subsection shall not apply to any gain from the sale or exchange of qualified small business stock by an applicable taxpayer (as defined in section 495).</text></subparagraph><subparagraph id="idcaf8aafc67924ff397fe656cda773ad0" commented="no"><enum>(B)</enum><header>Exception</header><text>Subparagraph (A) shall not apply to any qualified small business stock acquired before November 30, 2023.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection id="idc99a8967b1924187832c13a280847562" commented="no" display-inline="no-display-inline"><enum>(b)</enum><header>Effective date</header><text>The amendment made by this subsection shall apply to sales or exchanges on or after November 30, 2023.</text></subsection></section><section id="idDEFDB73D631644729B1EA055D40DCBA2" commented="no"><enum>232.</enum><header>Modifications for investments in qualified opportunity funds</header><subsection id="idAB2B82BA0F44493AB4824B4DF2F18A74" commented="no"><enum>(a)</enum><header>Termination of election</header><paragraph commented="no" id="id995FDCE31DAB4A80BC4C6CCA304DB5BA"><enum>(1)</enum><header>In general</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1400Z">Section 1400Z–2(a)(2)(B)</external-xref> is amended to read as follows:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id727915364DF7413ABA9FBDFBCDB7DB58"><subparagraph commented="no" id="id3594EB247AD54C3CB148BE4E658D952F"><enum>(B)</enum><text>except as provided in paragraph (3), with respect to any sale or exchange after the earlier of—</text><clause commented="no" id="idBFA9051D80CB4165AE840D54679B1839"><enum>(i)</enum><text>December 31, 2026, or</text></clause><clause commented="no" id="idE6ABBD651DD94E38A4C365BBD16D9259"><enum>(ii)</enum><text>in the case of an applicable taxpayer, the last day of the taxable year preceding the first taxable year for which the taxpayer is an applicable taxpayer.</text></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph><paragraph commented="no" id="idA3610C59609C498A9FB746AA141CE068"><enum>(2)</enum><header>Special rules</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1400Z">Section 1400Z–2(a)</external-xref> is amended by adding at the end the following new paragraph:</text><quoted-block style="OLC" display-inline="no-display-inline" id="id2F1A9318CD684A96AF47E534105C3C39"><paragraph commented="no" id="id504686BC3CF24D2AB8A57DC54B7C3A1E"><enum>(3)</enum><header>Special rules for applicable taxpayers and entities</header><text>For purposes of paragraph (2)(B)—</text><subparagraph commented="no" id="idA42E16ACD3544AC6AA4EAB10F50E6057"><enum>(A)</enum><header>Applicable entities</header><text>No election may be made under paragraph (1) by an applicable entity with respect to any sale or exchange if a notice received by the entity under subsection (b)(2)(A) or (c)(2) of section 493 is in effect at the time of such sale or exchange.</text></subparagraph><subparagraph id="id4C9526BAC0404B099D4BD68F6F7579ED"><enum>(B)</enum><header>Special rule for 2023</header><text>In the case of a taxpayer which would be an applicable taxpayer for its first taxable year beginning in 2023 (determined as if part IV of subchapter E applied to taxable years beginning in 2023), clause (ii) of paragraph (2)(B) shall be applied by substituting <quote>November 30, 2023</quote> for the date otherwise specified in such clause.</text></subparagraph><subparagraph id="idADD33D094E74403B85092751FB71D35A"><enum>(C)</enum><header>Definitions</header><text>For purposes of this paragraph and subsection (c), any term used in this paragraph which is also used in part IV of subchapter E shall have the same meaning as when used in such part.</text></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></paragraph></subsection><subsection id="id5E94791B25914B8E8D453DE6480F25F2" commented="no"><enum>(b)</enum><header>Modification of special rule for investments held 10 years</header><text><external-xref legal-doc="usc" parsable-cite="usc/26/1400Z">Section 1400Z–2(c)</external-xref> is amended by striking <quote>shall be equal to</quote> and all that follows and inserting </text><quoted-block style="OLC" display-inline="yes-display-inline" id="idA4FC7BFEE1984D558385A0D0FF085843"><text>shall be equal to—</text><paragraph commented="no" id="idAA25AD4833324BD3B7B35FA9A504C043"><enum>(1)</enum><text>in the case of any taxpayer who is an applicable taxpayer for any taxable year during which such investment was held by the taxpayer or any taxpayer which is an applicable entity, the lesser of—</text><subparagraph commented="no" id="id5890056C918A48D3AF7304CA5F9A2395"><enum>(A)</enum><text>the fair market value of such investment as of the last day of the taxable year which includes the later of—</text><clause commented="no" id="id9BFF2B9303CD4E149BC0858FBB13A79D"><enum>(i)</enum><text>the date that such investment has been held for 10 years, or</text></clause><clause commented="no" id="idF76B01E82990461BA22152A175FC6780"><enum>(ii)</enum><text>in the case of—</text><subclause commented="no" id="idCB02B82FDEAE4837BD7836919FC351DB"><enum>(I)</enum><text>an applicable taxpayer, the date that such taxpayer first became an applicable taxpayer, or</text></subclause><subclause commented="no" id="id5951F9DF89F646AB9C2B87EDA826B0CA"><enum>(II)</enum><text>an applicable entity, the first date a notice was received by the entity under subsection (b)(2)(A) or (c)(2) of section 493, or </text></subclause></clause></subparagraph><subparagraph commented="no" id="id65D937ED6B574777BA1E3C3CD2EF75B7"><enum>(B)</enum><text>the fair market value of such investment on the date that investment is sold or exchanged, and</text></subparagraph></paragraph><paragraph commented="no" id="id039D3227D3C64687BE9D01371CFD1BE2"><enum>(2)</enum><text>in the case of any other taxpayer, the fair market value of such investment on the date the investment is sold or exchanged.</text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block></subsection><subsection id="idEDDE6A512F974BDBB3F5E19827AC0DFA"><enum>(c)</enum><header>Effective date</header><text>The amendments made by this section shall apply to sales or exchanges after November 30, 2023, in taxable years ending after such date.</text></subsection></section></subtitle>