SEC. 2. RETENTION OF ESTATE TAX; REPEAL OF CARRY-
OVER BASIS. 
(a) IN GENERAL.—Subtitles A and E of title V of 
the Economic Growth and Tax Relief Reconciliation Act 
of 2001, and the amendments made by such subtitles, are 
hereby repealed; and the Internal Revenue Code of 1986 
shall be applied as if such subtitles, and amendments, had 
never been enacted. 
(b) SUNSET NOT TO APPLY.—Section 901 of the 
Economic Growth and Tax Relief Reconciliation Act of 
2001 shall not apply to title V of such Act. 
(c) CONFORMING AMENDMENTS.—Subsections (d) 
and (e) of section 511 of the Economic Growth and Tax 
Relief Reconciliation Act of 2001, and the amendments 
made by such subsections, are hereby repealed; and the 
Internal Revenue Code of 1986 shall be applied as if such 
subsections, and amendments, had never been enacted. 
SEC. 3. MODIFICATIONS TO ESTATE TAX. 
(a) $3,500,000 EXCLUSION EQUIVALENT OF UNI-
FIED CREDIT.—Subsection (c) of section 2010 of the In-
ternal Revenue Code of 1986 (relating to applicable credit 
amount) is amended by striking all that follows ‘‘the appli-
cable exclusion amount’’ and inserting ‘‘. For purposes of 
the preceding sentence, the applicable exclusion amount 
is $3,500,000.’’. 
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(b) FREEZE MAXIMUM ESTATE TAX RATE AT 45 
PERCENT; RESTORATION OF PHASEOUT OF GRADUATED 
RATES AND UNIFIED CREDIT.— 
(1) Paragraph (1) of section 2001(c) of such 
Code is amended by striking the last 2 items in the 
table and inserting the following new item: 
‘‘Over $1,500,000 ................................
$555,800, plus 45 percent of the ex-
cess 
of 
such 
amount 
over 
$1,500,000.’’. 
(2) Paragraph (2) of section 2001(c) of such 
Code is amended to read as follows: 
‘‘(2) PHASEOUT
OF
GRADUATED
RATES
AND 
UNIFIED
CREDIT.—The tentative tax determined 
under paragraph (1) shall be increased by an 
amount equal to 5 percent of so much of the amount 
(with respect to which the tentative tax is to be com-
puted) as exceeds $10,000,000. The amount of the 
increase under the preceding sentence shall not ex-
ceed the sum of the applicable credit amount under 
section 2010(c) and $119,200.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to estates of decedents dying, and 
gifts made, after December 31, 2009. 
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SEC. 4. VALUATION RULES FOR CERTAIN TRANSFERS OF 
NONBUSINESS ASSETS; LIMITATION ON MI-
NORITY DISCOUNTS. 
(a) IN GENERAL.—Section 2031 of the Internal Rev-
enue Code of 1986 (relating to definition of gross estate) 
is amended by redesignating subsection (d) as subsection 
(f) and by inserting after subsection (c) the following new 
subsections: 
‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS 
OF NONBUSINESS ASSETS.—For purposes of this chapter 
and chapter 12— 
‘‘(1) IN GENERAL.—In the case of the transfer 
of any interest in an entity other than an interest 
which is actively traded (within the meaning of sec-
tion 1092)— 
‘‘(A) the value of any nonbusiness assets 
held by the entity shall be determined as if the 
transferor had transferred such assets directly 
to the transferee (and no valuation discount 
shall be allowed with respect to such nonbusi-
ness assets), and 
‘‘(B) the nonbusiness assets shall not be 
taken into account in determining the value of 
the interest in the entity. 
‘‘(2) NONBUSINESS ASSETS.—For purposes of 
this subsection— 
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‘‘(A) IN
GENERAL.—The term ‘nonbusi-
ness asset’ means any asset which is not used 
in the active conduct of 1 or more trades or 
businesses. 
‘‘(B) EXCEPTION
FOR
CERTAIN
PASSIVE 
ASSETS.—Except as provided in subparagraph 
(C), a passive asset shall not be treated for pur-
poses of subparagraph (A) as used in the active 
conduct of a trade or business unless— 
‘‘(i) the asset is property described in 
paragraph (1) or (4) of section 1221(a) or 
is a hedge with respect to such property, 
or 
‘‘(ii) the asset is real property used in 
the active conduct of 1 or more real prop-
erty trades or businesses (within the mean-
ing of section 469(c)(7)(C)) in which the 
transferor materially participates and with 
respect to which the transferor meets the 
requirements of section 469(c)(7)(B)(ii). 
For purposes of clause (ii), material participa-
tion shall be determined under the rules of sec-
tion 469(h), except that section 469(h)(3) shall 
be applied without regard to the limitation to 
farming activity. 
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‘‘(C) EXCEPTION
FOR
WORKING
CAP-
ITAL.—Any asset (including a passive asset) 
which is held as a part of the reasonably re-
quired working capital needs of a trade or busi-
ness shall be treated as used in the active con-
duct of a trade or business. 
‘‘(3) PASSIVE
ASSET.—For purposes of this 
subsection, the term ‘passive asset’ means any— 
‘‘(A) cash or cash equivalents, 
‘‘(B) except to the extent provided by the 
Secretary, stock in a corporation or any other 
equity, profits, or capital interest in any entity, 
‘‘(C) evidence of indebtedness, option, for-
ward or futures contract, notional principal con-
tract, or derivative, 
‘‘(D) asset described in clause (iii), (iv), or 
(v) of section 351(e)(1)(B), 
‘‘(E) annuity, 
‘‘(F) real property used in 1 or more real 
property trades or businesses (as defined in sec-
tion 469(c)(7)(C)), 
‘‘(G) asset (other than a patent, trade-
mark, or copyright) which produces royalty in-
come, 
‘‘(H) commodity, 
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‘‘(I) collectible (within the meaning of sec-
tion 401(m)), or 
‘‘(J) any other asset specified in regula-
tions prescribed by the Secretary. 
‘‘(4) LOOK-THRU RULES.— 
‘‘(A) IN GENERAL.—If a nonbusiness asset 
of an entity consists of a 10-percent interest in 
any other entity, this subsection shall be ap-
plied by disregarding the 10-percent interest 
and by treating the entity as holding directly its 
ratable share of the assets of the other entity. 
This subparagraph shall be applied successively 
to any 10-percent interest of such other entity 
in any other entity. 
‘‘(B) 10-PERCENT
INTEREST.—The term 
‘10-percent interest’ means— 
‘‘(i) in the case of an interest in a cor-
poration, ownership of at least 10 percent 
(by vote or value) of the stock in such cor-
poration, 
‘‘(ii) in the case of an interest in a 
partnership, ownership of at least 10 per-
cent of the capital or profits interest in the 
partnership, and 
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‘‘(iii) in any other case, ownership of 
at least 10 percent of the beneficial inter-
ests in the entity. 
‘‘(5) COORDINATION WITH SUBSECTION (b).— 
Subsection (b) shall apply after the application of 
this subsection. 
‘‘(e) LIMITATION ON MINORITY DISCOUNTS.—For 
purposes of this chapter and chapter 12, in the case of 
the transfer of any interest in an entity other than an in-
terest which is actively traded (within the meaning of sec-
tion 1092), no discount shall be allowed by reason of the 
fact that the transferee does not have control of such enti-
ty if the transferee and members of the family (as defined 
in section 2032A(e)(2)) of the transferee have control of 
such entity.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transfers after the date of the 
enactment of this Act. 
Æ 
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