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H.R.5336

Equal Tax Act

Introduced·9/11/25
Introduced

H. R. 5336

Introduced in House · September 24, 2025

September 11, 2025

Mrs. Ramirez (for herself, Ms. Jayapal, Mr. García of Illinois, Ms. Tlaib, Ms. Ansari, Ms. McCollum, Mr. Thanedar, Ms. Omar, Mr. Deluzio, and Mrs. Watson Coleman) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to equalize treatment of capital gains and earned income.

Gains from certain property transferred by gift or upon death

Exclusion of gain from transfers of appreciated assets at death

Extension of time for payment of capital gains on certain assets realized by reason of death

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title.

This Act may be cited as the “Equal Tax Act”.

SEC. 2. Preferential rates for dividends and capital gains limited to incomes of $1,000,000 or less.

  1. (a) In general.— Section 1(h) of the Internal Revenue Code of 1986 is amended by inserting “on so much of such gain as does not cause the taxable income of the taxpayer to exceed $1,000,000 (computed after taking into account all other taxable income of the taxpayer)” after “the tax imposed by this section for such taxable year”.
  2. (b) Treatment of qualifying family farm or business.—Section 1(h) of such Code, as amended by subsection (a), is further amended by inserting “and without regard to gain realized from the transfer by gift or bequest of a qualifying family farm or business described in section 139J(c)” after “all other taxable income of the taxpayer”.

Effective date.—(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

SECTION 3. Deemed realization of capital gains at time of gift or death.

  1. (a) Treatment as sale.—
  1. (1) IN GENERAL.—Part IV of subchapter P of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

“SEC. 1261.

“(a) In general.—Any property which is transferred by gift or at death shall be treated as sold for its fair market value on the date of such gift or death.

“(b) Exceptions.—

“(1) SPOUSE OR SURVIVING SPOUSE.—This section shall not apply to a transfer of property to the spouse or surviving spouse of the transferor (or to a qualified spousal trust).

“(2) CERTAIN TANGIBLE PERSONAL PROPERTY.—In the case of tangible personal property, this section shall only apply to the following:

“(A) Property held in connection with a trade or business.

“(B) Property held for investment.

“(C) Collectibles (as defined in section 408(m) (determined without regard to paragraph (3) thereof)).

“(3) CHARITABLE CONTRIBUTIONS.—This section shall not apply to any transfer to an organization described in section 170(c).

“(c) Special rules for trusts.—

“(1) CERTAIN GRANTOR TRUSTS.—In the case of any property which—

“(A) is held in a trust of which the grantor or another person is treated as the owner under subpart E of part I of subchapter J of chapter 1, and

“(B) is includible in the gross estate of the grantor or such other person under chapter 11,

such property shall be treated as transferred under subsection (a) when the grantor or such other person ceases to be treated as the owner of such property, or such property ceases to be includible in the gross estate of the grantor or such other person (including by reason of the death of the grantor or such other person, or the distribution of such property to a person other than the grantor or such other person).

“(2) OTHER TRUSTS.—In the case of any property held in trust and not described in paragraph (1), such property shall be treated as transferred under subsection (a) upon the transfer of such property to a trust.

“(3) TRANSFERS FROM AND MODIFICATIONS OF TRUSTS.—The Secretary may by regulation prescribe such rules to treat the modification of the terms of a trust or the transfer or distribution of trust assets (including to another trust) as a transfer described in subsection (a) as are necessary or appropriate to prevent the avoidance of this section.

“(4) GENERATION-SKIPPING TRUSTS.—At the end of each 30-year period for which any property is continuously held in trust (other than property described in paragraph (1)), such property shall be treated as transferred pursuant to subsection (a).

“(5) QUALIFYING SPOUSAL TRUST.—

“(A) IN GENERAL.—The property of a qualifying spousal trust shall be treated as transferred under subsection (a)—

“(i) upon the death of the spousal beneficiary,

“(ii) upon the distribution of such property from such trust to any person other than the spousal beneficiary, or

“(iii) at such time such property ceases to be held by a qualifying spousal trust.

“(B) QUALIFYING SPOUSAL TRUST.—For purposes of this section, a trust is a qualifying spousal trust if—

“(i) the sole beneficiary of such trust is the spouse, or surviving spouse of the transferor, or

“(ii) such spouse or surviving spouse is the sole life tenant, or sole income beneficiary, of such trust.

“(d) Exclusion of certain gifts.—In the case of gifts (other than gifts of future interests in property) made to any person during the taxable year, so much of the dollar amount of such gifts to such person as does not exceed the amount in effect for the calendar year under section 2503(b) in which the taxable year begins shall not be taken into account under subsection (a) for such taxable year. Where there has been a transfer to any person of a present interest in property, the possibility that such interest may be diminished by the exercise of a power shall be disregarded in applying this subsection, if no part of such interest will at any time pass to any other person.

“(e) Regulations.—The Secretary shall prescribe such regulations as may be necessary to prevent the avoidance of the purposes of this section.”.

  1. (2) CLERICAL AMENDMENT.—The table of sections for part IV of subchapter P of chapter 1 of such Code is amended by adding at the end the following new item:
    1. (b) Coordination of related party loss rules.—Section 267 of such Code is amended by adding at the end the following new subsection:

“(h) Property treated as sold at death.—Subsection (a)(1) shall not apply to any property that is transferred at death and treated as sold under section 1261.”.

  1. (c) Treatment of basis for gifts and bequests to which tax applies.—
  1. (1) ELIMINATION OF CARRYOVER BASIS FOR GIFTS.—Section 1015(a) of such Code is amended—

(A) by striking “If the property” and inserting the following:

“(1) GIFTS BEFORE JANUARY 1, 2026.—If the property”;

(B) by inserting “, and before January 1, 2026” after “after December 31, 1920”; and

(C) by adding at the end the following new paragraph:

“(2) GIFTS AFTER DECEMBER 31, 2025.—If the property was acquired by gift after December 31, 2025, the basis shall be the fair market value of such property at the time of the gift.”.

  1. (2) RULES FOR TRANSFERS BETWEEN SPOUSES.—
    1. (A) IN GENERAL.—Section 1041(b) of such Code is amended to read as follows:

“(b) Transferee has transferor’s basis.—In the case of any transfer of property described in subsection (a), the basis of the transferee in the property shall be the adjusted basis of the transferor.”.

  1. (B) TRANSFERS AT DEATH.—Section 1041(a) of such Code is amended by inserting “(including at death)” after “transfer of property”.
  2. (C) CONFORMING AMENDMENTS.—
    1. (i) Section 1014 of such Code is amended by adding at the end the following new subsection:

“(g) Property acquired from decedent spouse.—In the case of property which passes from the decedent to (or in trust for the benefit of) the decedent’s surviving spouse in a transfer described in section 1041(a)(1), the basis of such property in the hands of the transferee shall be determined under section 1041(b) and not this section.”, and

  1. (ii) Section 1015(e) of such Code is amended by striking “1041(b)(2)” and inserting “1041(b)”.
  1. (3) BASIS MUST BE CONSISTENT WITH GAINS RECOGNIZED IN DEEMED REALIZATION.—
    1. (A) PROPERTY ACQUIRED FROM DECEDENT.—Section 1014 of such Code, as amended by the preceding provisions of this Act, is amended by adding at the end the following new subsection:

“(h) Basis must be consistent with gains recognized in deemed realization.—The basis of any property to which subsection (a) applies shall not exceed the amount for which the property was treated as sold under section 1261.”.

  1. (B) PROPERTY ACQUIRED BY GIFT.—Section 1015 of such Code is amended by adding at the end the following new subsection:

“(f) Basis must be consistent with gains recognized in deemed realization.—The basis of any property to which subsection (a)(2) applies shall not exceed the amount for which the property was treated as sold under section 1261.”.

  1. (d) Conforming amendments.—
  1. (1) Section 7477(a) of such Code is amended by striking “chapter 12” and inserting “chapter 1 or 12”.
  2. (2) Section 7517(a) of such Code is amended by striking “chapter 11” and inserting “chapter 1, 11”.

Effective date.—(e) Effective date.—The amendments made by this section shall apply to transfers by gift, or at death by decedents dying, after December 31, 2025.