Bill > HR2945

This bill, the Capital Gains Inflation Relief Act of 2011, aims to adjust the tax calculation for gains and losses on certain assets by accounting for inflation. Specifically, it proposes to allow taxpayers to increase the "adjusted basis" (the original cost of an asset plus improvements, minus depreciation) of certain assets held for over three years by an amount reflecting inflation, as measured by the Gross Domestic Product (GDP) deflator. This inflation-adjusted basis, called the "indexed basis," would then be used to determine the taxable gain or loss when the asset is sold. The bill defines "indexed assets" to include common stock in C corporations and tangible property used in a trade or business or held as a capital asset, with some exceptions for foreign corporations. It also includes provisions for how this inflation adjustment would apply to short sales, regulated investment companies (like mutual funds) and real estate investment trusts (REITs), partnerships, and other entities that pass income through to their owners, as well as rules for transactions between related parties and for improvements made to assets. The intent is to prevent taxpayers from being taxed on gains that are solely due to inflation rather than an actual increase in the asset's real value.