Abstract
The Economic Growth and Tax Relief and Reconciliation Act of 2001 provided for a systematic increase in the exclusion amount of the Estate Tax, with a complete repeal of the tax in the year 2010. The Act, however, did not repeal the Gift Tax. This article explores the connection between these two transfer taxes and their effect for estate planning purposes. Currently, Gift Tax paid on transfers within three years of the transferor’s death is included in the value of the transferor’s gross estate for Estate Tax purposes. This results in a nullification of the benefits of the lifetime gift─reducing the transferor’s property subject to Estate Tax. Similarly, an estate is allowed a credit of the lesser of (1) the amount of the federal estate tax attributable to the transferred property in the transferor’s estate, or (2) the amount of the federal estate tax attributable to the transferred property in the transferee’s estate for Estate Tax paid by a prior estate within ten years. Thus, the estate comprised of property received from a prior estate is granted a tax credit that is unavailable to the estate comprised of property received as a taxable gift. The author proposes changes to the Internal Revenue Code to bring these transfer taxes into agreement so that regardless of whether an estate is subject to the Estate Tax or the Gift Tax, the end result is the same.
Recommended Citation
Kelly A. Moore,
Previously Taxed Property Credit and the 2035(b) Gross Up,
34
S. Ill. U. L.J.
275
(2010).
Available at:
https://opensiuc.lib.siu.edu/siulj/vol34/iss2/2