1.This Act may be cited as the
Generate Retirement Ownership Through
Long-Term Holding Act of 2005
.
2.Deferral of reinvested
capital gain dividends of regulated investment companies
(a)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:
1046.Reinvested
capital gain dividends of regulated investment companies
(a)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 rulesFor purposes of this section—
(1)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)Gain treated as unrecognized in accordance with
subsection (a) shall be recognized in accordance with subparagraph (B)—
(i)upon a subsequent
sale or redemption by such individual of stock in the distributing company,
or
(ii)upon the death of
the individual.
(B)
(i)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 total
shares in the distributing company that are sold or redeemed.
(ii)Except as provided
by regulations, any portion of such total gain not recognized under clause (i)
prior to the taxpayer’s death shall be recognized upon the death of the
taxpayer and included in the taxpayer’s gross income for the taxable year
ending on the date of the taxpayer’s death.
(3)
(A)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 gainsIn the case of a distribution of a capital
gain dividend (or portion thereof) in a taxable year beginning after December
31, 2008, and properly treated as qualified 5-year gain (within the meaning of
section 1(h), as in effect after such date), subparagraph (A) shall apply by
substituting 5 years and a day
for one year and a
day
.
(c)Section not to
apply to certain taxpayersThis 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.
(d)The
Secretary shall prescribe such regulations as may be necessary to carry out the
purposes of this
section.
.
(b)
(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)The amendments made by this section shall apply to taxable
years ending after the date of the enactment of this Act.