A bill to amend the Internal Revenue Code of 1986 to restore the preferential treatment of capital gains, to eliminate the retroactivity in the repeal of the investment tax credit by the Tax Reform Act of 1986, and to provide for the indexing of the basis of certain assets.

Repeals specified provisions of the Tax Reform Act of 1986 that eliminated: (1) an income tax deduction for long-term capital gains of individuals; and (2) preferential treatment of the capital gains of both noncorporate and corporate taxpayers. (The repeal thus restores such preferential treatment.) Provides that the Internal Revenue Code (IRC) shall be applied and administered as if such provisions had not been enacted.

Amends the IRC to remove retroactivity in the repeal of provisions relating to the investment tax credit (thus making the repeal effective January 1, 1987, instead of January 1, 1986).

Amends the IRC to require an inflation adjustment, based on the gross national product deflator, to the adjusted basis of certain assets (corporate stock and real property held for more than one year that is a capital asset or property used in a trade or business) at the time of sale or exchange, solely for the purpose of determining gain or loss on such assets. Excludes from such treatment: (1) creditors' interests; (2) options; (3) net lease property in the case of a lessor; (4) preferred stock with fixed dividends; and (5) stock in small business corporations, personal holding companies, and certain foreign corporations.

Describes the means of deriving the: (1) indexed basis for an asset; (2) applicable inflation ratio; and (3) gross national product deflator.