CAPITAL GAINS AND LOSSES.

SEC. 322. CAPITAL GAINS AND LOSSES. (a) Treatment of Long-Term Capital Gains and Losses.— (1) Amendment of section 23.—Section 23 (relating to deductions from gross income) is hereby amended by adding at the end thereof the following new subsection: “(ee) Long-Term Capital Gains.—In the case of a taxpayer other than a corporation, the deduction for long-term capital gains provided in section 117 (b).” (2) Amendment of section 117 (b).—Section 117 (b) (relating to treatment of long-term capital gains and losses) is hereby amended to read as follows: “(b) Deduction From Gross Income.—In the case of a taxpayer other than a corporation, if for any taxable year the net long-term capital gain exceeds the net short-term capital loss, 50 per centum of the amount of such excess shall be a deduction from gross income. In the case of an estate or trust, the deduction shall be computed by excluding the portion (if any), of the gains for the taxable year from sales or exchanges of capital assets, which, under section 162 (b) or (c), is includible by the income beneficiaries as gain derived from the sale or exchange of capital assets.” (b) Alternative Tax.—Section 117 (c) (2) (relating to alternative tax) is hereby amended to read as follows: “(2) Other taxpayers.— If for any taxable year the net long-term capital gain of any taxpayer (other than a corporation) exceeds the net short-term capital loss, there shall be levied, collected, and paid, in lieu of the tax imposed by sections 11 and 12 (or, in the case of certain tax-exempt trusts, in lieu of the tax imposed by section 421), a tax determined as follows, if and only if such tax is less than the tax imposed by such sections: “(A) A partial tax shall first be computed upon the net income reduced by an amount equal to 50 per centum of such excess, at the rates and in the manner as if this subsection had not been enacted. “(B) There shall then be ascertained an amount equal to 25 per centum of the excess of the net long-term capital gain over the net short-term capital loss. In the case of any taxable year beginning after October 31, 1951, and before November 1, 1953, there shall be ascertained, in lieu of the amount computed under the preceding sentence, an amount equal to 26 per centum of the excess of the net long-term capital gain over the net short-term capital loss. “(C) The total tax shall be the partial tax computed under subparagraph (A) plus the amount computed under subparagraph (B).” (c) Technical Amendments.— (1) Amendment of section 22 (n).—Section 22 (n) (relating to the definition of adjusted gross income) is hereby amended by striking out the word “and” at the end of paragraph (5), by striking out the period at the end of paragraph (6) and inserting in lieu thereof “; and”, and by inserting after paragraph (6) the following new paragraph: “(7) Long-term capital gains.—The deduction allowed by section 23 (ee).” 65 Stat. 500 (2) Amendment of section 117 (a).—Paragraphs (2) and (4) of section 117 (a) (relating to definitions of short-term capital gain and long-term capital gain) are each hereby amended by striking out “net income” and inserting in lieu thereof “gross income”. (3) Amendment of section 117 (j).— Section 117 (j) (2) (A) (relating to gains and losses from involuntary conversion and from the sale or exchange of certain property used in the trade or business) is hereby amended to read as follows: “(A) In determining under this paragraph whether gains exceed losses, the gains described therein shall be included only if and to the extent taken into account in computing gross income and the losses described therein shall be included only if and to the extent taken into account in computing net income, except that subsection (d) shall not apply.” (4) Amendment of section 122 (d) (4).—Section 122 (d) (4) (relating to computation of net operating loss deduction) is hereby amended to read as follows: “(4) The amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includible on account of gains from such sales or exchanges. The deduction provided in section 23 (ee) shall not be allowed.” (5) Amendment of section 162 (a).—Section 162 (a) (relating to computation of net income of estates and trusts) is hereby amended by striking out the semicolon and inserting in lieu thereof a period and the following: “Where any amount of the income so paid or set aside is attributable to gain from the sale or exchange of capital assets held for more than six months, proper adjustment of the deduction otherwise allowable under this subsection shall be made for any deduction allowable to the trust under section 23 (ee);”. (d) Effective Date.—The amendments made by this section shall be applicable only with respect to taxable years beginning on or after the date of the enactment of this Act. In determining under section 117 (e) of the Internal Revenue Code the amount of the carryover to a taxable year beginning on or after such date, of the capital loss for a taxable year beginning before such date, such amendments shall not affect the computation of the amount of the net capital loss or of the net capital gain for any taxable year beginning before such date.