Page:United States Statutes at Large Volume 112 Part 1.djvu/827

 PUBLIC LAW 105-206-JULY 22, 1998 112 STAT. 801 "(i) the amount of taxable income which would (without regard to this paragraph) be taxed at a rate below 28 percent, over "(ii) the taxable income reduced by the adjusted net capital gain; "(C) 20 percent of the adjusted net capital gain (or, if less, taxable income) in excess of the amount on which a tax is determined under subparagraph (B); "(D) 25 percent of the excess (if any) of— "(i) the unrecaptured section 1250 gain (or, if less, the net capital gain), over "(ii) the excess (if any) of— "(I) the sum of the amount on which tax is determined under subparagraph (A) plus the net capital gain, over "(II) taxable income; and "(E) 28 percent of the amount of taxable income in excess of the sum of the amounts on which tax is determined under the preceding subparagraphs of this paragraph. " (2) REDUCED CAPITAL GAIN RATES FOR QUALIFIED 5-YEAR GAIN. — "(A) REDUCTION IN IO-PERCENT RATE.— In the case of any taxable year beginning after December 31, 2000, the rate under paragraph (1)(B) shall be 8 percent with respect to so much of the amount to which the 10-percent rate would otherwise apply as does not exceed qualified 5-year gain, and 10 percent with respect to the remainder of such amount. "(B) REDUCTION IN 20-PERCENT RATE.— The rate under paragraph (1)(C) shall be 18 percent with respect to so much of the amount to which the 20-percent rate would otherwise apply as does not exceed the lesser of— "(i) the excess of qualified 5-year gain over the amount of such gain taken into account under subparagraph (A) of this paragraph; or "(ii) the amount of qualified 5-year gain (determined by taking into account only property the holding period for which begins after December 31, 2000), and 20 percent with respect to the remainder of such amount. For purposes of determining under the preceding sentence whether the holding period of property begins after December 31, 2000, the holding period of property acquired pursuant to the exercise of an option (or other right or obligation to acquire property) shall include the period such option (or other right or obligation) was held. " (3) NET CAPITAL GAIN TAKEN INTO ACCOUNT AS INVESTMENT INCOME.— For purposes of this subsection, the net capital gain for any taxable year shall be reduced (but not below zero) by the amount which the taxpayer takes into account as investment income under section 163(d)(4)(B)(iii). "(4) ADJUSTED NET CAPITAL GAIN. — For purposes of this subsection, the term 'adjusted net capital gain' means net capital gain reduced (but not below zero) by the sum of— "(A) unrecaptured section 1250 gain; and "(B) 28-percent rate gain.

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