[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 593 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 593

   To amend the Internal Revenue Code of 1986 to increase the dollar 
  limitation on the 1-time exclusion of gain from sale of a principal 
  residence by individuals who have attained age 55, to increase the 
 amount of the unified estate and gift tax credits, and to reduce the 
                         tax on capital gains.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 19, 1995

    Mr. Rohrabacher (for himself, Mr. Doolittle, Mr. Moorhead, Mr. 
Manzullo, Mr. Burton of Indiana, Mr. Hastert, Mr. Stump, Mr. McCollum, 
  Mr. Blute, Mr. Bartlett of Maryland, Mr. King, Mr. Knollenberg, Mr. 
  Zimmer, Mr. Sensenbrenner, Mr. Bunning of Kentucky, Mr. Spence, Mr. 
 Dornan, Mr. Bunn of Oregon, Mr. Forbes, Mr. McHugh, Mr. Smith of New 
Jersey, Mr. Fox of Pennsylvania, Mr. Hall of Texas, Mr. Istook, and Mr. 
   Solomon) introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to increase the dollar 
  limitation on the 1-time exclusion of gain from sale of a principal 
  residence by individuals who have attained age 55, to increase the 
 amount of the unified estate and gift tax credits, and to reduce the 
                         tax on capital gains.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Senior Citizens' Tax Relief Act of 
1995''.

SEC. 2. INCREASE IN LIMITATION ON 1-TIME EXCLUSION OF GAIN FROM SALE OF 
              PRINCIPAL RESIDENCE.

    (a) General Rule.--Paragraph (1) of section 121(b) of the Internal 
Revenue Code of 1986 (relating to dollar limitation) is amended by 
striking ``$125,000 ($62,500'' and inserting ``$205,000 ($102,500''.
    (b) Cost-of-Living Adjustments.--Subsection (b) of section 121 of 
such Code is amended by adding at the end thereof the following new 
paragraph:
            ``(4) Cost-of-living adjustments.--In the case of any 
        taxable year beginning in a calendar year after 1995, each 
        dollar amount set forth in paragraph (1) shall be increased by 
        an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                1994' for `calendar year 1992' in subparagraph (B) 
                thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $1,000.''
    (c) Effective Date.--The amendments made by this section shall 
apply to any sale or exchange after December 31, 1994.

SEC. 3. INCREASE IN UNIFIED ESTATE AND GIFT TAX CREDITS.

    (a) Estate Tax Credit.--
            (1) Subsection (a) of section 2010 of the Internal Revenue 
        Code of 1986 (relating to unified credit against estate tax) is 
        amended by striking ``$193,500'' and inserting ``the applicable 
        credit amount''.
            (2) Section 2010 of such Code is amended by redesignating 
        subsection (c) as subsection (d) and by inserting after 
        subsection (b) the following new subsection:
    ``(c) Applicable Credit Amount.--For purposes of this section--
            ``(1) In general.--The applicable credit amount is the 
        amount of the tentative tax which would be determined under the 
        rate schedule set forth in section 2001(c) if the amount with 
        respect to which such tentative tax is to be computed were 
        $808,000.
            ``(2) Cost-of-living adjustments.--In the case of any 
        decedent dying, and gift made, in a calendar year after 1995, 
        the $808,000 amount set forth in paragraph (1) shall be 
        increased by an amount equal to--
                    ``(A) $808,000, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 1994' for `calendar year 
                1992' in subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $1,000.''
            (3) Paragraph (1) of section 6018(a) of such Code is 
        amended by striking ``$600,000'' and inserting ``$808,000 
        (adjusted as provided in section 2010(c)(2))''.
            (4) Paragraph (2) of section 2001(c) of such Code is 
        amended by striking ``$21,040,000'' and inserting ``the amount 
        at which the effective tax rate under this section is 55 
        percent''.
            (5) Subparagraph (A) of section 2102(c)(3) of such Code is 
        amended by striking ``$192,800'' and inserting ``the applicable 
        credit amount in effect under section 2010(c) for the calendar 
        year which includes the date of death''.
    (b) Unified Gift Tax Credit.--Paragraph (1) of section 2505(a) of 
such Code is amended by striking ``$193,500'' and inserting ``the 
applicable credit amount in effect under section 2010(c) for such 
calendar year''.
    (c) Effective Date.--The amendments made by this section shall 
apply to the estates of decedents dying, and gifts made, after December 
31, 1994.

SEC. 4. REDUCTION IN CAPITAL GAINS TAX FOR INDIVIDUALS.

    (a) General Rule.--Part I of subchapter P of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
1201 the following new section:

``SEC. 1202. DEDUCTION FOR CAPITAL GAINS.

    ``(a) General Rule.--If, for any taxable year, a taxpayer other 
than a corporation has a net capital gain, an amount equal to 50 
percent of the net capital gain shall be allowed as a deduction.
    ``(b) Estates and Trusts.--In the case of an estate or trust, the 
deduction under subsection (a) shall be computed by excluding the 
portion (if any) of the gains for the taxable year from sales or 
exchanges of capital assets which, under sections 652 and 662 (relating 
to inclusions of amounts in gross income of beneficiaries of trusts), 
is includible by the income beneficiaries as gain derived from the sale 
or exchange of capital assets.
    ``(c) Coordination With Treatment of Capital Gain Under Limitation 
on Investment Interest.--For purposes of this section, the net capital 
gain for any taxable year shall be reduced (but not below zero) by the 
amount which the taxpayer takes into account as investment income under 
section 163(d)(4)(B)(iii).''
    (b) Minimum Tax.--Section 56(b) of such Code is amended by adding 
at the end thereof the following new paragraph:
            ``(4) Capital gains deduction disallowance.--The deduction 
        under section 1202 shall not be allowed.''
    (c) Conforming Amendments.--
            (1) Section 13113 of the Revenue Reconciliation Act of 1993 
        (relating to 50-percent exclusion for gain from certain small 
        business stock), and the amendments made by such section, are 
        hereby repealed; and the Internal Revenue Code of 1986 shall be 
        applied as if such section (and amendments) had never been 
        enacted.
            (2) Subsection (h) of section 1 of such Code is hereby 
        repealed.
            (3) Section 62(a) of such Code is amended by inserting 
        after paragraph (15) the following new paragraph:
            ``(16) Capital gains deduction.--The deduction allowed by 
        section 1202.''
            (4) Section 170(e)(1)(B) of such Code is amended by 
        inserting ``(or, in the case of a taxpayer other than a 
        corporation, 50 percent of the amount of gain)'' after ``the 
        amount of gain''.
            (5)(A) Section 172(d)(2) of such Code is amended to read as 
        follows:
            ``(2) Capital gains and losses of taxpayers other than 
        corporations.--In the case of a taxpayer other than a 
        corporation--
                    ``(A) the amount deductible on account of losses 
                from sales or exchanges of capital assets shall not 
                exceed the amount includible on account of gains from 
                sales or exchanges of capital assets; and
                    ``(B) the deduction provided by section 1202 shall 
                not be allowed.''
            (B) Subparagraph (B) of section 172(d)(4) of such Code is 
        amended by inserting ``, (2)(B),'' after ``paragraph (1)''.
            (6)(A) Section 220 of such Code is amended to read as 
        follows:

``SEC. 220. CROSS REFERENCES.

                                ``(1) For deduction for net capital 
gain, see section 1202.  
                                ``(2) For deductions in respect of a 
decedent, see section 691.''
            (B) The table of sections for part VII of subchapter B of 
        chapter 1 is amended by striking ``reference'' in the item 
        relating to section 220 and inserting ``references''.
            (7) Paragraph (4) of section 642(c) of such Code is amended 
        to read as follows:
            ``(4) Adjustments.--To the extent that the amount otherwise 
        allowable as a deduction under this subsection consists of gain 
        from the sale or exchange of capital assets held for more than 
        1 year, proper adjustment shall be made for any deduction 
        allowable to the estate or trust under section 1202 (relating 
        to deduction for net capital gain). In the case of a trust, the 
        deduction allowed by this subsection shall be subject to 
        section 681 (relating to unrelated business income).''
            (8) Paragraph (3) of section 643(a) of such Code is amended 
        by adding at the end thereof the following new sentence: ``The 
        deduction under section 1202 (relating to deduction for net 
        capital gain) shall not be taken into account.''.
            (9) Paragraph (6)(C) of section 643(a) of such Code is 
        amended--
                    (A) by inserting ``(i)'' before ``there'', and
                    (B) by inserting ``, and (ii) the deduction under 
                section 1202 (relating to deduction for capital gains) 
                shall not be taken into account'' before the period at 
                the end thereof.
            (10) Paragraph (4) of section 691(c) of such Code is 
        amended by striking ``1(h), 1201'' and inserting ``1201, 
        1202,''.
            (11) The second sentence of paragraph (2) of section 871(a) 
        of such Code is amended by inserting ``such gains and losses 
        shall be determined without regard to section 1202 (relating to 
        deduction for net capital gain) and'' after ``except that''.
            (12)(A) Subparagraph (B) of section 904(b)(2) of such Code 
        is amended by striking so much of such subparagraph as precedes 
        clause (i) and inserting the following:
                    ``(B) Special rules where corporate capital rate 
                gain differential.--In the case of a corporation, for 
                any taxable year for which there is a capital gain rate 
                differential--''.
            (B) Subparagraphs (D) and (E) of section 904(b)(3) of such 
        Code are amended to read as follows:
                    ``(D) Capital gain rate differential.--There is a 
                capital gain rate differential for any taxable year if 
                any rate of tax imposed by section 11, 511, or 831(a) 
                or (b) (whichever applies) exceeds the alternative rate 
                of tax under section 1201(a) (determined without regard 
                to the last sentence of section 11(b)(1)).
                    ``(E) Rate differential portion.--The rate 
                differential portion of foreign source net capital 
                gain, net capital, or the excess of net capital gain 
                from sources within the United States over net capital 
                gain, as the case maybe, is the same proportion of such 
                amount as--
                            ``(i) the excess of the highest rate of tax 
                        specified in section 11(b)(1) over the 
                        alternative rate of tax under section 1201(a), 
                        bears to
                            ``(ii) the highest rate of tax specified in 
                        section 11(b)(1).''
            (13) Subsection (d) of section 1044 of such Code is amended 
        by striking the last sentence.
            (14) Section 1402(i)(1) of such Code is amended to read as 
        follows:
            ``(1) In general.--In determining the net earnings from 
        self-employment of any options dealer or commodities dealer--
                    ``(A) notwithstanding subsection (a)(3)(A), there 
                shall not be excluded any gain or loss (in the normal 
                course of the taxpayer's activity of dealing in or 
                trading section 1256 contracts) from section 1256 
                contracts or property related to such contracts, and
                    ``(B) the deduction provided by section 1202 shall 
                not apply.''
    (d) Clerical Amendment.--The table of sections for part I of 
subchapter P of chapter 1 of such Code is amended by striking the item 
relating to section 1202 and inserting the following new item:

                              ``Sec. 1202. Deduction for capital 
                                        gains.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
                                 <all>