On Dec. 17, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. In essence, the act extends through 2012 most of the so-called “Bush era tax cuts,” which were originally contained in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). With respect to the federal estate tax, generation-skipping transfer tax and gift tax, the act defers for two years the “sunset” of the EGTRRA provisions, but with several significant modifications.
EGTRRA phased-out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010. The gift tax remained in 2010, subject to a $1 million exemption amount and a maximum gift tax rate of 35 percent. The EGTRRA phase-out and eventual repeal of the estate and generation-skipping transfer tax were scheduled to “sunset” in 2011. Therefore, absent legislation, the estate and generation-skipping transfer taxes would have been reinstated in 2011 with the pre-EGTRRA unified exemption amount of $1 million and a top tax rate of 55 percent.
