A bill to amend the Internal Revenue Code of 1986 to repeal the Federal estate and gift taxes and the tax on generation-skipping transfers, to preserve a step up in basis of certain property acquired from a decedent, and for other purposes.

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Estate Tax 
Elimination Act of 2001''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. REPEAL OF ESTATE, GIFT, AND GENERATION-SKIPPING TAXES.

    (a) In General.--Subtitle B is hereby repealed.
    (b) Effective Date.--The repeal made by subsection (a) shall apply 
to the estates of decedents dying, and gifts and generation-skipping 
transfers made, after the date of the enactment of this Act.

SEC. 3. PRESERVATION OF STEP UP IN BASIS OF CERTAIN PROPERTY ACQUIRED 
              FROM A DECEDENT.

    (a) In General.--Subsection (a) of section 1014 (relating to basis 
of property acquired from a decedent) is amended to read as follows:
    ``(a) Step up in Basis.--
            ``(1) In general.--Except as otherwise provided in this 
        section, the basis of property in the hands of a person 
        acquiring the property from a decedent or to whom the property 
        passed from a decedent shall, if not sold, exchanged, or 
        otherwise disposed of before the decedent's death by such 
        person, be the fair market value of the property at the date of 
        the decedent's death.
            ``(2) Limitation.--The aggregate fair market value of 
        property which may be taken into account under paragraph (1) 
        shall not exceed the sum of--
                    ``(A) the aggregate basis of all property described 
                in paragraph (1) in the hands of the decedent, plus
                    ``(B) $2,800,000.
            ``(3) Allocation of amount.--The executor shall allocate 
        the limitation under paragraph (2)(B) to the extent the 
        aggregate fair market value exceeds the aggregate basis under 
        paragraph (2).
            ``(4) Inflation adjustment of excepted amounts.--In the 
        case of decedents dying in a calendar year after 2001, the 
        dollar amount in paragraph (2)(B) shall be increased by an 
        amount equal to the product of--
                    ``(A) such dollar amount, and
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year, 
                determined by substituting `2000' for `1992' in 
                subparagraph (B) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $10,000, such increase shall be rounded to the 
        nearest multiple of $10,000.''.
    (b) Regulations.--Section 1014 is amended by adding at the end the 
following new subsection:
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (c) Conforming Amendments.--
            (1) Adjustment to basis.--Subsection (a) of section 1016 
        (relating to adjustments to basis) is amended by striking 
        ``and'' at the end of paragraph (26), by striking the period at 
        the end of paragraph (27) and inserting ``, and'', and by 
        adding at the end the following:
            ``(28) to the extent provided in section 1014 (relating to 
        step up in basis of certain property acquired from a 
        decedent).''.
            (2) The heading for section 1014 is amended by striking 
        ``basis of property'' and inserting ``step up in basis of 
        certain property''.
            (3) The item relating to section 1014 in the table of 
        sections for part II of subchapter O of chapter 1 is amended by 
        striking ``Basis of property'' and inserting ``Step up in basis 
        of certain property''.
    (d) Effective Date.--The amendments made by this section shall 
apply to the estates of decedents dying after the date of the enactment 
of this Act.

SEC. 4. CARRYOVER BASIS FOR CERTAIN PROPERTY ACQUIRED FROM A DECEDENT.

    (a) General Rule.--Part II of subchapter O of chapter 1 (relating 
to basis rules of general application) is amended by inserting after 
section 1021 the following new section:

``SEC. 1022. CARRYOVER BASIS FOR CERTAIN PROPERTY ACQUIRED FROM A 
              DECEDENT.

    ``(a) Carryover Basis.--Except as otherwise provided in this 
section, the basis of carryover basis property in the hands of a person 
acquiring such property from a decedent shall be determined under 
section 1015.
    ``(b) Carryover Basis Property Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `carryover basis property' means any property--
                    ``(A) which is acquired from or passed from a 
                decedent who died after the date of the enactment of 
                this section, and
                    ``(B) which is not excluded pursuant to paragraph 
                (2).
        The property taken into account under subparagraph (A) shall be 
        determined under section 1014(b) without regard to subparagraph 
        (A) of the last sentence of paragraph (9) thereof.
            ``(2) Certain property not carryover basis property.--The 
        term `carryover basis property' does not include--
                    ``(A) any item of gross income in respect of a 
                decedent described in section 691, and
                    ``(B) any property for which basis is provided by 
                section 1014.''.
    (b) Information Returns.--
            (1) In general.--Subpart A of part III of subchapter A of 
        chapter 61 (relating to information concerning persons subject 
        to special provisions) is amended by adding after section 6039G 
        the following:

``SEC. 6039H. INFORMATION REGARDING PROPERTY ACQUIRED FROM A DECEDENT.

    ``Every executor shall furnish the Secretary such information with 
property to which section 1014 or 1022 applies as the Secretary may by 
regulations prescribe.''.
            (2) Conforming amendment.--The table of sections for 
        subpart A of part III of subchapter A of chapter 61 of such 
        Code is amended by adding after the item relating to section 
        6039G the following:

                              ``Sec. 6039H. Information regarding 
                                        property acquired from a 
                                        decedent.''.
    (c) Miscellaneous Amendments Related To Carryover Basis.--
            (1) Capital gain treatment for inherited art work or 
        similar property.--
                    (A) In general.--Subparagraph (C) of section 
                1221(a)(3) (defining capital asset) is amended by 
                inserting ``(other than by reason of section 1022)'' 
                after ``is determined''.
                    (B) Coordination with section 170.--Paragraph (1) 
                of section 170(e) (relating to certain contributions of 
                ordinary income and capital gain property) is amended 
                by adding at the end the following: ``For purposes of 
                this paragraph, the determination of whether property 
                is a capital asset shall be made without regard to the 
                exception contained in section 1221(a)(3)(C) for basis 
                determined under section 1022.''.
            (2) Definition of executor.--Section 7701(a) (relating to 
        definitions) is amended by adding at the end the following:
            ``(47) Executor.--The term `executor' means the executor or 
        administrator of the decedent, or, if there is no executor or 
        administrator appointed, qualified, and acting within the 
        United States, then any person in actual or constructive 
        possession of any property of the decedent.''.
            (3) Clerical amendment.--The table of sections for part II 
        of subchapter O of chapter 1 is amended by adding at the end 
        the following new item:

                              ``Sec. 1022. Carryover basis for certain 
                                        property acquired from a 
                                        decedent.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after the date of the enactment of 
this Act.

Summary: Estate Tax Elimination Act of 2001 - Amends the Internal Revenue Code to eliminate Federal estate, gift, and transfer taxes. Limits the aggregate step up basis of certain property acquired from a decedent to the aggregate basis of such property plus $2.8 million. Provides for an inflation adjustment. States that the basis for carryover basis property shall be determined under the provision respecting the basis of property acquired by gifts or transfers in trust . Describes noncarryover basis property. Directs an executor to provide the Secretary of the Treasury with related information.