Federal Estate Tax Brought Back to Life for Tax Year 2010

Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the federal estate tax and generation-skipping transfer tax was repealed for tax year 2010 ONLY.

On December 17, 2010, President Obama signed into law the 2010 Tax Relief Act which revives the federal estate tax and generation-skipping transfer tax for 2010. However, the exclusion amount has been increased and tax rate lowered. The exclusion amount for estates is $5,000,000 and the maximum estate tax rate is 35%.

Special Election for Year 2010

The 2010 Tax Relief Act gives estates of decedents dying in calendar year 2010, the option to elect not to come under the revived estate tax. The new law gives those estates the option to elect to apply :

1. The estate tax based on the new 35% top rate and $5,000,000 applicable exclusion amount, with stepped-up basis, OR

2. No estate tax and modified carryover basis rules under EGTRRA

Any election would be revocable only with the consent of the IRS.

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