To amend the Internal Revenue Code of 1986 with respect to the treatment of certain real estate activities under the passive loss rules and to provide for individuals a capital gains preference based on the period the asset is held.

Amends the Internal Revenue Code to provide for the treatment of rental and nonrental real estate activities under the limitations on losses from passive activities.

Provides individuals a deduction for capital gains based on the period the asset is held (up to three years). Excludes collectibles from such assets. Makes such deduction an item of tax preference.