Estate, Gift and Generation-Skipping Transfer Tax QuestionsIs the estate tax repealed for decedents dying in 2010? Yes. Title V of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") repeals the estate tax for decedents dying after December 31, 2009 and before January 1, 2011. Is the gift tax repealed for gifts made during 2010? No. Title V of EGTRRA does not repeal the gift tax for 2010. However, the maximum gift tax rate for taxable gifts is reduced from 45% to 35% for gifts made in 2010. Furthermore, EGTRRA broadened the application of the gift tax by treating certain transfers in trust as transfers of property by gift. For more information, you should consult your tax adviser or go to the IRS Web site. Key words: “Notice 2010-19.” Is the generation-skipping transfer (GST) tax repealed in 2010? Yes. Title V of EGTRRA repeals the generation-skipping transfer (“GST”) tax on direct skips, taxable terminations, or taxable distributions occurring after December 31, 2009 and before January 1, 2011. Should I file a Form 706 for a decedent who died in 2010? No. Because the estate tax is repealed for decedents dying in 2010, no estate tax is due and there is no need to file a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. IRC §6018 no longer requires the filing of an estate tax return. In addition, the most recent revision of Form 706, dated 09-2009, is applicable only to decedents dying after December 31, 2008 and before January 1, 2010. There is no Form 706 for decedents dying after December 31, 2009. What happens if I file a Form 706 for a decedent who died in 2010? If you file a Form 706 for a decedent dying in 2010, the IRS will not accept the return and it will be sent back to you. Should I file a Form 709 for gifts I made in 2010? Yes, if you made gifts that are subject to the gift tax. Because the gift tax was not repealed, donors should continue to file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, to report gifts made in 2010. For more information, please contact your tax adviser. Will the estate tax return in 2011? Yes. Under current legislation, the estate tax repeal will “sunset”, effective January 1, 2011. Therefore, the estate tax is applicable to decedents dying after December 31, 2010. What are the exemption amounts and tax rates for 2011? Under current legislation, the exemption amount for estates and gifts is $1 million. For GST transfers, the exemption amount is $1 million with an inflation adjustment. Under current legislation, the maximum rate for estate, gift, and GST tax is 55%, with a surtax for estate and gift transfers between $10 million and $17,184,000. Will Congress retroactively reinstate the estate tax for decedents dying in 2010? We do not know. If legislation is enacted regarding the estate tax, the IRS will act swiftly to assess the impact of such legislation and provide guidance to taxpayers regarding their tax obligations and filing requirements. Will Congress change the exemption amount and rates for 2011? We do not know. If legislation is enacted regarding the estate, gift or GST tax, the IRS will act swiftly to assess the impact of such legislation and provide guidance to taxpayers regarding their tax obligations and filing requirements. The decedent was the beneficiary of a Qualified Domestic Trust (“QDOT”). Is the property remaining in the QDOT subject to estate tax? Maybe. Title V of EGTRRA provides, with respect to the surviving spouse of a decedent dying before January 1, 2010, that the estate tax will not apply to property remaining in a Qualified Domestic Trust (“QDOT”) on the surviving spouse’s date of the death if the surviving spouse dies after December 31, 2009. Title V also provides that the estate tax will not apply to distributions from QDOTs after December 31, 2020. Both of these provisions will sunset, however, and will no longer be applicable beginning January 1, 2011. For more information, you should consult your tax adviser. The decedent died before January 1, 2010. Do I still need to file an estate tax return? Yes, if the gross estate exceeds the applicable exemption amount for the year of death. The estate tax is not repealed for the estates of decedents who died before January 1, 2010; therefore, an estate tax return will still need to be filed for those estates.
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