This bill amends the Internal Revenue Code of 1986 to introduce a mechanism for indexing certain assets to account for inflation when calculating capital gains or losses. For non-corporate taxpayers, it provides for the substitution of an "indexed basis" for the adjusted basis of an asset when determining gain or loss upon its sale or disposition, provided the asset has been held for more than three years. This adjustment aims to prevent taxpayers from being taxed on gains that are solely due to inflation rather than real economic appreciation.

The term "indexed asset" encompasses a broad range of investments, including common stock in C corporations (both domestic and certain foreign corporations), digital assets, and tangible property, if they are capital assets or property used in a trade or business. The "indexed basis" is calculated by increasing the asset's adjusted basis by an "applicable inflation adjustment," which is determined using the Gross Domestic Product deflator from the acquisition date to the disposition date. Taxpayers must maintain written documentation of the original purchase price to qualify for this indexing.

The bill includes specific rules for various scenarios, such as the treatment of regulated investment companies (RICs) and real estate investment trusts (REITs), where adjustments can occur at both the entity and shareholder levels. It also outlines how the indexing adjustment applies to other pass-through entities like partnerships, S corporations, and common trust funds. Provisions address situations involving related persons, short sales, and anti-abuse rules, with the amendments applying to indexed assets acquired by taxpayers after December 31, 2025.