H.R. 1857: Capital Gains Inflation Relief Act of 2025

This bill, known as the Capital Gains Inflation Relief Act of 2025, amends the Internal Revenue Code to introduce a system for adjusting the basis of certain assets for inflation. Here’s a breakdown of what it proposes:

Basics of the Bill

The primary goal of the bill is to provide a way to account for inflation when calculating capital gains or losses on the sale of specific assets. This means that when individuals (but not corporations) sell certain types of assets, they can use an "indexed basis" instead of the standard adjusted basis for determining their tax obligations.

Indexed Assets

The bill defines "indexed assets" as:

• Common stocks in C corporations, excluding foreign corporations
• Digital assets
• Tangible property that qualifies as a capital asset or business property
• Common stocks in foreign corporations that are regularly traded on established securities markets, with some exceptions

How It Works

For assets held for more than three years, taxpayers can use the indexed basis, which is the adjusted basis increased by an inflation adjustment based on the gross domestic product (GDP) deflator. This adjustment reflects changes in the economy over time:

• The inflation adjustment is calculated by taking the adjusted basis and multiplying it by the difference in GDP deflator values from acquisition to disposition.
• Taxpayers must maintain written documentation of the original purchase price of the asset to utilize this indexed basis.

Exceptions & Special Cases

There are various exceptions and special rules outlined in the bill:

• Deductions for depreciation, depletion, and amortization will not be affected by the use of indexed basis.
• Assets that substantially decrease in risk of loss will not be treated as indexed during that period.
• For short sales that exceed three years, any adjustment for inflation will also apply.
• Regulated investment companies and real estate investment trusts have special provisions for how adjustments are made and how they affect distributions.

Related Persons and Transfers

The bill specifies that transactions between related persons (as defined by the tax code) will have different rules applying to the treatment of assets, focusing on how basis is calculated during such transactions. Additionally, it includes rules aiming to prevent manipulation of assets simply to gain a larger inflation adjustment.

Effective Date

These provisions will apply to indexed assets acquired after December 31, 2025.

Relevant Companies

• AMZN (Amazon.com Inc.) - As a company that manages vast amounts of digital assets and trades in equities, it may be impacted regarding its reporting and tax liabilities concerning capital gains.
• AAPL (Apple Inc.) - As a significant producer of tangible and digital products, Apple could see implications for stock transactional reporting under this new bill.
• FB (Meta Platforms Inc.) - This company operates within the digital asset sphere and may be affected by the new treatment of capital gains for digital assets.