Deduction for net capital gain of certain individuals

(a)

In general

Part I of subchapter P of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

1203.

Deduction for net capital gain of certain individuals

(a)

In general

In the case of an individual, there shall be allowed a deduction against gross income the amount equal to the taxpayer's net capital gain for such year. (b)

Limitation based on adjusted gross income

(1)

In general

The amount which would (but for this paragraph) be allowed as a deduction under subsection (a) shall be reduced (but not below zero) by the amount which bears the same ratio to such amount as— (A)the excess (if any) of— (i)the taxpayer’s modified adjusted gross income for the taxable year, over (ii)the threshold amount bears to (B)$10,000 ($20,000 in the case of a joint return). (2)

Threshold amount

For purposes of paragraph (1), the threshold amount is $100,000 (twice such amount in the case of a joint return). (3)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2008, the $100,000 amount contained in paragraph (1)(B) 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, determined by substituting calendar year 2007 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)

Modified adjusted gross income

For purposes of this section, the term modified adjusted gross income means adjusted gross income determined— (1)without regard to this section and sections 199, 911, 931, and 933, and (2)after application of sections 86, 135, 137, 219, 221, 222, and 469.

(b)

Coordination with maximum capital gains rates

Paragraph (2) of section 1(h) of such Code is amended to read as follows:

(2)

Reduction of net capital gain

For purposes of this subsection, the net capital gain for any taxable year shall be reduced (but not below zero) by the sum of— (A)the amount which the taxpayer takes into account as investment income under section 163(d)(4)(B)(iii), and (B)the deduction allowed by section 1203.

(c)

Deduction allowed whether or not individual itemizes other deductions

Subsection (a) of section 62 of such Code is amended by inserting before the last sentence the following new paragraph:

(22)

Net capital gain of certain individuals

The deduction allowed by section 1203.

(d)

Conforming amendments

(1)Sections 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A), and 221(b)(2)(C)(i) of such Code are each amended by striking and 933 and inserting 933, and 1203. (2)Subparagraph (B) of section 172(d)(2) of such Code is amended to read as follows:

(B)the exclusion under section 1202, and the deduction under section 1203, shall not be allowed.

(3)Section 219(g)(3)(A)(ii) of such Code is amended by striking and 911 and inserting 911, and 1203. (4)Section 469(i)(3)(F)(ii) of such Code is amended by striking and 137 and inserting 137, and 1203. (5)Paragraph (4) of section 691(c) of such Code is amended by inserting 1203, after 1202,. (6)Paragraph (2) of section 871(a) of such Code is amended by inserting or 1203, after 1202,. (7)The table of sections for part I of subchapter P of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 1203. Deduction for net capital gain of certain individuals..

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.