Generating Retirement Ownership through Long-Term Holding

Key Points

• This bill lets individuals skip paying taxes on capital gains from mutual funds when those gains are automatically reinvested into more shares of the same fund. Currently, investors owe taxes on these distributions every year even if they never receive any cash.
• The deferred taxes come due when the investor sells or redeems their shares, or when they pass away. At death, any remaining unrecognized gains are included in that person's final tax return rather than being forgiven.
• Shares purchased through reinvestment are automatically treated as if the investor held them for more than a year, which qualifies the gains for lower long-term capital gains tax rates right away instead of higher short-term rates.
• The tax break is limited to individuals. It does not apply to dependents claimed on someone else's tax return, estates, or trusts. The changes would take effect for tax years ending after the bill becomes law.