Summary: S.2 — 105th Congress (1997-1998)All Information (Except Text)

There is one summary for S.2. Bill summaries are authored by CRS.

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Introduced in Senate (01/21/1997)


Title I: Child Tax Credit

Title II: Capital Gains Reform

Subtitle A: Taxpayers Other Than Corporations

Subtitle B: Corporate Capital Gains

Subtitle C: Capital Loss Deduction Allowed with

Respect to Sale or Exchange of Principal Residence

Title III: Estate and Gift Provisions

Title IV: Savings Incentives

American Family Tax Relief Act - Title I: Child Tax Credit - Amends the Internal Revenue Code to allow a credit of $500 per child. Reduces such credit incrementally as income increases above threshold amounts.

Title II: Capital Gains Reform - Subtitle A: Taxpayers Other Than Corporations - Provides for taxpayers, other than corporations, a deduction of 50 percent of net capital gain. Provides that, in the case of an estate or trust, the deduction shall be computed by excluding the portion of the gains from sales or exchanges of certain capital assets includible in gross income by the income beneficiaries as gain derived from the sale of capital assets.

Excludes collectibles gain from the computation of net capital gain.

Sets forth a formula for determining the maximum rate on nondeductible capital gain.

Allows the deduction in computing adjusted gross income.

(Sec. 202) Provides that for taxpayers, other than corporations, the indexed basis of an asset shall be substituted for its adjusted basis in determining gain on the disposition of an indexed asset, if held more than three years. Defines an indexed asset as: (1) common stock in a C corporation; and (2) tangible property which is a capital asset used in a trade or business. Defines the indexed basis as: (1) the adjusted basis of the asset, increased by; (2) the applicable inflation adjustment. Defines applicable inflation adjustment.

Suspends treatment of an asset as an indexed asset during any period in which a taxpayer enters into an agreement which substantially reduces the risk of loss of holding the asset. Provides for the treatment of short sales.

Permits such substitution, subject to stated exceptions, to any qualified investment entity. Permits stock in a regulated investment company or a real estate investment trust to be an indexed asset as specified.

Provides for pass-through in the case of: (1) a partnership to partners; (2) an S corporation to shareholders; and (3) a common trust fund to participants.

Makes the provisions of this section inapplicable to a 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.

Sets forth rules concerning: (1) improvements; (2) assets which are not indexed assets throughout the holding period; (3) treatment of certain dispositions; (4) acquisition date where there has been a prior application of this section; and (5) collapsible corporations.

Applies the provisions of this section to the disposition of property the holding period of which began after December 31, 1996.

(Sec. 203) Repeals the minimum tax preference applicable to the sale of certain small business stock.

Doubles the amount of assets a qualified small business may have and remain eligible for reduced rates.

Repeals the per-issuer limitation on a taxpayer's eligible gain.

Requires that certain working capital of a small business must be expended in five (currently, two) years to be treated as actively in business.

Subtitle B: Corporate Capital Gains - Provides for a reduction in the alternative capital gains tax for corporations.

Subtitle C: Capital Loss Deduction Allowed With Respect to Sale or Exchange of Principal Residence - Treats as a deductible capital loss a loss from the sale or exchange of a principal residence.

Title III: Estate and Gift Provisions - Increases, over an eight year period, the unified estate and gift tax credit.

(Sec. 302) Establishes estate tax rules for qualified family-owned business interests, if such interests exceed 50 percent of the adjusted gross estate. Excludes, subject to specified requirements, from the value of such an estate the lesser of: (1) the adjusted value of the qualified family-owned business interests of the decedent otherwise includible in the estate, or; (2) the sum of $1.5 million, plus 50 percent of the excess of the adjusted value of such interests over $1.5 million. Subjects such exclusion to recapture, if specified events occur.

(Sec. 303) Extends from 10 to 20 years the amount of time permitted to an estate for making installment payments of the estate tax in an estate consisting largely of interest in a closely held business. Revises provisions concerning the payment of interest on such tax to make a certain portion interest-free.

Title IV: Savings Incentives - Increases incrementally, through the year 2000, the adjusted gross income phaseout limits for IRA (individual retirement account) contributions. Repeals, after the year 2000, such limits. Permits a spouse who is not an active IRA plan participant to make a deductible IRA contribution of up to $2,000 without regard to such limits.

(Sec. 403) Permits an individual to create an IRA Plus Account into which limited nondeductible contributions can be made. Excludes a qualified distribution from gross income. Defines a qualified distribution as any distribution made: (1) after age 59 and one-half; (2) to a beneficiary after the death of the owner of the account; (3) because of disability; or (4) as a qualified special purpose distribution (medical expenses, long-term unemployment, etc.). Prohibits distributions made within five years of establishing (or, of rolling over into) such an account as being treated as qualified distributions.

(Sec. 404) Permits tax-free withdrawals from an individual retirement account for: (1) business start-up costs; (2) long-term (more than 12 weeks) unemployment; or (3) higher education expenses of the taxpayer or the taxpayer's spouse or child.