HR2089-119

1. Short title This Act may be cited as the Generating Retirement Ownership through Long-Term Holding.

2. Deferral of reinvested capital gain dividends of regulated investment companies Part III of subchapter O of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 1045 the following new section: 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. For purposes of this section— The term capital gain dividend has the meaning given to such term by section 852(b)(3)(C). 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. 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 shares in the distributing company that are sold or redeemed. 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. 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. 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. The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section. 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: The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act. 1046.Reinvested capital gain dividends of regulated investment companies(a)Nonrecognition of gainIn 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)Capital gain dividendThe 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)In generalGain 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)Gain recognition(i)In generalUpon 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 shares in the distributing company that are sold or redeemed.(ii)Death of individualExcept 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)Holding periodThe 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.(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)RegulationsThe Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.. Sec. 1046. Reinvested capital gain dividends of regulated investment companies..

1046. Reinvested capital gain dividends of regulated investment companies 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. For purposes of this section— The term capital gain dividend has the meaning given to such term by section 852(b)(3)(C). 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. 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 shares in the distributing company that are sold or redeemed. 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. 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. 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. The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.