Chapter 1: Provisions Relating to Individuals - Allows gains to be rolled over from one residence to another in the order the residences are purchased and used, regardless of the reasons for the sale of the old residence.
Sets a two-year residence rule for taxpayers who sell a residence pursuant to a divorce or marital separation for purposes of determining the rollover of gain on the sale of a principal residence.
Provides that the amount allowed as a deduction to rural mail carriers for the business expense of a vehicle shall be equal to qualified reimbursements.
Amends the Technical and Miscellaneous Revenue Act of 1988 to repeal the rule on the business use of automobiles by rural mail carriers.
Chapter 2: Pension Simplification - Subchapter A: Simplified Distribution Rules - Treats a stock bonus, pension, or profit-sharing trust which would otherwise be exempt from tax, except that it was organized outside the U.S., as a tax exempt trust.
Repeals the $5,000 exclusion of employees' death benefits.
Establishes a method of taxing annuity payments by taking into account the investment in the contract and the number of anticipated payments.
Subchapter B: Increased Access to Pension Plans - Makes tax- exempt organizations (except for State and local governments) eligible for 401(k) plans.
Subchapter C: Nondiscrimination Provisions - Redefines the term "highly compensated employee" for pension, profit sharing, stock bonus plan, etc.
purposes. Makes such an employee one who is a five-percent owner, or one who has compensation from the employer in excess of $80,000, or and was in top-paid group of the employer.
Repeals the family aggregation rules.
Provides alternative methods of satisfying the special nondiscrimination requirements applicable to elective deferrals and employer matching contributions.
Modifies the present nondiscrimination test applicable to simplified employee pension plans to provide that the average deferral percentage for nonhighly compensated employees for the previous year is to be used.
Subchapter D: Miscellaneous Provisions - Establishes a contribution limit for owner-employees of retirement plans.
Allows rural cooperatives which include cash or deferred arrangements to make distributions to participants after attainment of age 59 and one-half.
Modifies the treatment of government plans with respect to limits on contributions and benefits.
Provides special rules for distributions of deferred compensation plans of State and local governments and tax-exempt organizations.
Provides for the application of participant's compensation provisions to permanently and totally disabled participants when a defined contribution plan provides for the continuation of contributions on behalf of all such disabled participants for a fixed or determinable period.
Makes the social security retirement age the uniform retirement age for purposes of discrimination testing.
Doubles from five to ten percent the tax on prohibited transactions.
Repeals the combined limit for participants in both a defined contribution plan and a defined benefit plan maintained by the same employer.
Revises the definition of leased employee to mean one whose services are performed under the control of a service recipient, instead of one whose services are historically performed by employees.
Chapter 3: Treatment of Large Partnerships - Establishes special rules for electing large partnerships (100 or more partners) with respect to:
(1) determining the income tax of a partner;
(2) computing the taxable income of such partnership; and
(3) treatment of contributed property.
Provides that a large partnership does not include one where:
(1) substantially all of the activities involve the performance of personal services by individuals owning interests in such partnerships; and
(2) 25 percent or more of partnership assets consist of oil or gas properties.
Chapter 4: Foreign Provisions - Subchapter A: Modifications to Treatment of Passive Foreign Investment Companies - Modifies passive foreign investment company provisions and allows a mark-to-market election by a shareholder of such company.
Provides, in general, that a corporation shall not be treated with respect to a shareholder as a passive foreign investment company during the qualified portion of such shareholder's holding period with respect to stock in such corporation.
Provides, in general, that in the case of marketable stock in a passive foreign investment company which is owned by a U.S. person such person may elect:
(1) if the fair market value of such stock exceeds its adjusted basis, to include in gross income an amount equal to the amount of such excess; or
(2) if the adjusted basis of such stock exceeds the fair market value of such stock, a deduction equal to the lesser of the amount of the excess or the unreserved inclusions with respect to such stock.
Modifies the definition of passive income.
Subchapter B: Treatment of Controlled Foreign Corporations - Provides that if a controlled foreign corporation sells or exchanges stocks in other foreign corporations, then gain recognized on such sale or exchange shall be included in the gross income of such corporation as a dividend to the same extent that it would have been included if such corporation were a U.S. person.
Revises provisions concerning:
(1) determining pro rata share of gain from certain sales or exchanges of stock in certain foreign corporations;
(2) basis adjustments in stock held by lower-tier foreign corporations;
(3) determination of previously taxed income in redemptions through use of related corporations; and
(4) treatment of branch profits tax exemptions or reductions.
Extends the application of the indirect foreign tax credit to certain controlled corporations below the third tier.
Repeals Code provisions concerning earnings invested in excess passive assets.
Chapter 5: Other Income Tax Provisions - Subchapter A: Provisions Relating to S Corporations - Increases from 35 to 75 the number of eligible S corporation shareholders.
Permits an electing small business trust to be a shareholder of an S corporation.
Defines electing small business trust.
Expands from 60 days to two years the post-death holding period for testamentary trusts in an S corporation.
Expands the definition of "post-termination transition period" to include the 120-day period beginning on the date of any determination pursuant to an audit which follows the termination of the corporation's election and which adjusts a subchapter S item of income, loss, or deduction arising during the S period.
Permits an S corporation to be a member of an affiliated group, thus permitting it to own the stock of a C corporation.
Provides that adjustments for distributions by an S corporation during a taxable year are taken into account before applying the loss limitation for a year.
Provides that if:
(1) a corporation was an electing small business corporation for any taxable year beginning before January 1, 1983; and
(2) such corporation is an S corporation for its first taxable year beginning after December 31, 1995, the amount of such corporation's accumulated earnings and profits (as of the beginning of such first taxable year) shall be reduced by an amount equal to the portion (if any) of such accumulated earnings and profits which were accumulated in any taxable year beginning before January 1, 1983, for which such corporation was an electing small business corporation under subchapter S. Permits the carryover of disallowed losses and deductions under the at-risk rules.
Subchapter B: Repeal of 30-Percent Gross Income Limitation on Regulated Investment Companies - Repeals the requirement that less than 30 percent of the gross income of a regulated investment company be derived from the sale or disposition of any of the following which were held for less than three months:
(1) stocks or securities; or
(2) options, futures, or forward contracts (other than those on foreign currencies).
Subchapter C: Accounting Provisions - Revises the look-back method for long-term contracts and provides that for purposes of such method, only one rate of interest is to apply for each accrual period.
Permits a securities trader to use the mark to market accounting method.
Modifies special rules concerning nuclear decommissioning costs.
Subchapter D: Tax-Exempt Bond Provisions - Repeals the debt service-based limitation on investment in certain nonpurpose investments.
Subchapter E: Insurance Provisions - Provides for the treatment of life insurance variable contracts on retired lives and sets forth special rules for modified guaranteed contracts.
Subchapter F: Other Provisions - Provides that the taxable year for a partnership closes with respect to a partner whose entire interest in the partnership terminates, whether by death, liquidation, or otherwise.
Makes the FICA employer credit for employee tips available whether or not the employee reported such income.
Revises provisions concerning the due date for first quarter estimated payments by private foundations.
Chapter 6: Estates and Trusts - Subchapter A: Income Tax Provisions - Provides an irrevocable election to treat certain revocable trusts as part of the estate.
Makes the separate share rules available to estates.
Limits the taxable year of an estate to a year ending on October 31, November 30, or December 31.
Provides for the treatment of, as well as defines, a qualified funeral trust.
Subchapter B: Estate and Gift Tax Provisions - Allows the right of recovery with respect to qualified terminable interest property to be waived in a will only by specific reference.
Provides that a transfer from a revocable trust within three years of death does not result in the inclusion of the transfer in the gross estate.
Revises the qualified terminable interest rules with respect to a trust and the marital deduction.
Provides that a trust created before the enactment of the Revenue Reconciliation Act of 1990 is treated as satisfying the withholding requirement if its trust instrument requires that all trustees be U.S. citizens or domestic corporations.
Directs the Secretary to prescribe procedures which provide that executors will have the opportunity to submit subsequent information on a recapture agreement in the filing of an estate tax return.
Prohibits the revaluation of a gift for which the statute of limitations period has passed for purposes of determining the estate tax bracket and the unified credit.
Defines trust for the purposes of a qualified domestic trust to include, to the extent provided in regulations prescribed by the Secretary, other arrangements having substantially the same effect as a trust.
Subchapter C: Generation-Skipping Tax Provisions - Excludes from the definition of taxable termination a direct skip.
Chapter 7: Excise Tax Simplification - Subchapter A: Provisions Related to Distilled Spirits, Wines, and Beer - Makes refunds available for imported bottled distilled spirits returned to distilled spirits plants.
Repeals the requirement that wine returned to bonded premises be unmerchantable in order for tax to be refunded to the proprietor of the bonded wine cellar to which the wine is delivered.
Allows beer to be removed from a brewery without payment of tax for purposes of destruction.
Provides for imported beer to be withdrawn from customs custody for transfer to a brewery without payment of tax.
Subchapter B: Consolidation of Taxes on Aviation Gasoline - Provides for the consolidation of the entire aviation gasoline excise tax upon removal from a terminal facility.
Subchapter C: Other Excise Tax Provisions - Provides certain activities, including the removal of a fifth wheel, will not constitute manufacture with respect to the retail sales tax for a truck or tractor chassis.
Chapter 8: Administrative Provisions - Allows corporations to disregard any letter or notice of assessment or proposed assessment of tax if the deficiency or proposed deficiency is less than $100,000.