Bill Summary
The Retirement Inflation Protection Act of 2020 is a bill that aims to amend the Internal Revenue Code of 1986. The main purpose of this legislation is to provide for the indexing of certain assets for eligible individuals when determining gain or loss. This means that the adjusted basis of an asset will be substituted with an indexed basis when calculating the gain or loss on its sale or disposal. The eligible individuals referred to in this bill are those who have reached the age of 59 and a half at the time of the sale or disposal of the indexed asset. This legislation applies to common stock in C corporations (excluding foreign corporations) and tangible property that is a capital asset or used in a trade or business. However, there are exceptions for certain types of foreign stock, such as stock in a foreign investment company or a passive foreign investment company. The indexed basis is calculated by taking the adjusted basis of the asset and increasing it by the applicable inflation adjustment, which is determined by the Chained Consumer Price Index for All Urban Consumers. There are also special rules for improvements made to the asset and transfers made to secure or increase the indexing adjustment. This bill also includes regulations, a new section in the Internal Revenue Code, and a table of sections. It will take effect after the date of its enactment and will apply to sales or disposals in taxable years ending after that date.
Possible Impacts
1. Senior citizens over the age of 59 1/2 may see a decrease in their taxable income from the sale of indexed assets, resulting in a lower tax bill.
2. High-income individuals who regularly trade stocks may see a decrease in their taxable income due to the exclusion of certain foreign stock and the suspension of holding periods for short sales.
3. The requirement for written documentation of the original purchase price may create extra paperwork and administrative tasks for eligible individuals, such as gathering and organizing financial records.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8584 Introduced in House (IH)]
<DOC>
116th CONGRESS
2d Session
H. R. 8584
To amend the Internal Revenue Code of 1986 to provide for the indexing
of certain assets for purposes of determining gain or loss of eligible
individuals.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 13, 2020
Mr. Emmer introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
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 of eligible
individuals.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Retirement Inflation Protection Act
of 2020''.
SEC. 2. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING GAIN OR
LOSS OF ELIGIBLE INDIVIDUALS.
(a) In General.--Part II of subchapter O of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
1017 the following new section:
``SEC. 1018. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING
GAIN OR LOSS OF ELIGIBLE INDIVIDUALS.
``(a) In General.--
``(1) Indexed basis substituted for adjusted basis.--Solely
for purposes of determining gain or loss on the sale or other
disposition by an eligible individual of an indexed asset which
has been held by such individual for more than 3 years, the
indexed basis of the asset shall be substituted for its
adjusted basis.
``(2) Exception for depreciation, etc.--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.
``(3) Written documentation requirement.--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.
``(b) Eligible Individual.--For purposes of this section, the term
`eligible individual' means, with respect to any indexed asset, any
individual if such individual has attained age 59\1/2\ as of the date
of the sale or other disposition of such asset.
``(c) Indexed Asset.--
``(1) In general.--For purposes of this section, the term
`indexed asset' means--
``(A) common stock in a C corporation (other than a
foreign corporation), or
``(B) tangible property,
which is a capital asset or property used in the trade or
business (as defined in section 1231(b)).
``(2) Stock in certain foreign corporations included.--For
purposes of this section--
``(A) In general.--The term `indexed asset'
includes common stock in a foreign corporation which is
regularly traded on an established securities market.
``(B) Exception.--Subparagraph (A) shall not apply
to--
``(i) stock of a foreign investment
company,
``(ii) stock in a passive foreign
investment company (as defined in section
1296),
``(iii) stock in a foreign corporation held
by a United States person who meets the
requirements of section 1248(a)(2), and
``(iv) stock in a foreign personal holding
company.
``(C) Treatment of american depository receipts.--
An American depository receipt for common stock in a
foreign corporation shall be treated as common stock in
such corporation.
``(d) Indexed Basis.--For purposes of this section--
``(1) In general.--The indexed basis for any asset is--
``(A) the adjusted basis of the asset, increased by
``(B) the applicable inflation adjustment.
``(2) Applicable inflation adjustment.--The applicable
inflation adjustment for any asset is an amount equal to--
``(A) the adjusted basis of the asset, multiplied
by
``(B) the percentage (if any) by which--
``(i) C-CPI-U for the last calendar month
ending before the asset is disposed of, exceeds
``(ii) C-CPI-U for the last calendar month
ending before the asset was acquired by the
taxpayer.
The percentage under subparagraph (B) shall be rounded to the
nearest \1/10\ of 1 percentage point.
``(3) C-CPI-U.--
``(A) In general.--The term `C-CPI-U' means the
Chained Consumer Price Index for All Urban Consumers
(as published by the Bureau of Labor Statistics of the
Department of Labor). The values of the Chained
Consumer Price Index for All Urban Consumers taken into
account for purposes of determining the cost-of-living
adjustment for any calendar month under this subsection
shall be the latest values so published as of the date
on which such Bureau publishes the initial value of the
Chained Consumer Price Index for All Urban Consumers
for the month which precedes such calendar month by 4
months.
``(B) Determination for calendar month.--The C-CPI-
U for any calendar month is the average of the C-CPI-U
as of the close of the 12-month period ending with the
month which precedes such calendar month by 4 months.
``(e) Suspension of Holding Period Where Diminished Risk of Loss;
Treatment of Short Sales.--
``(1) In general.--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.
``(2) Short sales.--
``(A) In general.--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 (d)(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.
``(B) Short sale period.--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.
``(f) Dispositions Between Related Persons.--
``(1) In general.--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.
``(2) Related persons defined.--For purposes of this
section, the term `related persons' means--
``(A) persons bearing a relationship set forth in
section 267(b), and
``(B) persons treated as single employer under
subsection (b) or (c) of section 414.
``(g) Transfers To Increase Indexing Adjustment.--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.
``(h) Special Rules.--For purposes of this section--
``(1) Treatment of improvements, etc.--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--
``(A) such addition shall never be taken into
account under subsection (d)(1)(A) if the aggregate
amount thereof during the taxable year with respect to
such property or stock is less than $1,000, and
``(B) 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.
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.
``(2) Assets which are not indexed assets throughout
holding period.--The applicable inflation adjustment shall be
appropriately reduced for periods during which the asset was
not an indexed asset.
``(3) Treatment of certain distributions.--A distribution
with respect to stock in a corporation which is not a dividend
shall be treated as a disposition.
``(4) Section cannot increase ordinary loss.--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.
``(5) Acquisition date where there has been prior
application of subsection (a)(1) with respect to the
taxpayer.--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.
``(i) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the purposes of this
section.''.
(b) Clerical Amendment.--The table of sections for part II of
subchapter O of chapter 1 of such Code is amended by inserting after
the item relating to section 1017 the following new item:
``Sec. 1018. Indexing of certain assets for purposes of determining
gain or loss of eligible individuals.''.
(c) Effective Date.--The amendments made by this section shall
apply to sales or other dispositions after the date of the enactment of
this Act, in taxable years ending after such date.
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