PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 835 exceed the amount on which a tax is determined under section 1(h)(1)(D), plus "(D) 20 percent of the taxpayer's adjusted net capital gain (or, if less, taxable excess) in excess of the amount on which tsix is determined under subparagraph (C). In the case of taxable years beginning after December 31, 2000, rules similar to the rules of section 1(h)(2) shall apply for purposes of subparagraphs (C) and (D). Terms used in this paragraph which are also used in section 1(h) shall have the respective meanings given such terms by section 1(h).". (2) CONFORMING AMENDMENTS.— (A) Clause (ii) of section 55(b)(1)(A) is amended by striking "clause (i)" and inserting "this subsection". (B) Paragraph (7) of section 57(a) is amended by striking "one-half and inserting "42 percent". (c) OTHER CONFORMING AMENDMENTS. — (1) Paragraph (1) of section 1445(e) is amended by striking "28 percent" and inserting "20 percent". (2) The second sentence of section 7518(g)(6)(A), and the second sentence of section 607(h)(6)(A) of the Merchant Marine Act, 1936, are each amended by striking "28 percent" and 46 USC app. inserting "20 percent". ii'^'^ - (3) Paragraph (2) of section 904(b) is amended by adding at the end the following new subparagraph: "(C) COORDINATION WITH CAPITAL GAINS RATES.— The Secretary may by regulations modify the application of this paragraph and paragraph (3) to the extent necessary to properly reflect any capital gain rate differential under section 1(h) or 1201(a) and the computation of net capital gain. ". (d) EFFECTIVE DATES.— 26 USC i note. (1) IN GENERAL. —Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending after May 6, 1997. (2) WITHHOLDING. —The amendment made by subsection (c)(1) shall apply only to amounts paid after the date of the enactment of this Act. (e) ELECTION TO RECOGNIZE GAIN ON ASSETS HELD ON JANUARY 26 USC i note. 1, 2001.— For purposes of the Internal Revenue Code of 1986— (1) IN GENERAL.—^A taxpayer other than a corporation may elect to treat— (A) any readily tradable stock (which is a capital asset) held by such taxpayer on January 1, 2001, and not sold before the next business day after such date, as having been sold on such next business day for an amount equal to its closing market price on such next business day (and as having been reacquired on such next business day for an amount equal to such closing market price), and (B) any other capital asset or property used in the trade or business (as defined in section 1231(b) of the Internal Revenue Code of 1986) held by the taxpayer on January 1, 2001, as having been sold on such date for an amount equal to its fair market value on such date (and as having been reacquired on such date for an amount equal to such fair market value). (2) TREATMENT OF GAIN OR LOSS.—
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