1 2 3 4 5 6 7 8 9 under subsection (b) or (c) of section 414. 10 "(g) TRANSFERS TO INCREASE INDEXING ADJUST11 MENT OR DEPRECIATION ALLOWANCE.-If any person 12 transfers cash, debt, or any other property to another person 13 and the principal purpose of such transfer is— 14 9 lated persons except to the extent that the basis of such property in the hands of the transferee is a substi tuted basis. 24 "(2) RELATED PERSONS DEFINED.-For purposes of this section, the term 'related persons' means "(A) persons bearing a relationship set forth in section 267(b), and 15 16 17 18 or amortization, 19 the Secretary may disallow part or all of such adjustment or 20 increase. 21 "(B) persons treated as single employers "(1) to secure or increase an adjustment under subsection (a), or "(2) to increase (by reason of an adjustment under Ko subsection (a)) a deduction for depreciation, depletion, "(h) DEFINITIONS.-For purposes of this section "(1) NET LEASE PROPERTY DEFINED.-The term 'net lease property' means leased real property where 1 2 3 4 5 6 7 8 9 10 11 "(2) STOCK INCLUDES INTEREST IN COMMON TRUST FUND.-The term 'stock in a corporation' includes any interest in a common trust fund (as defined in section 584(a)). 15 "(i) REGULATIONS.-The Secretary shall prescribe 16 such regulations as may be necessary or appropriate to carry 17 out the purposes of this section.". 18 (b) CLERICAL AMENDMENT.-The table of sections for 19 part II of subchapter O of such chapter 1 is amended by 20 inserting after the item relating to section 1019 the following 21 new item: "Sec. 1020. Indexing of certain assets for purposes of determining gain or loss.". (c) EFFECTIVE DATE.-The amendments made by this 23 section shall apply to sales and exchanges after December 24 31, 1983. 25 12 13 14 22 10 "(A) the term of the lease (taking into account options to renew) was 57 percent or more of the useful life of the property, and "(B) for the period of the lease, the sum of the deductions with respect to such property which are allowable to the lessor solely by reason of section 162 (other than rents and reimbursed amounts with respect to such property) is 15 percent or less of the rental income produced by such property. DESCRIPTION OF TAX BILLS SCHEDULED FOR A HEARING BEFORE THE SUBCOMMITTEE ON TAXATION AND OF THE COMMITTEE ON FINANCE ON AUGUST 1, 1983 PREPARED BY THE STAFF OF THE JOINT COMMITTEE ON TAXATION INTRODUCTION The bills described in this pamphlet have been scheduled for a public hearing on August 1, 1983, by the Senate Finance Subcommittee on Taxation and Debt Management. The five bills scheduled for the hearing, in the order listed in the press release announcing the hearing, are S. 1600 (relating to indexing the basis of certain assets), S. 1579 (relating to charitable deduction for use of passenger automobile), S. 108 (relating to tax incentives for vocational education programs), S. 1464 (relating to exemption from divestiture requirements of excess business holdings provision for the El Pomar Foundation), and S. 1549 (relating to exemption from unrelated business income tax for income from certain oil and gas property). The first part of the pamphlet is a summary of the bills. This is followed in the second part by a more detailed description of the bills, including present law, explanation of provisions, and effective dates. I. SUMMARY 1. S. 1600-Senator Armstrong Indexing the Basis of Certain Assets Under present law, the adjusted basis for determining gain or loss from the disposition of capital assets is established in fixed dollar amounts. Thus, changes in the value of the dollar resulting from inflation are not taken into account for this purpose. The bill would provide for an inflation adjustment (i.e., indexing) to the basis of certain assets for purposes of determining gain or loss on a taxable disposition. The adjustment would be applicable to certain corporate stock and real property interests. The adjustment would apply only to inflation occurring after 1983. The inflation adjustment would not apply for purposes of determining depreciation and other cost-related deductions. 2. S. 1579-Senator Armstrong Charitable Expense Deduction for Use of Passenger Automobile Under present law, individual taxpayers may deduct charitable contributions up to certain limits (Code sec. 170). In determining the amount of their charitable contribution deduction, taxpayers may deduct their actual fuel expenses for a vehicle used to provide services to a charitable organization, or may use a standard rate of nine cents a mile. Under the bill, taxpayers would be allowed to use the standard mileage rate authorized for computing the business expense deduction for business use of a passenger automobile. At present, that rate generally is 20 cents a mile for the first 15,000 miles of business use, and 11 cents a mile for each additional mile. The bill would apply to taxable years beginning after 1982. 3. S. 108-Senators Grassley, Jepsen, Durenberger, and Thurmond Tax Incentives for Vocational Education Programs a. Increased charitable deduction for contributions of equipment to postsecondary vocational education programs Present law In general, the amount of charitable deduction otherwise allowed for donated property must be reduced by the amount of any ordinary gain which the taxpayer would have realized had the property been sold at its fair market value on the date of the donation (sec. 170(e)). For example, a manufacturer that makes a charitable donation of inventory generally may deduct only its basis in the property. (2) 3 However, under a special rule, corporations are allowed an augmented charitable deduction for donations of newly manufactured scientific equipment to a college or university for research use in the physical or biological sciences (sec. 170(e)(4)). The augmented deduction is generally for the sum of (1) the corporation's basis in the donated property and (2) one-half of the property's unrealized appreciation. In no event may the amount of the deduction under the special rule exceed twice the basis of the property. Explanation of provision Section 1 of the bill would provide an augmented charitable deduction for corporate or other taxpayers making certain donations of tangible personal property to institutions of higher education which use the property to train students enrolled in a postsecondary vocational education program. For qualifying donations, the augmented charitable deduction allowed generally would equal the sum of the taxpayer's basis in the donated property and one-half of the property's unrealized appreciation. In no event would a deduction be allowed for any amount which exceeded twice the property's basis. This provision of the bill would be effective for donations made after 1982. b. Postsecondary vocational education instruction tax credit Present law Employers generally may deduct as an ordinary and necessary business expense a reasonable allowance for compensation paid employees (sec. 162). Thus, a manufacturer, for example, generally may deduct reasonable compensation paid to vocational education teachers who work temporarily for the manufacturer to upgrade their skills, although regularly employed by teaching institutions. Present law also provides a targeted jobs credit to employers who hire individuals belonging to any of several defined groups (sec. 51). The targeted jobs credit is available with respect to certain vocational education students employed under cooperative education programs; it does not apply to vocational education teachers. Explanation of provision Section 2 of the bill would provide a nonrefundable credit with respect to (1) postsecondary vocational education courses taught by qualified teaching employees of the taxpayer and (2) vocational education instructors temporarily employed by the taxpayer. The amount of the new credit would be $100 for each postsecondary vocational education course taught by a qualified teaching employee during the taxable year (not to exceed five courses per employee per year), plus $100 for each qualified vocational education instructor temporarily employed during the taxable year. The bill specifies that the credit would be in addition to allowable deductions for compensation paid to employees. This provision of the bill would be effective for taxable years beginning after 1982. |
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