II
110th CONGRESS
1st Session
S. 2126
IN THE SENATE OF THE UNITED STATES
October 2, 2007
Mr. Crapo (for himself, Mr. Johnson, and Mr. Gregg) 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 allow individuals to defer recognition of reinvested capital gains distributions from regulated investment companies.
Short title
This Act may be cited as the
Generate Retirement Ownership Through
Long-Term Holding Act of 2007
.
Deferral of reinvested capital gain dividends of regulated investment companies
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:
Reinvested capital gain dividends of regulated investment companies
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.
Definitions and special rules
For purposes of this section—
Capital gain dividend
The term capital gain dividend has the meaning given to such term by section 852(b)(3)(C).
Recognition of deferred capital gain dividends
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, or
upon the death of the individual.
Gain recognition
In general
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.
Death of individual
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.
Holding period
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.
Special rule for distributions of qualified 5-year gains
In the case of a distribution of a capital
gain dividend (or portion thereof) in a taxable year beginning after December
31, 2010, 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
.
Section not To apply to certain taxpayers
This section shall not apply to—
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
an estate or trust.
Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.
.
Conforming amendments
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.
.
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.
.
Effective date
The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.