[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1989 Introduced in House (IH)]






108th CONGRESS
  1st Session
                                H. R. 1989

  To amend the Internal Revenue Code of 1986 to allow individuals to 
   defer recognition of reinvested capital gains distributions from 
                    regulated investment companies.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 6, 2003

   Mr. Ryan of Wisconsin (for himself and Mr. Saxton) 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 allow individuals to 
   defer recognition of reinvested capital gains distributions from 
                    regulated investment companies.

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

SECTION. 1. DEFERRAL OF REINVESTED CAPITAL GAIN DIVIDENDS OF REGULATED 
              INVESTMENT COMPANIES.

    (a) In General.--Part III of subchapter O of chapter 1 of the 
Internal Revenue Code of 1986 (relating to common nontaxable exchanges) 
is amended by inserting after section 1045 the following new section:

``SEC. 1046. REINVESTED CAPITAL GAIN DIVIDENDS OF REGULATED INVESTMENT 
              COMPANIES.

    ``(a) Nonrecognition of Gain.--In the case of an individual, no 
gain shall be recognized on the receipt of a capital gain dividend 
distributed by a regulated investment company to which part I of 
subchapter M applies if such capital gain dividend is automatically 
reinvested in additional shares of the company pursuant to a dividend 
reinvestment plan.
    ``(b) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Capital gain dividend.--The term `capital gain 
        dividend' has the meaning given to such term by section 
        852(b)(3)(C).
            ``(2) Recognition of deferred capital gain dividends.--
                    ``(A) In general.--Gain treated as unrecognized in 
                accordance with subsection (a) shall be recognized in 
                accordance with subparagraph (B) upon a subsequent sale 
                or redemption by such individual of stock in the 
                distributing company.
                    ``(B) Gain recognition.--Upon a sale or redemption 
                described in subparagraph (A), the taxpayer shall 
                recognize that portion of total gain treated as 
                unrecognized in accordance with subsection (a) (and not 
                previously recognized pursuant to this subparagraph) 
                that is equivalent to the portion of the taxpayer's 
                shares in the distributing company that are sold or 
                redeemed.
            ``(3) Holding period.--
                    ``(A) General rule.--The taxpayer's holding period 
                in shares acquired through reinvestment of a capital 
                gain dividend to which subsection (a) applies shall be 
                determined by treating the shareholder as having held 
                such shares for one year and a day as of the date such 
                shares are acquired.
                    ``(B) Special rule for distributions of qualified 
                5-year gains.--In the case of a capital gain dividend 
                (or portion thereof) properly treated as qualified 5-
                year gain (within the meaning of section 1(h)(9)), 
                subparagraph (A) shall apply by substituting `5 years 
                and a day' for `one year and a day.'
    ``(c) Section Not To Apply to Certain Taxpayers.--This section 
shall not apply to--
            ``(1) an individual with respect to whom a deduction under 
        section 151 is allowable to another taxpayer for a taxable year 
        beginning in the calendar year in which such individual's 
        taxable year begins, or
            ``(2) an estate or trust.''
    (b) Conforming Amendments.--
            (1) Section 852(b)(3)(B) of such Code is amended by adding 
        at the end the following new sentence: ``For rules regarding 
        nonrecognition of gain with respect to reinvested capital gain 
        dividends received by individuals, see section 1046.''
            (2) The table of sections for part III of subchapter O of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 1045 the following new item:

        ``Sec. 1046. Reinvested capital gain dividends of regulated 
                            investment companies.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.
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