[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 306 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 306

To amend the Internal Revenue Code of 1986 to provide a decrease in the 
 maximum rate of tax on capital gains which is based on the length of 
               time the taxpayer held the capital asset.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 12, 1997

   Mr. Ford introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide a decrease in the 
 maximum rate of tax on capital gains which is based on the length of 
               time the taxpayer held the capital asset.

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

SECTION 1. DECREASE IN MAXIMUM CAPITAL GAINS RATE BASED ON TAXPAYER'S 
              HOLDING PERIOD.

    (a) In General.--Section 1(h) of the Internal Revenue Code of 1986 
(relating to maximum capital gains rate) is amended to read as follows:
    ``(h) Maximum Capital Gains Rate.--
            ``(1) In general.--If a taxpayer has a net capital gain for 
        any taxable year, then the tax imposed by this section shall 
        not exceed the sum of--
                    ``(A) a tax computed at the rates and in the same 
                manner as if this subsection had not been enacted on 
                the greater of--
                            ``(i) taxable income reduced by the amount 
                        of the net capital gain, or
                            ``(ii) the 15-percent bracket amount, plus
                    ``(B) a tax equal to the sum of the amounts 
                determined by applying the applicable percentage to 
                long-term capital gain taken into account in computing 
                net capital gain.
            ``(2) 15-Percent bracket amount.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `15-percent bracket 
                amount' means the amount of taxable income taxed at a 
                rate below 28 percent, determined without taking into 
                account long-term capital gain attributable to a 
                capital asset for which the taxpayers' holding period 
                exceeds 8 years.
                    ``(B) LIFO ordering rule.--For purposes of applying 
                paragraph (1)(B), the determination as to which long-
                term capital gain (if any) was taken into account in 
                determining the 15-percent bracket amount shall be made 
                on the basis of the holding period of the capital 
                assets to which such gain is attributable, beginning 
                with assets with the shortest holding period.
            ``(3) Applicable percentage.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--The term `applicable percentage' 
                means, with respect to any long-term capital gain, 28 
                percent reduced (but not below 14 percent) by 2 
                percentage points for each year (or fraction thereof) 
                by which the taxpayer's holding period for the capital 
                asset to which the gain is attributable exceeds 2 
                years.
                    ``(B) Limitation on gain to which percentage 
                applies.--Subparagraph (A) shall not apply to long-term 
                capital gain on any sale or exchange to the extent the 
                gain exceeds the excess (if any) of--
                            ``(i) net capital gain for the taxable 
                        year, over
                            ``(ii) the sum of--
                                    ``(I) that portion of the 15-
                                percent bracket amount which is 
                                attributable to net capital gain, plus
                                    ``(II) other long-term capital gain 
                                to which paragraph (1)(B) applies and 
                                which is attributable to capital assets 
                                for which the taxpayer's holding period 
                                is longer.
                    ``(C) Application to classes of gain.--Subject to 
                such rules as the Secretary may prescribe, all long-
                term capital gain from the sale or exchange of capital 
                assets with the same holding period (determined on the 
                basis of the number of years or fractions thereof) 
                shall be treated as gain from the sale or exchange of a 
                single capital asset.
            ``(4) Investment income.--For purposes of this subsection, 
        the net capital gain for any taxable year shall be reduced (but 
        not below zero) by the amount which the taxpayer elects to take 
        into account as investment income for the taxable year under 
        section 163(d)(4)(B)(iii).''
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.
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