IRS Issues Guidance on Qualified Five-Year Gain Rules

Washington, DC, November 2, 2000 - The Internal Revenue Service (IRS) released guidance on the new "qualified five-year gain" rules that become effective after December 31, 2000. Under these rules, the capital gains tax rate applicable to taxpayers in the 15-percent tax bracket will be reduced from 10 percent to 8 percent for any asset held for more than five years and sold after December 31, 2000. For taxpayers in higher tax brackets, the capital gains tax rate will be reduced from 20 percent to 18 percent for any asset acquired after December 31, 2000 (or marked to market at the beginning of 2001) and held for more than five years. The guidance released to date is included in IRS Form 1099-DIV for 2001 (and accompanying instructions) and the instructions to IRS Form 4797 for 2000. The new rules implement the qualified five-year gain provision in the Taxpayer Relief Act of 1997.