Tax Reform Act

Tax Reform Act - Title I: Capital Gains of Individuals and Corporations - Elimintes the twenty-five percent capital gain rate on the first $50,000 of an individual's capital gains.

Increases to thirty-five percent (thirty percent in the case of a taxable year beginning after December 31, 1970, and before July 1, 1973) the alternative rate of taxation on capital gains for corporations.

Title II: Gain on Certain Property Transferred at Death or by Gift - Provides that in the case of the death of a taxpayer there shall be included in computing taxable income for the taxable period in which falls the date of his death, the gains and losses which would be taken into account if the taxpayer has sold all property, which is considered to have been acquired from or to have passed from the decedent taxpayer, at a selling price equal to its fair market value at death. Makes exceptions to this provision for household or personal items whose total value is less than $2000, and for property which passes or was passed to a surviving spouse. Sets forth rules applicable in determining the basis for computing gain or loss.

Makes provisions and rules for including gains and losses on lifetime property gifts in computing taxable income for the taxable period in which the transfer was made.

Requires the filing of a final income tax return for a decedent by April 15 of the year following the taxable year, or 9 months after the date of death, whichever is later. Makes provisions for extension of time for the paying of tax.

Title III: Depreciation Revision - Eliminates the provision permitting a variance from any class life for depreciation allowance purposes of up to 20 percent of such life.

Title IV: State and Local Bonds - Allows a State or local government to elect to issue obligations wthout excluding their interest from gross income. Authorizes necessary appropriations to pay a fixed percentage of interest yield on taxable issues, and sets forth procedures for such payment.

Title V: Foreign Corporations - Provides that if a foreign corporation is a controlled foreign corporation for an uninterrupted period of 30 days or more during any taxable year, every United States shareholder of such corporation who owns stock in such corporation on the last day in such year or which such corporation is a controlled foreign corporation, shall include in its gross income for its taxable year its pro rata share of the corporation's earnings and profits for such year. Excludes from such shareholder's gross income any previously taxed earnings or profits from a foreign corporation.

Provides that such shareholders in foreign corporations may be required to maintain records and accounts for purposes of this Act. Makes conforming amendments for this section.

Title VI: Income Derived From Extraction of Oil and Gas - Reduces to fifteen percent the depletion rate for oil and gas wells (presently twenty-two percent). Eliminates the granting of an option to deduct as expenses intangible drilling and development costs in the case of oil and gas wells.

Title VII: Farm Losses - Provides that, in the case of a taxpayer engaged in the business of farming, the deductions attributable to such business which would be allowable for the taxable year shall not exceed the sum of: (1) the adjusted farm gross income for the taxable year, and (2) the higher of the amount of the special deductions allowable for the taxable year, or $15,000 ($7,500 in the case of a married individual filing a sparate return), reduced by the amount by which the taxpayer's adjusted gross income (taxable income in the case of a corporation) for the taxable year attributable to all sources other than the business of farming exceeds $15,000 ($7,500 in the case of a married individual filing a separate return).

Provides for a disallowable farm operating loss carryback to each of the three taxable years preceding the loss year and a disallowed farm loss carryover to each of the five taxable years following the loss year.

Defines the various terms of this title.

States that a taxpayer shall be treated as engaged in the business of farming for any taxable year if: (1) any deduction is allowable for any expense paid or incurred by the taxpayer with respect to farming, or with respect to any farm property held by the taxpayer, or (2) any deduction would otherwise be allowable to the taxpayer for any expense paid or incurred with respect to farming, or with respect to property held for the production of income, which is used in farming. Exludes the raising of timber from the definition of farming.

Establishes a formula limiting the amount of deduction, regarding the business of farming, to a controlled group of corporations.

Directs that, under regulations prescribed by the Secretary of his delegate, an electing small business corporation which is engaged in the business of farming during its taxable year, and the shareholders of such corporation, shall apply the provisions of the Internal Revenue Code dealing with certain corporation payments to shareholders separately with respect to: (1) income derived from the business of farming by such corporation and deductions attributable to such business, and (2) all other income and deductions of such corporation.

Title VIII: Minimum Tax for Tax Preferences - Imposes for each taxable year, with respect to the income of every person, a tax equal to 20 percent (previously 10 percent) of the amount by which the sum of the items of tax preference exceeds $12,000. Repeals the provision allowing tax carry-overs for 7 taxable years for excess taxes.