tax-law legal-history irs
When did U.S. tax code limit the personal Capital Loss Deduction to $3000?
<p>Beginning in the late 1970s, after capital losses offset capital gains dollar for dollar, the allowable deduction on the IRS 1040 form for capital losses coming from Schedule D was $3000. The same is still true today.</p>
<p>When did the limit on capital losses become $3000?</p>
<p>The second part of the originally posed question has been re-posted on the Politics SE where some had iterated it is better suited:</p>
<p><a href="https://politics.stackexchange.com/questions/61274/more-than-40-years-later-1040-capital-losses-are-still-capped-at-3000-politi">https://politics.stackexchange.com/questions/61274/more-than-40-years-later-1040-capital-losses-are-still-capped-at-3000-politi</a></p>

<p>The <a href="https://www.govinfo.gov/content/pkg/STATUTE-68/pdf/STATUTE-68A-PgI.pdf" rel="noreferrer">Internal Revenue Code of 1954</a>, all 1024 pages of it, was enacted in the course of a year, basically rebooting and rewriting the tax code, contains §1211 in  in 68A Stat. 321:</p>
<blockquote>
<p>(b)   OTHER   TAXPAYERS.—In   the   case   of   a   taxpayer   other<br />
than   a  corporation,  losses  from   sales  or  exchanges   of
capital  assets  shall  be  allowed  only  to  the  extent   of  the
gains  from   such  sales  or   ex-changes,  plus  the  taxable
income  of the  taxpayer  or  $1,000,  whichever  is  smaller. For
purposes  of  this  subsection,  taxable  income  shall  be  computed
without  regard  to  gains  or  losses  from  sales  or  exchanges  of
capital  assets  and  without  regard  to  the  deductions  provided in   section   151   (relating  to  personal   exemptions)   or  any
deduction   in   lieu  thereof. If  the  taxpayer  elects  to  pay
the  optional  tax  imposed  by  section  3,  &quot;taxable  income&quot;  as
used  in  this  subsection   shall   be   read  as  &quot;adjusted  gross
income&quot;.</p>
</blockquote>
<p>This was rewritten in 1969, <a href="https://www.govinfo.gov/content/pkg/STATUTE-83/pdf/STATUTE-83-Pg487.pdf" rel="noreferrer">83 Stat. 642</a>, only 256 pages, to say</p>
<blockquote>
<p>(1)  IN GENERAL.—In  the  case  of  a taxpayer  other  than  a
corporation,  losses  from  sales  or  exchanges  of  capital  assets
shall  be  allowed   only  to   the   extent   of   the  gains   from
such   sales  or  exchanges,  plus  (if  such  losses  exceed  such
gains)   whichever  of  the following  is smallest: &quot; (A)  the taxable
income for the taxable year, &quot;(B)   $1,000, or &quot;(C)  the sum   of—<br />
&quot;(i)  the  excess  of  the  net  short-term  capital  loss over the
net long-term capital gain, and &quot; (ii)   one-half  of the excess of
the net long-term capital loss over the net short-term capital gain.
&quot;(2)    MARRIED  INDIVIDUALS.—In  the  case  of  a  husband  or  wife
who  files  a  separate  return,  the  amount  specified  in
paragraph  (1) (B)  shall be $500 in lieu of  $1,000.</p>
</blockquote>
<p>In 1976, <a href="https://www.govtrack.us/congress/bills/94/hr10612/text" rel="noreferrer">Pub. L. 94-455, 1401(a,b)</a> makes a further amendment, by replacing &quot;$1,000&quot; with &quot;the applicable amount&quot; and then defining the <em>applicable amount</em> for 1977 and for years thereafter:</p>
<blockquote>
<p>(2) APPLICABLE AMOUNT.—For purposes of paragraph (1) (B),
the term 'applicable amount' means—
&quot;(A) $2,000 in the case of any taxable year beginning in<br />
1977; a n d
&quot; (]3) $3,000 in the case of any taxable year beginning after
1977.</p>
</blockquote>
<p>So it has been that way since 1978.</p>

<p>The US federal tax law -- Title 26 USC, aka the Internal Revenue Code or IRC -- contains numerous money amounts, some of which are adjusted for inflation (aka 'cost of living') and some of which are not.</p>
<p>The adjustment procedure for several of the most basic amounts -- the 'brackets' of taxable income to which different rates apply, defined in IRC 1(a)-(e) -- is laid out in IRC 1(f)(3)-(7); the change to effectively use 'chained' CPI instead of the older fixed-basket version was made by TCJA'17 (PubL 115-97 sec 11002), hence the relatively recent base year here. Many provisions setting other amounts reference 1(f)(3), usually substituting a different base year and often modifying the rounding rule. IRS publishes the results of these adjustments annually; for example for the currently-upcoming year, <em>most</em> of them are in the recently released Revenue Procedure RP-2020-45 in <a href="https://www.irs.gov/irb/2020-46_IRB#REV-PROC-2020-45" rel="noreferrer">2020 IRB vol 46 (Nov. 9, 2020)</a> (the Internal Revenue Bulletin is like a custom version of the Federal Register). Adjustments related to (tax-advantaged) retirement plans are published separately, and this year's don't seem to be out yet AFAICS.</p>
<p>OTOH many other amounts are <em>not</em> adjusted, including the one you asked about. It is Congress' choice when creating or amending the relevant provision whether to include an adjustment, and AFAIK neither inclusion or omission has ever been found improper.</p>
