termined by reference to the basis of the secu rity in the hands of the distributee) shall, to the extent of the amount of such net unrealized appreciation attributable to such security, be considered a gain from the sale or exchange

of a capital asset held for more than 6 months but not more than 2 years."

(B) DISTRIBUTIONS UNDER EMPLOYEE NUITIES. Section 403(a)(2)(A) (relating to capital gains treatment for certain distributions) is amended by adding immediately before the period at the end of the first sentence the words “but not

more than 2 years".

(C) EFFECTIVE DATE.—

(i) The amendments made by subparagraphs (A)(ii) and (B) shall apply with re

spect to distributions or amounts paid in tax

able years of the distributees beginning after December 31, 1963.

(i) The amendments made by subparagraphs (A)(i) and (iii) shall apply with respeet to securities which are sold or otherwise

disposed of in taxable years beginning after December 31, 1963.

(4) SALE OR EXCHANGE OF PATENTS. Subsee

1

tion (a) of section 1235 (relating to the sale or ex

2

change of patents) is amended by adding at the end thereof the following new sentences:

3

4 "In the ease of a holder described in subsection (b)(1),

5

any gain or less on such a transfer shall be treated as class 6 B capital gain or loss. In the case of a holder described in 7 subsection (b) (2), any gain or loss on such a transfer shall 8 be treated as class A, or class B, capital gain or loss depend

9

ing on the period for which the property was held for 10 deemed held)."

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12

233

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15

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(5) EMPLOYEE TERMINATION PAYMENTS. Seetion 1240 (relating to taxability to employee of termination payments) is amended by striking out "6 months" and inserting in lieu thereof "6 months but not more than 2 years".

(b) UNLIMITED CAPITAL LOSS CARRYOVER. Section 17 1212 (relating to capital loss carryover) is amended

(1) by striking out "If for any taxable year the taxpayer" and inserting in lieu thereof:

"(a) CORPORATIONS. If for any taxable year a

corporation"; and

(2) by adding the following new subsection:

"(b) OTHER TAXPAYERS.

"(1) To the extent, for any taxable year, a tax

payer, other than a corporation, has a net short term

net class B, or net class A capital loss which does not

reduce capital gains under the rules provided in section

1222(d), such loss, reduced as provided in paragraph

(2), shall be carried forward and treated in the sue

eeeding taxable year as a short term, class B, or class A eapital loss, as the ease may be, sustained in such sue

eeeding year.

"(2) An amount equal to the excess of the sum allowable under section 1211(b) over the gains from sales or exchanges of capital assets for the taxable year

shall reduce, in order, any net short term, class B, or elass A capital loss for the taxable year which does

not reduce capital gains for such year under the rules provided in section 1222(d).

"(3) For purposes of this subsection, a net capital loss for a taxable year beginning before January 1, 1964, shall be determined under the applicable law

relating to the computation of capital gains and losses in effect before such date, and the amount of any such

eapital loss so determined which such applicable law allows to be carried over to the first taxable year of the

taxpayer beginning after December 31, 1963, shall be

treated as a short term capital loss occurring in such taxable year."

(e) TECHNICAL AMENDMENTS.

(1) Section 172(d)(2)(B) (relating to net operating loss deduction) is amended by striking out "long-term".

(2) Section 333(e)(2) (relating to noncorporate shareholders of certain liquidating corporations) is amended by striking out "short term or long term capital gain," and inserting in lieu thereof "short-term, class A, or class B capital gain,".

(3) Section 341(a) (relating to collapsible cor

porations) is amended by striking out "6 months" and inserting in lieu thereof "6 months but not more than 2 years or held for more than 2 years, as the ease may

be,”.

(4) Section 584(e) (1) (relating to common trust funds) is amended

(A) by striking out in subparagraph (B) wherever it appears 6 months" and inserting in lieu thereof "6 months but not more than 2 years", and

(B) by redesignating subparagraph (C) as subparagraph (D) and by inserting after subparagraph (B) the following new subparagraph:

"(C) as part of its gains and losses from sales

or exchanges of capital assets held for more than 2

years, its proportionate share of the gains and losses of the common trust fund from sales or exchanges of capital assets held for more than 2 years;".

(5) Section 642(e) (relating to special rules for eredits and deductions) is amended by striking out

"6 months," and inserting in lieu thereof "6 months but not more than 2 years or held for more than 2 years, as the ease may be,”.

(6) Section 702(a)(2) (relating to income and eredits of partners) is amended by striking out “G months," and inserting in lieu thereof "6 months but not more than 2 years or held for more than 2 years, as the ease may be,"

(7)(A) Section 852 (relating to taxation of reg ulated investment companies and their shareholders) is amended by striking out subparagraphs (B) and (C) of subsection (b)(3) and inserting in lieu thereof the following:

"(B) TREATMENT OF CAPITAL GAIN DIVI DENDS BY SHAREHOLDERS. A capital gain dividend shall be treated by shareholders, other than corporations, as a class A or class B capital gain to

the extent so designated by the company. Share