CAPITAL LOSSES OF INDIVIDUALS.

SEC. 513. CAPITAL LOSSES OF INDIVIDUALS. (a) Limitation on Allowance of Capital Losses.—Section 1211(b) (relating to limitation on capital losses of taxpayers other than corporations) is amended to read as follows: “(b) Other Taxpayers.— “(1) In general.—In the case of a taxpayer other than a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of the gains from such sales or exchanges, plus (if such losses exceed such gains) whichever of the following is smallest: “(A) the taxable income for the taxable year, “(B) $1,000, or “(C) the sum of— “(i) the excess of the net short-term capital loss over the net long-term capital gain, and “(ii) one-half of the excess of the net long-term capital loss over the net short-term capital gain. “(2) Married individuals.—In the case of a husband or wife who files a separate return, the amount specified in paragraph (1)(B) shall be $500 in lieu of $1,000. “(3) Computation of taxable income.—For purposes of paragraph (1), taxable income shall be computed without regard to gains or losses from sales or exchanges of capital assets and without regard to the deductions provided in section 151 (relating to personal exemptions) or any deduction in lieu thereof. If the taxpayer elects to pay the optional tax imposed by section 3, ‘taxable income’ as used in this subsection shall read as ‘adjusted gross income’.” (b) Capital Loss Carryover.—Section 1212(b) (relating to capital loss carryover of taxpayers other than corporations) is amended by striking out “beginning after December 31, 1963” at the beginning of paragraph (1), by striking out the last sentence of paragraph (1), and by striking out paragraph (2) and inserting in lieu thereof the following new paragraphs: “(2) Special rules.— “(A) For purposes of determining the excess referred to in paragraph (1)(A), an amount equal to the amount allowed for the taxable year under section 1211(b)(1)(A), (B), or (C) shall be treated as a short-term capital gain in such year. “(B) For purposes of determining the excess referred to in paragraph (1)(B), an amount equal to the sum of— “(i) the amount allowed for the taxable year under section 1211(b)(1)(A), (B), or (C), and “(ii) the excess of the amount described in clause (i) over the net short-term capital loss (determined without regard to this subsection) for such year, shall be treated as a short-term capital gain in such year. 83 Stat. 643 “(3) Transitional rule.—In the case of any amount which, under paragraph (1) and section 1211(b) (as in effect for taxable years beginning before January 1, 1970), is treated as a capital loss in the first taxable year beginning after December 31, 1969, paragraph (1) and section 1211(b) (as in effect for taxable years beginning before January 1, 1970) shall apply (and paragraph (1) and section 1211(b) as in effect for taxable years beginning after December 31, 1969, shall not apply) to the extent such amount exceeds the total of any net capital gains (determined without regard to this subsection) of taxable years beginning after December 31, 1969.” (c) Conforming Amendment.—Section 1222(9) (defining net capital gain) is amended by striking out “In the case of a corporation, the” and inserting in lieu thereof “The”. (d) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 1969.