Death Tax and Legal Fee Relief Act of 1997

Summary: Death Tax and Legal Fee Relief Act of 1997 - Amends the Internal Revenue Code to increase the unified credit against estate and gift taxes and provide for an additional increase based upon the unused credit of a predeceased spouse. 
Provides for a five-year deferral of interest on estate tax installment payments relating to a small business (closely held business with not more than $20 million in assets).

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Death Tax and Legal Fee Relief Act 
of 1997''.

SEC. 2. UNIFIED CREDIT INCREASED TO EQUIVALENT OF $1,200,000 EXCLUSION.

    (a) In General.--Subsection (a) of section 2010 of the Internal 
Revenue Code of 1986 (relating to unified credit against estate tax) is 
amended by striking ``$192,800'' and inserting ``the applicable credit 
amount''.
    (b) Applicable Credit Amount.--Section 2010 of such Code is amended 
by redesignating subsection (c) as subsection (d) and by inserting 
after subsection (b) the following new subsection:
    ``(c) Applicable Credit Amount.--For purposes of this section--
            ``(1) In general.--The applicable credit amount is the 
        amount of the tentative tax which would be determined under the 
        rate schedule set forth in section 2001(c) if the amount with 
        respect to which such tentative tax is to be computed were the 
        applicable exclusion amount determined in accordance with the 
        following table:

        ``In the case of estates of decedents
                                                         The applicable
          dying, and gifts made, during:
                                                   exclusion amount is:
                  1998...............................          $750,000

            ``(2) Cost-of-living adjustments.--In the case of any 
        decedent dying, and gifts made, in a calendar year after 1998, 
        the $750,000 amount set forth in paragraph (1) shall be 
        increased by an amount equal to--
                    ``(A) $750,000, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 2002' for `calendar year 
                1992' in subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10,000, such amount shall be rounded to the 
        nearest multiple of $10,000.''
    (c) Unified Gift Tax Credit.--Paragraph (1) of section 2505(a) of 
such Code is amended by striking ``$192,800'' and inserting ``the 
applicable credit amount in effect under section 2010(c) for such 
calendar year''.
    (d) Conforming Amendments.--
            (1) Paragraph (1) of section 6018(a) of such Code is 
        amended by striking ``$600,000'' and inserting ``the applicable 
        exclusion amount in effect under section 2010(c) (as adjusted 
        under paragraph (2) thereof) for the calendar year which 
        includes the date of death''.
            (2) Paragraph (2) of section 2001(c) of such Code is 
        amended by striking ``$21,040,000'' and inserting ``the amount 
        at which the average tax rate under this section is 55 
        percent''.
            (3) Subparagraph (A) of section 2102(c)(3) of such Code is 
        amended by striking ``$192,800'' and inserting ``the applicable 
        credit amount in effect under section 2010(c) for the calendar 
        year which includes the date of death''.
    (e) Effective Date.--The amendments made by this section shall 
apply to the estates of decedents dying, and gifts made, after December 
31, 1997.

SEC. 3. INCREASE IN AMOUNT OF ESTATE TAX DEFERRAL AVAILABLE TO OWNERS 
              OF SMALL BUSINESSES.

    (a) In General.--Subsection (a) of section 6166 of the Internal 
Revenue Code of 1986 (relating to extension of time for payment of 
estate tax where estate consists largely of interest in closely held 
business) is amended by adding at the end the following new paragraph:
            ``(4) Interest not required to be paid if closely held 
        business is small business.--
                    ``(A) In general.--In the case of an interest in a 
                closely held business which is a small business at all 
                times on or after the date of the enactment of this 
                paragraph, no interest shall be required to be paid on 
                any installment permitted made within five years of 
                decedent's death under this section to the extent the 
                amount of such installment is attributable to such 
                interest.
                    ``(B) Small business.--For purposes of subparagraph 
                (A), the term `small business' means any closely held 
                business with aggregate gross assets (determined in 
                accordance with section 1202(d)) which do not exceed 
                $20,000,000.''
    (b) Effective Date.--The amendment made by this section shall apply 
to estates of decedents dying after December 31, 1997.

SEC. 4. UNIFIED CREDIT INCREASED BY UNUSED UNIFIED CREDIT OF 
              PREDECEASED SPOUSE.

    (a) In General.--Section 2010 of the Internal Revenue Code of 1986 
(relating to unified credit against estate tax) is amended by 
redesignating subsections (b) and (c) as subsections (c) and (d), 
respectively, and by inserting after subsection (a) the following new 
subsection:
    ``(b) Increase in Credit for Unused Unified Credit of Predeceased 
Spouse.--
            ``(1) In general.--The amount of the credit allowable under 
        subsection (a) shall be increased by the aggregate of the 
        amounts of the unused predeceased spouse credit.
            ``(2) Unused predeceased spouse credit.--For purposes of 
        paragraph (1)--
                    ``(A) In general.--The term `unused predeceased 
                spouse credit' means, with respect to any predeceased 
                spouse of the decedent, the amount equal to the excess 
                of--
                            ``(i) the maximum amount allowable under 
                        subsection (a) to the estate of such spouse, 
                        over
                            ``(ii) the tax imposed by section 2001 
                        reduced by the credits against such tax other 
                        than the credit allowed by this section.
                    ``(B) Limitation based on credit equivalent of 
                value of property passing to decedent from predeceased 
                spouse.--The amount of the unused predeceased spouse 
                credit with respect to any predeceased spouse shall not 
                exceed the credit equivalent of the aggregate value of 
                property acquired from or passing from (within the 
                meaning of section 1014) the predeceased spouse to the 
                decedent.
                    ``(C) Credit equivalent.--For purposes of 
                subparagraph (B), the credit equivalent is the amount 
                of the tentative tax which would be determined under 
                the rate schedule set forth in section 2001(c) if the 
                amount with respect to which the tentative tax is to be 
                computed were the aggregate value of the property 
                referred to in subparagraph (B).
            ``(3) Limitation on aggregate increase where more than 1 
        predeceased spouse.--In no event may the amount of the increase 
        under paragraph (1) exceed the dollar amount contained in 
        subsection (a).
            ``(4) Predeceased spouse.--For purposes of this subsection, 
        the term `predeceased spouse' means, with respect to the 
        decedent, an individual who was married to the decedent on the 
        date of such individual's death.''
    (b) Gift Tax.--Section 2505 of such Code is amended by 
redesignating subsections (b) and (c) as subsections (c) and (d), 
respectively, and by inserting after subsection (a) the following new 
subsection:
    ``(b) Increase in Credit for Unused Unified Credit of Predeceased 
Spouse.--Rules similar to the rules of section 2010(b) shall apply with 
respect to calendar years beginning after the date of death of any 
predeceased spouse of the donor.''
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
1997.