1.The table of contents
for this Act is as follows:
Sec. 1. Table of contents.
Sec. 2. Findings.
Title I—EGTRRA, JGTRRA, and Certain Other Tax Relief Made
Permanent
Sec. 101. EGTRRA, JGTRRA, and certain other tax relief made
permanent.
Title II—Death Tax Repeal Permanency
Sec. 201. Repeal of estate and generation-skipping transfer
taxes.
Sec. 202. Modifications of gift tax.
Title III—Alternative Minimum Tax Relief
Sec. 301. Extension for individuals.
Title IV—Capital Gains Inflation Relief
Sec. 401. Indexing of certain assets for purposes of
determining gain or loss.
2.The Congress finds the following:
(1)According to the Tax Foundation, this year,
before being able to work for themselves, Americans will work 107 days out of
the year just to pay their taxes.
(2)Tax Freedom Day,
the day when Americans have finally earned enough money to pay their tax bills
for the year and can begin to work for themselves, fell on April 17th.
(3)Taxes are a
greater burden on the family budget than food, clothing, and housing
combined.
(4)The Federal tax
burden was 15.4 percent of gross domestic product in 2011.
(5)The historical
Federal tax burden of the previous few decades is 18.0 percent of gross
domestic product.
(6)Under current law,
the tax burden will rise to 21.0 percent of gross domestic product within ten
years, which would be the highest tax burden in United States history, even
during wartime.
(7)Families and
business cannot bear a tax increase of this magnitude.
<enum>I</enum><header>EGTRRA, JGTRRA,
and Certain Other Tax Relief Made Permanent</header>
<section id="HC6DFC7364E7D42DC98CA5953FE148F01" section-type="subsequent-section"><enum>101.</enum><header>EGTRRA, JGTRRA, and
certain other tax relief made permanent</header>
<subsection id="H524792B138D940F7B0A6C73264A0261F"><enum>(a)</enum><header>Economic Growth
and Tax Relief Reconciliation Act of 2001</header><text>Title IX of the
<act-name>Economic Growth and Tax Relief Reconciliation Act of 2001</act-name>
is hereby repealed.</text>
</subsection><subsection id="HA0B112EE83D0471B8F431038DDAE6A38"><enum>(b)</enum><header>Income tax rates
on dividends and net capital gain</header><text display-inline="yes-display-inline">Section 303 of the <act-name>Jobs and
Growth Tax Relief Reconciliation Act of 2003</act-name> is hereby
repealed.</text>
</subsection><subsection id="H4441F3CBDE364C90AE0A4167B68B3FB8"><enum>(c)</enum><header>Deduction for
State and local sales taxes</header><text>Paragraph (5) of section 164(b) of
the <act-name>Internal Revenue Code of 1986</act-name> is amended by striking
subparagraph (I).</text>
</subsection><subsection id="H677D69950878414F87ADD2CA5495C807"><enum>(d)</enum><header>Deduction for
tuition and related expenses</header><text display-inline="yes-display-inline">Section 222 of such Code is amended by
striking subsection (e).</text>
</subsection><subsection id="H02D779480E8140968AFFF2A14260E4E4"><enum>(e)</enum><header>Increased
expensing for small business</header>
<paragraph id="H46A83B65B2754AEA84C550ABEC0783F7"><enum>(1)</enum><header>Dollar
limitation</header><text display-inline="yes-display-inline">Paragraph (1) of
section 179(b) of such Code is amended by striking subparagraphs (C) and (D)
and inserting the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H2EE6C90379124E1EB3F2EEC59D2421CD" style="OLC">
<subparagraph id="H065DD62297214A62B5A42553786878F5"><enum>(C)</enum><text display-inline="yes-display-inline">$125,000 in the case of taxable years
beginning after
2011.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H3F2587F1C82E45139D6A24D96C083114"><enum>(2)</enum><header>Increase in
qualifying investment at which phaseout begins</header><text>Paragraph (2) of
section 179(b) of such Code is amended by striking subparagraphs (C) and (D)
and inserting the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H294844EE6A234DA5B36532F6BAA7F86E" style="OLC">
<subparagraph id="H900AA22E2C254859977D634CF2659395"><enum>(C)</enum><text display-inline="yes-display-inline">$500,000 in the case of taxable years
beginning after
2011.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H2DB753D2BA2440DE929360B3BDAE7E85"><enum>(3)</enum><header>Inflation
adjustments</header><text>Paragraph (6) of section 179 of such Code is amended
to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H85480FE4F9CB45C786446345D227FCEE" style="OLC">
<paragraph id="HDA63E9385B0445F8BDEA5ECA7AD79325"><enum>(6)</enum><header>Inflation
adjustments</header>
<subparagraph id="HEECD6A0E74BD4089B16F1CC39FD6E296"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of any
taxable year beginning in a calendar year after 2012, the $125,000 and $500,000
amounts in paragraphs (1)(C) and (2)(C) shall each be increased by an amount
equal to—</text>
<clause id="HD0C1A121E9C040DBAF8CFDFAC7AEDDC8"><enum>(i)</enum><text>such dollar
amount, multiplied by</text>
</clause><clause id="HD2DD5849E03C4A7C9B10C8B345FCC0EB"><enum>(ii)</enum><text>the
cost-of-living adjustment determined under section 1(f)(3) for the calendar
year in which the taxable year begins, by substituting <quote>calendar year
2011</quote> for <quote>calendar year 1992</quote> in subparagraph (B)
thereof.</text>
</clause></subparagraph><subparagraph id="H2CE1A6D7B552464DAAF4B54FC7262D78"><enum>(B)</enum><header>Rounding</header>
<clause id="H93D2BE6D28F34DE8A15B3FDC02B159FB"><enum>(i)</enum><header>Dollar
limitation</header><text display-inline="yes-display-inline">If the amount in
paragraph (1)(C), as increased under subparagraph (A), is not a multiple of
$1,000, such amount shall be rounded to the nearest multiple of $1,000.</text>
</clause><clause id="HE055A28926344B2BB4F1CD2211957785"><enum>(ii)</enum><header>Phaseout
amount</header><text>If the amount in paragraph (2)(C), as increased under
subparagraph (A), is not a multiple of $10,000, such amount shall be rounded to
the nearest multiple of
$10,000.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H2AFEF01E5AB64A64B9B4D7C37F67B2F5"><enum>(4)</enum><header>Revocation of
election</header><text>Paragraph (2) of section 179(c) of such Code (relating
to election irrevocable) is amended by striking <quote>and before
2013</quote>.</text>
</paragraph><paragraph id="HDDC06143CEB74182A1093CD0B1BE3673"><enum>(5)</enum><header>Computer
software</header><text display-inline="yes-display-inline">Clause (ii) of
section 179(d)(1)(A) of such Code is amended by striking <quote>and before
2012</quote>.</text>
</paragraph></subsection><subsection id="H39A2DAB894A445188FC511270087D24A"><enum>(f)</enum><header>Effective
date</header><text>The amendments made by this section shall take effect on the
date of the enactment of this Act.</text>
</subsection></section><enum>II</enum><header>Death Tax Repeal
Permanency</header>
<section id="HCA5DC01C40D44D2E83BC57E356A81FCF" section-type="subsequent-section"><enum>201.</enum><header>Repeal of estate and
generation-skipping transfer taxes</header>
<subsection id="H5CB84E7597AC46F2A9E210B486BD9807"><enum>(a)</enum><header>Estate Tax
Repeal</header><text display-inline="yes-display-inline">Subchapter C of
chapter 11 of subtitle B of the Internal Revenue Code of 1986 is amended by
adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H05DC7454E4C3477BAA3299741402F2F3" style="OLC">
<section id="H898AF30F264A4940B77389FFC3A3C8CE"><enum>2210.</enum><header>Termination</header>
<subsection id="H7108B5FF9C924F5D8E43907D47786DEB"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
subsection (b), this chapter shall not apply to the estates of decedents dying
on or after the date of the enactment of this section.</text>
</subsection><subsection id="H80E4791264DA48E8A11A6E503E07789A"><enum>(b)</enum><header>Certain
Distributions From Qualified Domestic Trusts</header><text>In applying section
2056A with respect to the surviving spouse of a decedent dying before the date
of the enactment of this section—</text>
<paragraph id="H32CE6F4A143C4F8CB8EA3C1DE3B0FEC5"><enum>(1)</enum><text>section
2056A(b)(1)(A) shall not apply to distributions made after the 10-year period
beginning on such date, and</text>
</paragraph><paragraph id="HF14989674670437E930909BA17EC9D67"><enum>(2)</enum><text>section
2056A(b)(1)(B) shall not apply on or after such
date.</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H67E3B34374C24B97878D1764990CDA02"><enum>(b)</enum><header>Generation-Skipping
Transfer Tax Repeal</header><text>Subchapter G of chapter 13 of subtitle B of
such Code is amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="H49A0926DACAD40FAA4D827662C9B55C3" style="OLC">
<section id="H03A0098811B54C09A53C23A9C743098C"><enum>2664.</enum><header>Termination</header><text display-inline="no-display-inline">This chapter shall not apply to
generation-skipping transfers on or after the date of the enactment of this
section.</text>
</section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H19D16F00480F4D009AA77222E2CFBE37"><enum>(c)</enum><header>Conforming
Amendments</header>
<paragraph id="HABCCB9E5438B4B85A96488660B7BFE1B"><enum>(1)</enum><text>The table of
sections for subchapter C of chapter 11 is amended by adding at the end the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="H4DCF9709B90A49ABBBB774801340F7D5" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 2210.
Termination.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H6A10883AF9BC4E8FA1B7A6E6ABE5630D"><enum>(2)</enum><text>The table of
sections for subchapter G of chapter 13 is amended by adding at the end the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="H9553D16DCCD54A5A8C58DA2BDBF23C57" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 2664.
Termination.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="H68B22F6536B246EB9178064BE34B6B2F"><enum>(d)</enum><header>Restoration of
pre-EGTRRA provisions not applicable</header>
<paragraph id="HAB5BAE1DA2784D2986C8EB2860E7FDCE"><enum>(1)</enum><header>In
general</header><text>Section 301 of the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010 shall not apply to estates of
decedents dying, and transfers made, on or after the date of the enactment of
this Act.</text>
</paragraph><paragraph id="HE9900A1F01814310A9D7E4334FB56AFF"><enum>(2)</enum><header>Exception for
stepped-up basis</header><text display-inline="yes-display-inline">Paragraph
(1) shall not apply to the provisions of law amended by subtitle E of title V
of the Economic Growth and Tax Relief Reconciliation Act of 2001 (relating to
carryover basis at death; other changes taking effect with repeal).</text>
</paragraph></subsection><subsection id="H886CE10588384A3C838EB924A71AD521"><enum>(e)</enum><header>Sunset not
applicable</header>
<paragraph id="HF71A981DD92547E392FD144A43072018"><enum>(1)</enum><text display-inline="yes-display-inline">Section 901 of the Economic Growth and Tax
Relief Reconciliation Act of 2001 shall not apply to title V of such Act in the
case of estates of decedents dying, and transfers made, on or after the date of
the enactment of this Act.</text>
</paragraph><paragraph id="H034D1BC0579A45289E64D307F7624AE8"><enum>(2)</enum><text>Section 304 of the
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of
2010 is hereby repealed.</text>
</paragraph></subsection><subsection id="HEC4C13506CC7426EBE7498EFEEF21E73"><enum>(f)</enum><header>Effective
Date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to the estates of decedents dying, and
generation-skipping transfers, after the date of the enactment of this
Act.</text>
</subsection></section><section id="H282B765E26A444CE9523C4AC1781A504"><enum>202.</enum><header>Modifications
of gift tax</header>
<subsection id="H22DC5D454B4F4EF69CD9956F4772C830"><enum>(a)</enum><header>Computation of
gift tax</header><text display-inline="yes-display-inline">Subsection (a) of
section 2502 of the Internal Revenue Code of 1986 is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H8CF4D4CE6F2A489F8C9D74B5A7CBC970" style="OLC">
<subsection id="HF21179A48E3543C7987260AE9FC9ACB0"><enum>(a)</enum><header>Computation of
tax</header>
<paragraph id="HAAC5550D73304C2F936960D9E98D7C5A"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The tax imposed by
section 2501 for each calendar year shall be an amount equal to the excess
of—</text>
<subparagraph id="HC43978257B0140C6AD34DC2EE78CEFFA"><enum>(A)</enum><text>a tentative tax,
computed under paragraph (2), on the aggregate sum of the taxable gifts for
such calendar year and for each of the preceding calendar periods, over</text>
</subparagraph><subparagraph id="H0F8C0B0088FF49B2838AE07B6A7E4D44"><enum>(B)</enum><text>a tentative tax,
computed under paragraph (2), on the aggregate sum of the taxable gifts for
each of the preceding calendar periods.</text>
</subparagraph></paragraph><paragraph id="H585B832B58B74390990B5479FB206CC0"><enum>(2)</enum><header>Rate
schedule</header><?xm-replace_text {#text}?>
<table align-to-level="section" blank-lines-before="1" colsep="0" frame="none" line-rules="no-gen" rowsep="0" rule-weights="0.0.0.0.0.0" table-template-name="Entry: 2 text, bold hds" table-type="">
<tgroup cols="2" grid-typeface="1.1" rowsep="0" thead-tbody-ldg-size="0.10.12"><colspec coldef="txt" colname="column1" colsep="0" colwidth="230pts" min-data-value="190" rowsep="0"></colspec><colspec coldef="txt-no-ldr-no-spread" colname="column2" colsep="0" colwidth="95pts" min-data-value="95" rowsep="0"></colspec>
<tbody>
<row><entry colname="column1" leader-modify="clr-ldr" rowsep="0" stub-definition="txt-clr" stub-hierarchy="1"><bold><?xm-replace_text {Bold}?></bold></entry><entry colname="column2" leader-modify="clr-ldr"><bold><?xm-replace_text {Bold}?></bold></entry>
</row>
<row><entry colname="column1" morerows="0" namest="column1" rowsep="0"><bold>If the amount with respect to which the tentative tax to be
computed is:</bold></entry><entry colname="column2" morerows="0" namest="column2" rowsep="0"><bold>The tentative tax is:</bold></entry>
</row>
<row><entry colname="column1" leader-modify="force-ldr-bottom" rowsep="0" stub-definition="txt-ldr">Not over $10,000</entry><entry colname="column2" leader-modify="force-ldr-bottom" rowsep="0">18% of such
amount.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $10,000 but not over $20,000</entry><entry colname="column2" rowsep="0">$1,800, plus 20% of the excess over
$10,000.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $20,000 but not over $40,000</entry><entry colname="column2" rowsep="0">$3,800, plus 22% of the excess over
$20,000.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $40,000 but not over $60,000</entry><entry colname="column2" rowsep="0">$8,200, plus 24% of the excess over
$40,000.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $60,000 but not over $80,000</entry><entry colname="column2" rowsep="0">$13,000, plus 26% of the excess over
$60,000.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $80,000 but not over $100,000</entry><entry colname="column2" rowsep="0">$18,200, plus 28% of the excess over
$80,000.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $100,000 but not over $150,000</entry><entry colname="column2" rowsep="0">$23,800, plus 30% of the excess over
$100,000.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $150,000 but not over $250,000</entry><entry colname="column2" rowsep="0">$38,800, plus 32% of the excess of
$150,000.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $250,000 but not over $500,000</entry><entry colname="column2" rowsep="0">$70,800, plus 34% of the excess over
$250,000.</entry>
</row>
<row><entry align="left" colname="column1" rowsep="0" stub-definition="txt-ldr">Over $500,000</entry><entry colname="column2" rowsep="0">$155,800, plus 35% of the excess of $500,000.</entry>
</row>
</tbody>
</tgroup></table>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBF255AA33A264389B0298672598488F1"><enum>(b)</enum><header>Treatment of
Certain Transfers in Trust</header><text>Section 2511 (relating to transfers in
general) is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H8B88B62593F44019A0418022F4185049" style="OLC">
<subsection id="H00DFFC33A5624E918301B87889E4BCFC"><enum>(c)</enum><header>Treatment of
Certain Transfers in Trust</header><text display-inline="yes-display-inline">Notwithstanding any other provision of this
section and except as provided in regulations, a transfer in trust shall be
treated as a taxable gift under section 2503, unless the trust is treated as
wholly owned by the donor or the donor’s spouse under subpart E of part I of
subchapter J of chapter
1.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4522B5D5362E44E2BC30412DEB16881E"><enum>(c)</enum><header>Lifetime gift
exemption</header><text display-inline="yes-display-inline">Paragraph (1) of
section 2505(a) of the Internal Revenue Code of 1986 is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="H86C5E794143641CB9F36EC61AD150363" style="OLC">
<paragraph id="HBA58657B901E413B8EC69F1A58CA5B8D"><enum>(1)</enum><text display-inline="yes-display-inline">the amount of the tentative tax which would
be determined under the rate schedule set forth in section 2502(a)(2) if the
amount with respect to which such tentative tax is to be computed were
$5,000,000, reduced
by</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HF62EC06E14564EBF92238700542EBA6B"><enum>(d)</enum><header>Conforming
amendments</header>
<paragraph id="HC8998605DC6A4858AEA6C944E0B59909"><enum>(1)</enum><text>Section 2505(a) of
such Code is amended by striking the last sentence.</text>
</paragraph><paragraph id="H1D003D55325346E49095CE0FE0263ACD"><enum>(2)</enum><text>The heading for
section 2505 of such Code is amended by striking <quote><header-in-text level="section" style="OLC">Unified</header-in-text></quote>.</text>
</paragraph><paragraph id="H35D423D9F6374ED9A8DABFA00B9035BA"><enum>(3)</enum><text>The item in the
table of sections for subchapter A of chapter 12 of such Code relating to
section 2505 is amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="H894E95187BE743059BA28CD2CBFA45CE" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 2505. Credit against gift
tax.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HCD34BEB13B57465EBECB71786BF0F576"><enum>(e)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to gifts made on or after the date of the enactment of
this Act.</text>
</subsection><subsection id="HC4C4AE1CB910439395F202C37B83FBFE"><enum>(f)</enum><header>Transition
rule</header>
<paragraph id="HDD01D55D73A44C3A81FBA3AA9F6C02A8"><enum>(1)</enum><header>In
general</header><text>For purposes of applying sections 1015(d), 2502, and 2505
of the Internal Revenue Code of 1986, the calendar year in which this Act is
enacted shall be treated as 2 separate calendar years one of which ends on the
day before the date of the enactment of this Act and the other of which begins
on such date of enactment.</text>
</paragraph><paragraph id="H2B21934C235F43D4B08969FF9949AA8D"><enum>(2)</enum><header>Application of
section <enum-in-header>2504(b)</enum-in-header></header><text>For purposes of
applying section 2504(b) of the Internal Revenue Code of 1986, the calendar
year in which this Act is enacted shall be treated as one preceding calendar
period.</text>
</paragraph></subsection></section><enum>III</enum><header>Alternative
Minimum Tax Relief</header>
<section id="H6E7A0300C3274546AEE8AC9AF09F02A3"><enum>301.</enum><header>Extension for
individuals</header>
<subsection id="H7C5D5B17BCC143AABAABB318EA860C8C"><enum>(a)</enum><header>Extension of
exemption amount</header><text display-inline="yes-display-inline">Section
55(d)(1) of the Internal Revenue Code of 1986 is amended by inserting <quote>or
2012</quote> after <quote>2011</quote> each place it appears in subparagraphs
(A) and (B).</text>
</subsection><subsection id="H0885750BA5FB4DA58F6E39471C231E9F"><enum>(b)</enum><header>Extension of
alternative minimum tax relief for nonrefundable personal credits</header><text display-inline="yes-display-inline">Section 26(a)(2) of such Code is
amended—</text>
<paragraph id="H2805E702BD5B450EAF83A4DF7FA80163"><enum>(1)</enum><text>by striking
<quote>during 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010,
or 2011</quote> and inserting <quote>after 1999 and before 2013</quote>,
and</text>
</paragraph><paragraph id="H9A8F538EBDEB4E76823BF06734D61344"><enum>(2)</enum><text>by striking
<quote><header-in-text level="paragraph" style="OLC">2011</header-in-text></quote> in the heading thereof and inserting
<quote><header-in-text level="paragraph" style="OLC">2012</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="HD29F48D33C0949D3814C1A5E2506ADA7"><enum>(c)</enum><header>Adjustment for
Inflation</header><text>Section 55(d) of such Code is amended by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HC5600C06297541CBAB7B1B71B9BCF66A" style="OLC">
<paragraph id="H8A9440B729524570B76B0034B14A7C83"><enum>(4)</enum><header>Adjustment for
inflation</header>
<subparagraph id="H69AA8B3DD1B545CA9F7934C1C28F70A6"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">In the case of any
taxable year beginning in a calendar year after 2011, the dollar amounts for
2011 in subparagraphs (A) and (B) of paragraph (1) for 2011 shall each be
increased by an amount equal to—</text>
<clause id="HE01C3B369F8345B7B85EA3EEBE204B7C"><enum>(i)</enum><text>such dollar
amount, multiplied by</text>
</clause><clause id="HA9A376CBAFA748979F5B06C42EEEA27F"><enum>(ii)</enum><text>the
cost-of-living adjustment determined under section 1(f)(3) for the calendar
year in which the taxable year begins, by substituting <quote>calendar year
2010</quote> for <quote>calendar year 1992</quote> in subparagraph (B)
thereof.</text>
</clause></subparagraph><subparagraph id="HC7E87A19B1EC4ABFB2514CD63D0EE62E"><enum>(B)</enum><header>Rounding</header><text>If
any amount in paragraph (1), as increased under subparagraph (A), is not a
multiple of $50, such amount shall be rounded to the nearest multiple of
$50.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H921B563B93424E0D99CA60DD3DA0FA06"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2011.</text>
</subsection></section><enum>IV</enum><header>Capital Gains
Inflation Relief</header>
<section display-inline="no-display-inline" id="HFA4876067C8F442296DB3BCEBF5192AB"><enum>401.</enum><header>Indexing of
certain assets for purposes of determining gain or loss</header>
<subsection id="HC3AF7736D1EF4F92A756D544FB615D71"><enum>(a)</enum><header>In
General</header><text>Part II of subchapter O of chapter 1 of the Internal
Revenue Code of 1986 (relating to basis rules of general application) is
amended by redesignating section 1023 as section 1024 and by inserting after
section 1022 the following new section:</text>
<quoted-block id="HE41ABF071EF641A78D7E07E06484FB6A" style="OLC">
<section id="H622843D37AA14DB79974DD36F694874E"><enum>1023.</enum><header>Indexing of
certain assets for purposes of determining gain or loss</header>
<subsection id="H80D22AA014AB40428847E45765B91BDD"><enum>(a)</enum><header>General
rule</header>
<paragraph id="H86B35A8A6AD64AF4A664F6FC6E082C02"><enum>(1)</enum><header>Indexed basis
substituted for adjusted basis</header><text>Solely for purposes of determining
gain or loss on the sale or other disposition by a taxpayer (other than a
corporation) of an indexed asset which has been held for more than 3 years, the
indexed basis of the asset shall be substituted for its adjusted basis.</text>
</paragraph><paragraph id="H281B7D7447E04BB9BF93CD88C2035D6D"><enum>(2)</enum><header>Exception for
depreciation, etc</header><text>The deductions for depreciation, depletion, and
amortization shall be determined without regard to the application of paragraph
(1) to the taxpayer or any other person.</text>
</paragraph><paragraph id="H908B9A3C511842948BC8332B96C2CBC0"><enum>(3)</enum><header>Written
documentation requirement</header><text>Paragraph (1) shall apply only with
respect to indexed assets for which the taxpayer has written documentation of
the original purchase price paid or incurred by the taxpayer to acquire such
asset.</text>
</paragraph></subsection><subsection id="H16DE3F5E07AA45539FE5ADF33A58B637"><enum>(b)</enum><header>Indexed
asset</header>
<paragraph id="HC07AA13E4FB04A5BBA73A44DFA43312D"><enum>(1)</enum><header>In
general</header><text>For purposes of this section, the term <term>indexed
asset</term> means—</text>
<subparagraph id="HE7F51E3966904DDBB42C4BE02B0DB00C"><enum>(A)</enum><text>common stock in a
C corporation (other than a foreign corporation), or</text>
</subparagraph><subparagraph id="H3E1FE484E3E3422AADC98CD1D3D31BFB"><enum>(B)</enum><text>tangible
property,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">which is a
capital asset or property used in the trade or business (as defined in section
1231(b)).</continuation-text></paragraph><paragraph id="HB24B74A0C5B34861BC73866DD3C27A86"><enum>(2)</enum><header>Stock in certain
foreign corporations included</header><text>For purposes of this
section—</text>
<subparagraph id="HB5AA26ABD9B44098AA385E2EF9E67376"><enum>(A)</enum><header>In
general</header><text>The term <term>indexed asset</term> includes common stock
in a foreign corporation which is regularly traded on an established securities
market.</text>
</subparagraph><subparagraph id="H97F83768E6F24050BB094C8D440C05C5"><enum>(B)</enum><header>Exception</header><text>Subparagraph
(A) shall not apply to—</text>
<clause id="HD344C8DC3C734546B00B2D67B62800BF"><enum>(i)</enum><text>stock of a foreign
investment company,</text>
</clause><clause id="HF4D611F429594D1CB3AE467C75B563B8"><enum>(ii)</enum><text>stock in a
passive foreign investment company (as defined in section 1296),</text>
</clause><clause id="H71DC87D4CD4A4841A8EA8A0DF81645A2"><enum>(iii)</enum><text>stock in a
foreign corporation held by a United States person who meets the requirements
of section 1248(a)(2), and</text>
</clause><clause id="HEB972DE62C7A473FB9558620D4F3E5BE"><enum>(iv)</enum><text>stock in a
foreign personal holding company.</text>
</clause></subparagraph><subparagraph id="H3F076C24AE664D2DB20B0CACC752F9A7"><enum>(C)</enum><header>Treatment of
american depository receipts</header><text>An American depository receipt for
common stock in a foreign corporation shall be treated as common stock in such
corporation.</text>
</subparagraph></paragraph></subsection><subsection id="H3A1813A8CBAA4CCE89C38FDDE43FEAB7"><enum>(c)</enum><header>Indexed
basis</header><text>For purposes of this section—</text>
<paragraph id="H0A543D7B27F94E0899E8E53D54651B85"><enum>(1)</enum><header>General
rule</header><text>The indexed basis for any asset is—</text>
<subparagraph id="HEA4C2E027A464FD0A42376ABE43E0B87"><enum>(A)</enum><text>the adjusted basis
of the asset, increased by</text>
</subparagraph><subparagraph id="H08B3E8521F2F4E0F92BA370114378C36"><enum>(B)</enum><text>the applicable
inflation adjustment.</text>
</subparagraph></paragraph><paragraph id="H1B530FD4383A42FF9BECFA42E38084CD"><enum>(2)</enum><header>Applicable
inflation adjustment</header><text>The applicable inflation adjustment for any
asset is an amount equal to—</text>
<subparagraph id="H205E82AF3BE24F1AA2FB2399A12E7AC9"><enum>(A)</enum><text>the adjusted basis
of the asset, multiplied by</text>
</subparagraph><subparagraph id="H4C336BFB50614DCCB480C08ED1D65FFF"><enum>(B)</enum><text>the percentage (if
any) by which—</text>
<clause id="HBED88C4C5AA443719C285B6AF8589D32"><enum>(i)</enum><text>the gross domestic
product deflator for the last calendar quarter ending before the asset is
disposed of, exceeds</text>
</clause><clause id="H9CCF5FC5AF754AC4AA31236E276E3412"><enum>(ii)</enum><text>the gross
domestic product deflator for the last calendar quarter ending before the asset
was acquired by the taxpayer.</text>
</clause></subparagraph><continuation-text continuation-text-level="paragraph">The
percentage under subparagraph (B) shall be rounded to the nearest
<fraction>1/10</fraction> of 1 percentage point.</continuation-text></paragraph><paragraph id="HA3AC15CB08174544809EDB67FC9DCDE9"><enum>(3)</enum><header>Gross domestic
product deflator</header><text>The gross domestic product deflator for any
calendar quarter is the implicit price deflator for the gross domestic product
for such quarter (as shown in the last revision thereof released by the
Secretary of Commerce before the close of the following calendar
quarter).</text>
</paragraph></subsection><subsection id="H0C3A73342B1F4FE7AC79E3EF424E5724"><enum>(d)</enum><header>Suspension of
holding period where diminished risk of loss; treatment of short sales</header>
<paragraph id="H795C5D64524F4A3085E0ADE0B7154356"><enum>(1)</enum><header>In
general</header><text>If the taxpayer (or a related person) enters into any
transaction which substantially reduces the risk of loss from holding any
asset, such asset shall not be treated as an indexed asset for the period of
such reduced risk.</text>
</paragraph><paragraph id="H16809A418A264E32A56EF235051A86F8"><enum>(2)</enum><header>Short
sales</header>
<subparagraph id="H0D7F3B2598C748F3855D8680C99EBABE"><enum>(A)</enum><header>In
general</header><text>In the case of a short sale of an indexed asset with a
short sale period in excess of 3 years, for purposes of this title, the amount
realized shall be an amount equal to the amount realized (determined without
regard to this paragraph) increased by the applicable inflation adjustment. In
applying subsection (c)(2) for purposes of the preceding sentence, the date on
which the property is sold short shall be treated as the date of acquisition
and the closing date for the sale shall be treated as the date of
disposition.</text>
</subparagraph><subparagraph id="H1D8C279DCB924FBBA54A6DA015C884F6"><enum>(B)</enum><header>Short sale
period</header><text>For purposes of subparagraph (A), the short sale period
begins on the day that the property is sold and ends on the closing date for
the sale.</text>
</subparagraph></paragraph></subsection><subsection id="H52802DBC4603423D8971EC2BA93960D6"><enum>(e)</enum><header>Treatment of
regulated investment companies and real estate investment trusts</header>
<paragraph id="HC1FA993F1A254F3FAB52600A2B42C1EA"><enum>(1)</enum><header>Adjustments at
entity level</header>
<subparagraph id="H22BDF897D9984B71A84A1C1695B3EEAF"><enum>(A)</enum><header>In
general</header><text>Except as otherwise provided in this paragraph, the
adjustment under subsection (a) shall be allowed to any qualified investment
entity (including for purposes of determining the earnings and profits of such
entity).</text>
</subparagraph><subparagraph id="HAC802F3DC55C48A98C9D7B9051E5E839"><enum>(B)</enum><header>Exception for
corporate shareholders</header><text>Under regulations—</text>
<clause id="HC3B6379BE4284179AE7EF6EFFA60335B"><enum>(i)</enum><text>in
the case of a distribution by a qualified investment entity (directly or
indirectly) to a corporation—</text>
<subclause id="H56905A9B81874BC597B786FE765A561D"><enum>(I)</enum><text>the determination
of whether such distribution is a dividend shall be made without regard to this
section, and</text>
</subclause><subclause id="H327774C74EFF40D583AAE9278838C257"><enum>(II)</enum><text>the amount
treated as gain by reason of the receipt of any capital gain dividend shall be
increased by the percentage by which the entity’s net capital gain for the
taxable year (determined without regard to this section) exceeds the entity’s
net capital gain for such year determined with regard to this section,
and</text>
</subclause></clause><clause id="HB5C3994C06444F2BB6A1AAD36ACF9BCB"><enum>(ii)</enum><text>there shall be
other appropriate adjustments (including deemed distributions) so as to ensure
that the benefits of this section are not allowed (directly or indirectly) to
corporate shareholders of qualified investment entities.</text>
</clause><continuation-text continuation-text-level="subparagraph">For
purposes of the preceding sentence, any amount includible in gross income under
section 852(b)(3)(D) shall be treated as a capital gain dividend and an S
corporation shall not be treated as a corporation.</continuation-text></subparagraph><subparagraph id="H0F1A6BD2420A4B7591E8094197151140"><enum>(C)</enum><header>Exception for
qualification purposes</header><text>This section shall not apply for purposes
of sections 851(b) and 856(c).</text>
</subparagraph><subparagraph id="HF93218DD39C54606A289C70FFAC49444"><enum>(D)</enum><header>Exception for
certain taxes imposed at entity level</header>
<clause id="H8311BB5BD0314BE9AD128EA0D39B90E5"><enum>(i)</enum><header>Tax on failure
to distribute entire gain</header><text>If any amount is subject to tax under
section 852(b)(3)(A) for any taxable year, the amount on which tax is imposed
under such section shall be increased by the percentage determined under
subparagraph (B)(i)(II). A similar rule shall apply in the case of any amount
subject to tax under paragraph (2) or (3) of section 857(b) to the extent
attributable to the excess of the net capital gain over the deduction for
dividends paid determined with reference to capital gain dividends only. The
first sentence of this clause shall not apply to so much of the amount subject
to tax under section 852(b)(3)(A) as is designated by the company under section
852(b)(3)(D).</text>
</clause><clause id="H3D7AFC2FE0514694880272F29C5FE806"><enum>(ii)</enum><header>Other
taxes</header><text>This section shall not apply for purposes of determining
the amount of any tax imposed by paragraph (4), (5), or (6) of section
857(b).</text>
</clause></subparagraph></paragraph><paragraph id="H0F4B459E50EF4EA6B237C8EABDDA3479"><enum>(2)</enum><header>Adjustments to
interests held in entity</header>
<subparagraph id="H336C15F90BDE4D0AA47EBD177D007F9E"><enum>(A)</enum><header>Regulated
investment companies</header><text>Stock in a regulated investment company
(within the meaning of section 851) shall be an indexed asset for any calendar
quarter in the same ratio as—</text>
<clause id="HEF883A3C167D4353A10F1635BEA2988C"><enum>(i)</enum><text>the average of the
fair market values of the indexed assets held by such company at the close of
each month during such quarter, bears to</text>
</clause><clause id="H3F89A76EBAE94170A01A86679DFCCD94"><enum>(ii)</enum><text>the average of
the fair market values of all assets held by such company at the close of each
such month.</text>
</clause></subparagraph><subparagraph id="HF2DBE4DD104D44CF96CC8BD347497E13"><enum>(B)</enum><header>Real estate
investment trusts</header><text>Stock in a real estate investment trust (within
the meaning of section 856) shall be an indexed asset for any calendar quarter
in the same ratio as—</text>
<clause id="H49E64676AE7D4D5DAF69D951C29EAFE4"><enum>(i)</enum><text>the fair market
value of the indexed assets held by such trust at the close of such quarter,
bears to</text>
</clause><clause id="H80134000D1DD4218B6C993EE99D2B06E"><enum>(ii)</enum><text>the fair market
value of all assets held by such trust at the close of such quarter.</text>
</clause></subparagraph><subparagraph id="H8C641FEDE3314D5F933D06F28D92504E"><enum>(C)</enum><header>Ratio of 80
percent or more</header><text>If the ratio for any calendar quarter determined
under subparagraph (A) or (B) would (but for this subparagraph) be 80 percent
or more, such ratio for such quarter shall be 100 percent.</text>
</subparagraph><subparagraph id="H1DA0BA6752E6451AAF0BFF9A9144989C"><enum>(D)</enum><header>Ratio of 20
percent or less</header><text>If the ratio for any calendar quarter determined
under subparagraph (A) or (B) would (but for this subparagraph) be 20 percent
or less, such ratio for such quarter shall be zero.</text>
</subparagraph><subparagraph id="HFCBE718BADB14AD2A3ACFF0C719CED74"><enum>(E)</enum><header>Look-thru of
partnerships</header><text>For purposes of this paragraph, a qualified
investment entity which holds a partnership interest shall be treated (in lieu
of holding a partnership interest) as holding its proportionate share of the
assets held by the partnership.</text>
</subparagraph></paragraph><paragraph id="HA6F29FAFB654405691F15392E2E7FF6D"><enum>(3)</enum><header>Treatment of
return of capital distributions</header><text>Except as otherwise provided by
the Secretary, a distribution with respect to stock in a qualified investment
entity which is not a dividend and which results in a reduction in the adjusted
basis of such stock shall be treated as allocable to stock acquired by the
taxpayer in the order in which such stock was acquired.</text>
</paragraph><paragraph id="H2D9EFAFF062F4F0CB9B42EB26FBE27A5"><enum>(4)</enum><header>Qualified
investment entity</header><text>For purposes of this subsection, the term
<term>qualified investment entity</term> means—</text>
<subparagraph id="HFC00D42764034044903E2CB240190512"><enum>(A)</enum><text>a regulated
investment company (within the meaning of section 851), and</text>
</subparagraph><subparagraph id="HF0ACA7524C3945ADA86B2FC0FEF66A26"><enum>(B)</enum><text>a real estate
investment trust (within the meaning of section 856).</text>
</subparagraph></paragraph></subsection><subsection id="HE1F44834715C4884B528136392A441D4"><enum>(f)</enum><header>Other pass-Thru
entities</header>
<paragraph id="HAED1F35464F146A4AB59E80292B0B98C"><enum>(1)</enum><header>Partnerships</header>
<subparagraph id="H9E434FC45A324B848BDFB75981DF7EB4"><enum>(A)</enum><header>In
general</header><text>In the case of a partnership, the adjustment made under
subsection (a) at the partnership level shall be passed through to the
partners.</text>
</subparagraph><subparagraph id="HCA3BA551541D4BE79289AC735DC4097B"><enum>(B)</enum><header>Special rule in
the case of section 754 elections</header><text>In the case of a transfer of an
interest in a partnership with respect to which the election provided in
section 754 is in effect—</text>
<clause id="H6F2B962563AF4036921D333DCABC6395"><enum>(i)</enum><text>the adjustment
under section 743(b)(1) shall, with respect to the transferor partner, be
treated as a sale of the partnership assets for purposes of applying this
section, and</text>
</clause><clause id="HBCA0ED2FB82748AF9FE2CE6131896376"><enum>(ii)</enum><text>with respect to
the transferee partner, the partnership’s holding period for purposes of this
section in such assets shall be treated as beginning on the date of such
adjustment.</text>
</clause></subparagraph></paragraph><paragraph id="H54A0332BA6AB43C1BD898D41F0F5EA4D"><enum>(2)</enum><header>S
corporations</header><text>In the case of an S corporation, the adjustment made
under subsection (a) at the corporate level shall be passed through to the
shareholders. This section shall not apply for purposes of determining the
amount of any tax imposed by section 1374 or 1375.</text>
</paragraph><paragraph id="HBF5BAF6C6E084254A06324DE91FDE3A9"><enum>(3)</enum><header>Common trust
funds</header><text>In the case of a common trust fund, the adjustment made
under subsection (a) at the trust level shall be passed through to the
participants.</text>
</paragraph><paragraph id="H0F29C8141B2E4D1FB284DBAC777C3C6B"><enum>(4)</enum><header>Indexing
adjustment disregarded in determining loss on sale of interest in
entity</header><text>Notwithstanding the preceding provisions of this
subsection, for purposes of determining the amount of any loss on a sale or
exchange of an interest in a partnership, S corporation, or common trust fund,
the adjustment made under subsection (a) shall not be taken into account in
determining the adjusted basis of such interest.</text>
</paragraph></subsection><subsection id="H90B8E33B506E4163A33771AE2FB93057"><enum>(g)</enum><header>Dispositions
between related persons</header>
<paragraph id="HDA9C88FCC04B4DE5993CA0F62B2C3DAE"><enum>(1)</enum><header>In
general</header><text>This section shall not apply to any sale or other
disposition of property between related persons except to the extent that the
basis of such property in the hands of the transferee is a substituted
basis.</text>
</paragraph><paragraph id="H47BA9DF704DC4CBFA265660FE09E3B05"><enum>(2)</enum><header>Related persons
defined</header><text>For purposes of this section, the term <term>related
persons</term> means—</text>
<subparagraph id="H8003DAD52C0F4E90BBC98A010B6484E8"><enum>(A)</enum><text>persons bearing a
relationship set forth in section 267(b), and</text>
</subparagraph><subparagraph id="HB340DE35000541C091EE4F2F1F2D4B35"><enum>(B)</enum><text>persons treated as
single employer under subsection (b) or (c) of section 414.</text>
</subparagraph></paragraph></subsection><subsection id="H26CCA8DE5379460ABD477C15842B977B"><enum>(h)</enum><header>Transfers To
increase indexing adjustment</header><text>If any person transfers cash, debt,
or any other property to another person and the principal purpose of such
transfer is to secure or increase an adjustment under subsection (a), the
Secretary may disallow part or all of such adjustment or increase.</text>
</subsection><subsection id="H3EFEE1F57FA744BDAC07996CE75E144D"><enum>(i)</enum><header>Special
rules</header><text>For purposes of this section—</text>
<paragraph id="H646A8041566740F3A9F2F78960BED1D1"><enum>(1)</enum><header>Treatment of
improvements, etc</header><text>If there is an addition to the adjusted basis
of any tangible property or of any stock in a corporation during the taxable
year by reason of an improvement to such property or a contribution to capital
of such corporation—</text>
<subparagraph id="HE0884305486A46EE9AAE55FDE198E69C"><enum>(A)</enum><text>such addition
shall never be taken into account under subsection (c)(1)(A) if the aggregate
amount thereof during the taxable year with respect to such property or stock
is less than $1,000, and</text>
</subparagraph><subparagraph id="H730E2753E507466CBD639C18A56BCEF1"><enum>(B)</enum><text>such addition
shall be treated as a separate asset acquired at the close of such taxable year
if the aggregate amount thereof during the taxable year with respect to such
property or stock is $1,000 or more.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">A rule
similar to the rule of the preceding sentence shall apply to any other portion
of an asset to the extent that separate treatment of such portion is
appropriate to carry out the purposes of this section.</continuation-text></paragraph><paragraph id="H7B525406B8AE4E0FAE077D5342415CDC"><enum>(2)</enum><header>Assets which are
not indexed assets throughout holding period</header><text>The applicable
inflation adjustment shall be appropriately reduced for periods during which
the asset was not an indexed asset.</text>
</paragraph><paragraph id="H7D1D4C83112D41CE97252607A790557F"><enum>(3)</enum><header>Treatment of
certain distributions</header><text>A distribution with respect to stock in a
corporation which is not a dividend shall be treated as a disposition.</text>
</paragraph><paragraph id="HC4772E2970CC4A49B534F93644132F8C"><enum>(4)</enum><header>Section cannot
increase ordinary loss</header><text>To the extent that (but for this
paragraph) this section would create or increase a net ordinary loss to which
section 1231(a)(2) applies or an ordinary loss to which any other provision of
this title applies, such provision shall not apply. The taxpayer shall be
treated as having a long-term capital loss in an amount equal to the amount of
the ordinary loss to which the preceding sentence applies.</text>
</paragraph><paragraph id="H76448A6138434D0DA5D9540F4F95F1F5"><enum>(5)</enum><header>Acquisition date
where there has been prior application of subsection
<enum-in-header>(a)(1)</enum-in-header> with respect to the
taxpayer</header><text>If there has been a prior application of subsection
(a)(1) to an asset while such asset was held by the taxpayer, the date of
acquisition of such asset by the taxpayer shall be treated as not earlier than
the date of the most recent such prior application.</text>
</paragraph></subsection><subsection id="HAD1AE8EB06CC48D595EC84746778707D"><enum>(j)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H6A591633ABF84E0B97F6C904684719AF"><enum>(b)</enum><header>Clerical
amendment</header><text>The table of sections for part II of subchapter O of
chapter 1 of such Code is amended by striking the item relating to section 1023
and by inserting after the item relating to section 1022 the following new
item:</text>
<quoted-block id="HCCB70764C5084CEF9AD58FAAEA620768" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1023. Indexing of certain assets for
purposes of determining gain or loss.</toc-entry>
<toc-entry level="section">Sec. 1024. Cross
references.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H38817CB897BD452BB3AFC1ADE5040525"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to indexed
assets acquired by the taxpayer after December 31, 2012, in taxable years
ending after such date.</text>
</subsection></section>