“A bill to amend the Internal Revenue Code of 1986 to provide for the indexing of certain assets for purposes of determining gain or loss.”
No CRS summary available for this bill.
This section establishes an inflation-indexed basis rule (new IRC §1023) under which non-corporate taxpayers substitute the indexed basis for the adjusted basis in determining gain or loss from the sale or other disposition of an "indexed asset" held for more than three years, provided the taxpayer has written documentation of the original purchase price. The indexed basis equals the asset's adjusted basis increased by an inflation adjustment equal to the adjusted basis multiplied by the percentage increase (rounded to the nearest 0.1 percentage point) in the gross domestic product (GDP) deflator from the last calendar quarter ending before acquisition to the last calendar quarter ending before disposition. (Thus, the rule reduces taxable gain to account for inflation measured by the GDP deflator published by the Department of Commerce.) Depreciation, depletion, and amortization deductions are computed without regard to indexing. Indexed assets include (1) common stock in a domestic C corporation, (2) any digital asset (i.e., a natively electronic asset on a cryptographically secured distributed ledger designed to confer only economic or access rights), and (3) tangible property that is a capital asset or IRC §1231 property; common stock in certain foreign corporations regularly traded on an established securities market is also included, with exceptions for foreign investment companies, passive foreign investment companies (PFICs), stock triggering IRC §1248(a)(2), and foreign personal holding companies (American depositary receipts are treated as the underlying stock). Indexing is suspended during any period of substantially reduced risk of loss from holding the asset (e.g., due to related-party transactions). For short sales of indexed assets with a short-sale period exceeding three years, the amount realized is increased by the applicable inflation adjustment (treating the short-sale date as acquisition and the closing date as disposition). Qualified investment entities (i.e., regulated investment companies and real estate investment trusts) apply indexing at the entity level for earnings and profits purposes, but regulations prevent direct or indirect benefits to corporate shareholders (e.g., via adjustments to dividends and capital gain dividends); the rule does not apply for regulated investment company qualification under IRC §851(b).