Generating Retirement Ownership through Long-Term Holding

This bill amends the Internal Revenue Code to allow individuals to defer taxes on capital gains dividends from regulated investment companies if those dividends are automatically reinvested in additional shares through a dividend reinvestment plan. Sec. 2, Deferral of reinvested capital gain dividends: The bill adds a new section 1046 to the tax code. Under this section, an individual does not have to recognize gain when receiving a capital gain dividend from a regulated investment company if the dividend is automatically reinvested in more shares of the same company. The deferred gain is recognized later when the individual sells or redeems shares in the company, or upon the individual's death. When shares are sold or redeemed, the taxpayer recognizes a portion of the deferred gain equal to the portion of shares sold. Upon death, any remaining deferred gain is recognized and included in the taxpayer's gross income for the final tax year. Shares acquired through reinvestment are treated as held for one year and a day from the date acquired. The deferral does not apply to individuals who can be claimed as a dependent by another taxpayer, or to estates or trusts. The Secretary of the Treasury is directed to issue necessary regulations. The bill also makes conforming amendments to related sections of the tax code and applies to taxable years ending after the date of enactment.