Capital Gains Inflation Relief Act of 2023

If passed, individual investors would pay lower capital gains taxes on assets held for over three years, as the taxable gain would be reduced by the inflation that occurred during the holding period.

• •The bill allows individual taxpayers (excluding corporations) to use an 'indexed basis' instead of an 'adjusted basis' for assets held for more than three years.
• •The indexed basis is calculated by increasing the original purchase price by an inflation adjustment based on the GDP deflator.
• •Eligible assets include common stock in C corporations, digital assets, and tangible property used in a trade or business.
• •Digital assets are defined as natively electronic assets recorded on a cryptographically secured distributed ledger that confer economic or access rights.
• •Common stock in foreign corporations is eligible if regularly traded on an established securities market, with specific exceptions for investment companies.
• •Taxpayers must maintain written documentation of the original purchase price to qualify for the inflation adjustment.
• •The inflation adjustment is calculated using the GDP deflator from the quarter of disposition compared to the quarter of acquisition.
• •The adjustment does not apply to depreciation, depletion, or amortization deductions.
• •Assets are disqualified from indexing during any period where the taxpayer enters a transaction that substantially reduces their risk of loss.
• •Special rules apply to regulated investment companies (RICs) and real estate investment trusts (REITs) to allow indexing at the entity level while preventing corporate shareholders from receiving the benefit.

Patterns POLISCOPE noticed across the record. These are observations to investigate, not conclusions.