IB
Union Calendar No. 26
107TH CONGRESS
1ST SESSION
H. R. 8
[Report No. 107–37]
To amend the Internal Revenue Code of 1986 to phase out the estate
and gift taxes over a 10-year period, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 14, 2001
Ms. DUNN (for herself, Mr. TANNER, Mr. COX, Mr. ABERCROMBIE, Mr.
BROWN of South Carolina, Mr. CULBERSON, Mr. EVERETT, Mr. GOODE,
Mr. COOKSEY, Mr. BACHUS, Mr. PENCE, Mr. LAHOOD, Mr. SHADEGG,
Mr. DUNCAN, Mr. WHITFIELD, Mr. SAXTON, Mr. BONILLA, Mrs. ROU-
KEMA, Mrs. BIGGERT, Mr. FERGUSON, Mr. GILCHREST, Mr. RADANO-
VICH, Mr. SHAW, Mr. MALONEY of Connecticut, Mr. SAM JOHNSON of
Texas, Mr. TANCREDO, Mr. BOUCHER, Mr. TRAFICANT, Mr. KELLER,
Mr. BURTON of Indiana, Mr. SHOWS, Mr. GARY MILLER of California,
Mr. ROGERS of Michigan, Mr. CUNNINGHAM, Mr. ROYCE, Mr. GREEN-
WOOD, Mr. SMITH of Texas, Mr. FOLEY, Mr. HAYWORTH, Mr. WELLER,
Mr. KIRK, Mr. YOUNG of Alaska, Mr. BAIRD, Mr. WAMP, Mr. DOOLEY
of California, Mr. EHLERS, Mr. CANTOR, Mr. POMBO, Mr. SIMMONS, Mr.
CAMP, Mr. MCINTYRE, Mr. HAYES, Mr. NETHERCUTT, Ms. HART, Mr.
BARTON of Texas, Mrs. WILSON, Mr. HALL of Texas, Mr. HYDE, Mr.
WOLF, Mr. SUNUNU, Mr. GRUCCI, Mr. CALLAHAN, Mr. RYAN of Wis-
consin, Mrs. KELLY, Mr. LARGENT, Mr. DEAL of Georgia, Mr. CANNON,
Mr. ADERHOLT, Mr. CRANE, Ms. GRANGER, Mr. BLUNT, Mr. GREEN of
Wisconsin, Mr. HERGER, Mr. ENGLISH, Mr. LOBIONDO, Mr. JENKINS,
Mr. PITTS, Mr. LEWIS of California, Mr. OXLEY, Mr. RILEY, Mr.
CHAMBLISS, Mr. WATTS of Oklahoma, Mrs. NORTHUP, Mr. OSE, Mr.
SMITH of New Jersey, Mr. LEWIS of Kentucky, Mr. LUCAS of Oklahoma,
Mr. SIMPSON, Mr. PETERSON of Pennsylvania, Mr. MCCRERY, Mrs.
BONO, Mr. CALVERT, Mr. NEY, Mr. DOOLITTLE, Mr. HUNTER, Mr.
SKEEN, Mr. HOEKSTRA, Mr. LATOURETTE, Mr. SHIMKUS, Mr. FLETCH-
ER, Mrs. CAPITO, Mr. EHRLICH, Mr. BISHOP, Mr. ROHRABACHER, Mr.
BOEHLERT, Mr. RYUN of Kansas, Mr. CRAMER, Mrs. EMERSON, Mr.
SCHAFFER, Mr. SESSIONS, Mr. ISAKSON, Ms. ROS-LEHTINEN, Mr. BURR
of North Carolina, Mr. BARR of Georgia, Mr. HASTINGS of Washington,
Mr. MILLER of Florida, Mr. HORN, Mr. RAMSTAD, Mr. MCHUGH, Mr.
WALSH, Mr. CRENSHAW, Mr. NORWOOD, Mr. COBLE, Mr. NUSSLE, Mr.
PLATTS, Mr. JONES of North Carolina, Mr. GEKAS, Mr. ROGERS of Ken-
tucky, Mr. BASS, Mr. TERRY, Mr. SCHROCK, Mr. GOODLATTE, Mr.
TOOMEY, Mr. WICKER, Mr. PORTMAN, Mr. TAUZIN, Mr. HANSEN, Mr.
ARMEY, Mr. HILLEARY, Mr. MCINNIS, Mr. COMBEST, Mr. DELAY, Mrs.
CUBIN, Mr. LINDER, Mr. MICA, Mrs. MCCARTHY of New York, Mr.
FRELINGHUYSEN, Mr. BERRY, Mr. JOHN, Mr. CONDIT, Mr. SANDLIN,
Mr. SWEENEY, Mr. KNOLLENBERG, Mr. PHELPS, Mr. CARSON of Okla-
homa, Mr. GANSKE, Mr. THUNE, Mr. KERNS, Ms. PRYCE of Ohio, Mr.
STUMP, Mr. SENSENBRENNER, Mr. OTTER, Mr. RAHALL, Mr. SISISKY,
Mr. HULSHOF, Mr. LUCAS of Kentucky, Mr. WALDEN of Oregon, Mr.
WYNN, Mr. FORD, Mr. REYNOLDS, Mr. BRADY of Texas, Mr. PAUL, Mr.
GORDON, Mrs. JO ANN DAVIS of Virginia, Mr. COSTELLO, Mr. GILLMOR,
Mr. WATKINS, Mr. PUTNAM, Mr. GIBBONS, Mr. AKIN, Mr. ISSA, Mr.
FARR of California, Mr. BARCIA, Mrs. MYRICK, Mr. BARTLETT of Mary-
land, Mr. CHABOT, Mr. KINGSTON, Mr. HEFLEY, Mr. GALLEGLY, Mr.
GILMAN, Mr. GOSS, Mr. WELDON of Florida, Mr. DEMINT, Mr. SOUDER,
Mr. FOSSELLA, Mr. KOLBE, Mr. BILIRAKIS, Mr. LATHAM, Mr. TIAHRT,
Mr. TAYLOR of North Carolina, Mr. SCARBOROUGH, Mr. VITTER, Mr.
HOSTETTLER, Mr. GRAHAM, Mr. SPENCE, Mr. TOM DAVIS of Virginia,
Mr. BOEHNER, Mr. OSBORNE, Mr. BRYANT, Mr. DREIER, Mr. PICK-
ERING, Mr. THORNBERRY, Mr. WELDON of Pennsylvania, Mr. BAKER,
Mr. KING, Mr. HUTCHINSON, Mr. MCKEON, Mr. MANZULLO, Mr. SMITH
of Washington, Mr. LAMPSON, and Mrs. CLAYTON) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means
APRIL 3, 2001
Additional sponsors: Ms. BERKLEY, Mr. STEARNS, Mr. THOMAS, and Mr.
HASTERT
APRIL 3, 2001
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on March 14, 2001]
A BILL
To amend the Internal Revenue Code of 1986 to phase
out the estate and gift taxes over a 10-year period,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Death 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 consid-
ered to be made to a section or other provision of the Inter-
nal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; etc.
TITLE I—REPEAL OF ESTATE, GIFT, AND GENERATION-SKIPPING
TAXES
Sec. 101. Repeal of estate, gift, and generation-skipping taxes.
TITLE II—REDUCTIONS OF ESTATE AND GIFT TAX RATES PRIOR
TO REPEAL
Sec. 201. Additional reductions of estate and gift tax rates.
TITLE III—UNIFIED CREDIT REPLACED WITH UNIFIED EXEMPTION
AMOUNT
Sec. 301. Unified credit against estate and gift taxes replaced with unified ex-
emption amount.
TITLE IV—CARRYOVER BASIS AT DEATH; OTHER CHANGES TAKING
EFFECT WITH REPEAL
Sec. 401. Termination of step-up in basis at death.
Sec. 402. Treatment of property acquired from a decedent dying after December
31, 2010.
TITLE V—CONSERVATION EASEMENTS
Sec. 501. Expansion of estate tax rule for conservation easements.
TITLE VI—MODIFICATIONS OF GENERATION-SKIPPING TRANSFER
TAX
Sec. 601. Deemed allocation of GST exemption to lifetime transfers to trusts; ret-
roactive allocations.
Sec. 602. Severing of trusts.
Sec. 603. Modification of certain valuation rules.
Sec. 604. Relief provisions.
TITLE VII—EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX
Sec. 701. Increase in number of allowable partners and shareholders in closely
held businesses.
TITLE I—REPEAL OF ESTATE,
GIFT, AND GENERATION-SKIP-
PING TAXES
SEC. 101. 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 December 31,
2010.
TITLE II—REDUCTIONS OF ES-
TATE AND GIFT TAX RATES
PRIOR TO REPEAL
SEC. 201. ADDITIONAL REDUCTIONS OF ESTATE AND GIFT
TAX RATES.
(a) MAXIMUM RATE OF TAX REDUCED TO 50 PER-
CENT.—
(1) IN GENERAL.—The table contained in section
2001(c)(1) is amended by striking the two highest
brackets and inserting the following:
‘‘Over $2,500,000 ..............................
$1,025,800, plus 50% of the excess over
$2,500,000.’’.
(2) PHASE-IN OF REDUCED RATE.—Subsection
(c) of section 2001 is amended by adding at the end
the following new paragraph:
‘‘(3) PHASE-IN OF REDUCED RATE.—In the case
of decedents dying, and gifts made, during 2002, the
last item in the table contained in paragraph (1)
shall be applied by substituting ‘53%’ for ‘50%’.’’.
(b) REPEAL OF PHASEOUT OF GRADUATED RATES.—
Subsection (c) of section 2001 is amended by striking para-
graph (2) and redesignating paragraph (3), as added by
subsection (a), as paragraph (2).
(c) ADDITIONAL REDUCTIONS OF RATES OF TAX.—
Subsection (c) of section 2001, as so amended, is amended
by adding at the end the following new paragraph:
‘‘(3) PHASEDOWN OF TAX.—In the case of estates
of decedents dying, and gifts made, during any cal-
endar year after 2003 and before 2011—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (C), the tentative tax under this
subsection shall be determined by using a table
prescribed by the Secretary (in lieu of using the
table contained in paragraph (1)) which is the
same as such table; except that—
‘‘(i) each of the rates of tax shall be re-
duced by the number of percentage points
determined under subparagraph (B), and
‘‘(ii) the amounts setting forth the tax
shall be adjusted to the extent necessary to
reflect the adjustments under clause (i).
‘‘(B) PERCENTAGE
POINTS
OF
REDUC-
TION.—
The number of
‘‘For calendar year:
percentage points is:
2004 ....................................................................................
1.0
2005 ....................................................................................
2.0
2006 ....................................................................................
3.0
2007 ....................................................................................
5.0
2008 ....................................................................................
7.0
2009 ....................................................................................
9.0
2010 ....................................................................................
11.0.
‘‘(C) COORDINATION
WITH
INCOME
TAX
RATES.—The reductions under subparagraph
(A)—
‘‘(i) shall not reduce any rate under
paragraph (1) below the lowest rate in sec-
tion 1(c) applicable to the taxable year
which includes the date of death (or, in the
case of a gift, the date of the gift), and
‘‘(ii) shall not reduce the highest rate
under paragraph (1) below the highest rate
in section 1(c) for such taxable year.
‘‘(D) COORDINATION
WITH
CREDIT
FOR
STATE DEATH TAXES.—Rules similar to the rules
of subparagraph (A) shall apply to the table con-
tained in section 2011(b) except that the Sec-
retary shall prescribe percentage point reductions
which maintain the proportionate relationship
(as in effect before any reduction under this
paragraph) between the credit under section
2011 and the tax rates under subsection (c).’’.
(d) EFFECTIVE DATES.—
(1) SUBSECTIONS (a) AND (b).—The amend-
ments made by subsections (a) and (b) shall apply to
estates of decedents dying, and gifts made, after De-
cember 31, 2001.
(2) SUBSECTION (c).—The amendment made by
subsection (c) shall apply to estates of decedents
dying, and gifts made, after December 31, 2003.
TITLE III—UNIFIED CREDIT RE-
PLACED WITH UNIFIED EX-
EMPTION AMOUNT
SEC. 301. UNIFIED CREDIT AGAINST ESTATE AND GIFT
TAXES REPLACED WITH UNIFIED EXEMPTION
AMOUNT.
(a) IN GENERAL.—
(1) ESTATE TAX.—Subsection (b) of section 2001
(relating to computation of tax) is amended to read
as follows:
‘‘(b) COMPUTATION OF TAX.—
‘‘(1) IN GENERAL.—The tax imposed by this sec-
tion shall be the amount equal to the excess (if any)
of—
‘‘(A) the tentative tax determined under
paragraph (2), over
‘‘(B) the aggregate amount of tax which
would have been payable under chapter 12 with
respect to gifts made by the decedent after De-
cember 31, 1976, if the provisions of subsection
(c) (as in effect at the decedent’s death) had been
applicable at the time of such gifts.
‘‘(2) TENTATIVE
TAX.—For purposes of para-
graph (1), the tentative tax determined under this
paragraph is a tax computed under subsection (c) on
the excess of—
‘‘(A) the sum of—
‘‘(i) the amount of the taxable estate,
and
‘‘(ii) the amount of the adjusted tax-
able gifts, over
‘‘(B) the exemption amount for the calendar
year in which the decedent died.
‘‘(3) EXEMPTION
AMOUNT.—For purposes of
paragraph (2), the term ‘exemption amount’ means
the amount determined in accordance with the fol-
lowing table:
‘‘In the case of
The exemption
calendar year:
amount is:
2002 and 2003 ................................................................
$700,000
2004 .................................................................................
$850,000
2005 .................................................................................
$950,000
2006 or thereafter ...........................................................
$1,000,000.
‘‘(4) ADJUSTED TAXABLE GIFTS.—For purposes
of paragraph (2), the term ‘adjusted taxable gifts’
means the total amount of the taxable gifts (within
the meaning of section 2503) made by the decedent
after December 31, 1976, other than gifts which are
includible in the gross estate of the decedent.’’.
(2) GIFT TAX.—Subsection (a) of section 2502
(relating to computation of tax) is amended to read
as follows:
‘‘(a) COMPUTATION OF TAX.—
‘‘(1) IN GENERAL.—The tax imposed by section
2501 for each calendar year shall be the amount equal
to the excess (if any) of—
‘‘(A) the tentative tax determined under
paragraph (2) for such calendar year, over
‘‘(B) the aggregate amount of tax that
would have been payable under this chapter with
respect to gifts made by the donor in preceding
calendar periods if the tax had been computed
under the provisions of section 2001(c) as in ef-
fect for such calendar year.
‘‘(2) TENTATIVE
TAX.—For purposes of para-
graph (1), the tentative tax determined under this
paragraph for a calendar year is a tax computed
under section 2001(c) on the excess of—
‘‘(A) the aggregate sum of the taxable gifts
for such calendar year and for each of the pre-
ceding calendar periods, over
‘‘(B) the exemption amount under section
2001(b)(3) for such calendar year.’’.
(b) REPEAL OF UNIFIED CREDITS.—
(1) Section 2010 (relating to unified credit
against estate tax) is hereby repealed.
(2) Section 2505 (relating to unified credit
against gift tax) is hereby repealed.
(c) CONFORMING AMENDMENTS.—
(1)(A) Subsection (b) of section 2011 is
amended—
(i) by striking ‘‘adjusted’’ in the table; and
(ii) by striking the last sentence.
(B) Subsection (f) of section 2011 is amended by
striking ‘‘, reduced by the amount of the unified cred-
it provided by section 2010’’.
(2) Subsection (a) of section 2012 is amended by
striking ‘‘and the unified credit provided by section
2010’’.
(3) Subparagraph (A) of section 2013(c)(1) is
amended by striking ‘‘2010,’’.
(4) Paragraph (2) of section 2014(b) is amended
by striking ‘‘2010, 2011,’’ and inserting ‘‘2011’’.
(5) Clause (ii) of section 2056A(b)(12)(C) is
amended to read as follows:
‘‘(ii) to treat any reduction in the tax
imposed by paragraph (1)(A) by reason of
the credit allowable under section 2010 (as
in effect on the day before the date of the en-
actment of the Death Tax Elimination Act
of 2001) or the exemption amount allowable
under section 2001(b) with respect to the de-
cedent as a credit under section 2505 (as so
in effect) or exemption under section 2501
(as the case may be) allowable to such sur-
viving spouse for purposes of determining
the amount of the exemption allowable
under section 2501 with respect to taxable
gifts made by the surviving spouse during
the year in which the spouse becomes a cit-
izen or any subsequent year,’’.
(6) Subsection (a) of section 2057 is amended by
striking paragraphs (2) and (3) and inserting the fol-
lowing new paragraph:
‘‘(2) MAXIMUM DEDUCTION.—The deduction al-
lowed by this section shall not exceed the excess of
$1,300,000 over the exemption amount (as defined in
section 2001(b)(3)).’’.
(7) Subsection (b) of section 2101 is amended to
read as follows:
‘‘(b) COMPUTATION OF TAX.—
‘‘(1) IN GENERAL.—The tax imposed by this sec-
tion shall be the amount equal to the excess (if any)
of—
‘‘(A) the tentative tax determined under
paragraph (2), over
‘‘(B) a tentative tax computed under section
2001(c) on the amount of the adjusted taxable
gifts.
‘‘(2) TENTATIVE
TAX.—For purposes of para-
graph (1), the tentative tax determined under this
paragraph is a tax computed under section 2001(c)
on the excess of—
‘‘(A) the sum of—
‘‘(i) the amount of the taxable estate,
and
‘‘(ii) the amount of the adjusted tax-
able gifts, over
‘‘(B) the exemption amount for the calendar
year in which the decedent died.
‘‘(3) EXEMPTION AMOUNT.—
‘‘(A) IN
GENERAL.—The term ‘exemption
amount’ means $60,000.
‘‘(B) RESIDENTS OF POSSESSIONS OF THE
UNITED STATES.—In the case of a decedent who
is considered to be a nonresident not a citizen of
the United States under section 2209, the exemp-
tion amount under this paragraph shall be the
greater of—
‘‘(i) $60,000, or
‘‘(ii) that proportion of $175,000
which the value of that part of the dece-
dent’s gross estate which at the time of his
death is situated in the United States bears
to the value of his entire gross estate wher-
ever situated.
‘‘(C) SPECIAL RULES.—
‘‘(i) COORDINATION WITH TREATIES.—
To the extent required under any treaty ob-
ligation of the United States, the exemption
amount allowed under this paragraph shall
be equal to the amount which bears the
same ratio to the exemption amount under
section 2001(b)(3) (for the calendar year in
which the decedent died) as the value of the
part of the decedent’s gross estate which at
the time of his death is situated in the
United States bears to the value of his en-
tire gross estate wherever situated. For pur-
poses of the preceding sentence, property
shall not be treated as situated in the
United States if such property is exempt
from the tax imposed by this subchapter
under any treaty obligation of the United
States.
‘‘(ii) COORDINATION
WITH
GIFT
TAX
EXEMPTION
AND
UNIFIED
CREDIT.—If an
exemption has been allowed under section
2501 (or a credit has been allowed under
section 2505 as in effect on the day before
the date of the enactment of the Death Tax
Elimination Act of 2001) with respect to
any gift made by the decedent, each dollar
amount contained in subparagraph (A) or
(B) or the exemption amount applicable
under clause (i) of this subparagraph
(whichever applies) shall be reduced by the
exemption so allowed under section 2501
(or, in the case of such a credit, by the
amount of the gift for which the credit was
so allowed).’’.
(8) Section 2102 is amended by striking sub-
section (c).
(9)(A) Paragraph (1) of section 2107(a) is
amended by striking ‘‘the table contained in’’.
(B) Paragraph (1) of section 2107(c) is amended
to read as follows:
‘‘(1) EXEMPTION AMOUNT.—For purposes of sub-
section (a), the exemption amount under section 2001
shall be $60,000.’’
(C) Paragraph (3) of section 2107(c) is amended
by striking the second sentence.
(D) The heading of subsection (c) of section 2107
is amended to read as follows:
‘‘(c) EXEMPTION AMOUNT AND CREDITS.—’’.
(10) Paragraph (1) of section 6018(a) is amend-
ed by striking ‘‘the applicable exclusion amount in ef-
fect under section 2010(c)’’ and inserting ‘‘the exemp-
tion amount under section 2001(b)(3)’’.
(11) Subparagraph (A) of section 6601(j)(2) is
amended to read as follows:
‘‘(A) the amount of the tentative tax which
would be determined under the rate schedule set
forth in section 2001(c) if the amount with re-
spect to which such tentative tax is to be com-
puted were $1,000,000, or’’.
(12) The table of sections for part II of sub-
chapter A of chapter 11 is amended by striking the
item relating to section 2010.
(13) The table of sections for subchapter A of
chapter 12 is amended by striking the item relating
to section 2505.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to estates of decedents dying and gifts
made after December 31, 2001.
TITLE IV—CARRYOVER BASIS AT
DEATH; 
OTHER 
CHANGES
TAKING 
EFFECT 
WITH 
RE-
PEAL
SEC. 401. TERMINATION OF STEP-UP IN BASIS AT DEATH.
Section 1014 (relating to basis of property acquired
from a decedent) is amended by adding at the end the fol-
lowing new subsection:
‘‘(f) TERMINATION.—This section shall not apply with
respect to decedents dying after December 31, 2010.’’.
SEC. 402. TREATMENT OF PROPERTY ACQUIRED FROM A
DECEDENT DYING AFTER DECEMBER 31, 2010.
(a) GENERAL RULE.—Part II of subchapter O of chap-
ter 1 (relating to basis rules of general application) is
amended by inserting after section 1021 the following new
section:
‘‘SEC. 1022. TREATMENT OF PROPERTY ACQUIRED FROM A
DECEDENT DYING AFTER DECEMBER 31, 2010.
‘‘(a) IN GENERAL.—Except as otherwise provided in
this section—
‘‘(1) property acquired from a decedent dying
after December 31, 2010, shall be treated for purposes
of this subtitle as transferred by gift, and
‘‘(2) the basis of the person acquiring property
from such a decedent shall be the lesser of—
‘‘(A) the adjusted basis of the decedent, or
‘‘(B) the fair market value of the property
at the date of the decedent’s death.
‘‘(b) BASIS INCREASE FOR CERTAIN PROPERTY.—
‘‘(1) IN GENERAL.—In the case of property to
which this subsection applies, the basis of such prop-
erty under subsection (a) shall be increased by its
basis increase under this subsection.
‘‘(2) BASIS
INCREASE.—For purposes of this
subsection—
‘‘(A) IN
GENERAL.—The basis increase
under this subsection for any property is the
portion of the aggregate basis increase which is
allocated to the property pursuant to this sec-
tion.
‘‘(B) AGGREGATE BASIS INCREASE.—In the
case of any estate, the aggregate basis increase
under this subsection is $1,300,000.
‘‘(C) LIMIT INCREASED BY UNUSED BUILT-
IN LOSSES AND LOSS CARRYOVERS.—The limita-
tion under subparagraph (B) shall be increased
by—
‘‘(i) the sum of the amount of any cap-
ital loss carryover under section 1212(b),
and the amount of any net operating loss
carryover under section 172, which would
(but for the decedent’s death) be carried
from the decedent’s last taxable year to a
later taxable year of the decedent, plus
‘‘(ii) the sum of the amount of any
losses that would have been allowable under
section 165 if the property acquired from
the decedent had been sold at fair market
value immediately before the decedent’s
death.
‘‘(3) DECEDENT NONRESIDENTS WHO ARE NOT
CITIZENS OF THE UNITED STATES.—In the case of a
decedent nonresident not a citizen of the United
States—
‘‘(A) paragraph (2)(B) shall be applied by
substituting ‘$60,000’ for ‘$1,300,000’, and
‘‘(B) paragraph (2)(C) shall not apply.
‘‘(c) ADDITIONAL BASIS INCREASE FOR PROPERTY AC-
QUIRED BY SURVIVING SPOUSE.—
‘‘(1) IN GENERAL.—In the case of property to
which this subsection applies and which is qualified
spousal property, the basis of such property under
subsection (a) (as increased, if any, under subsection
(b)) shall be increased by its spousal property basis
increase.
‘‘(2) SPOUSAL PROPERTY BASIS INCREASE.—For
purposes of this subsection—
‘‘(A) IN GENERAL.—The spousal property
basis increase for property referred to in para-
graph (1) is the portion of the aggregate spousal
property basis increase which is allocated to the
property pursuant to this section.
‘‘(B) 
AGGREGATE
SPOUSAL
PROPERTY
BASIS INCREASE.—In the case of any estate, the
aggregate spousal property basis increase is
$3,000,000.
‘‘(3) QUALIFIED SPOUSAL PROPERTY.—For pur-
poses of this subsection, the term ‘qualified spousal
property’ means—
‘‘(A) outright transfer property, and
‘‘(B) qualified terminable interest property.
‘‘(4) OUTRIGHT TRANSFER PROPERTY.—For pur-
poses of this subsection—
‘‘(A) IN
GENERAL.—The term ‘outright
transfer property’ means any interest in prop-
erty acquired from the decedent by the decedent’s
surviving spouse.
‘‘(B) EXCEPTION.—Subparagraph (A) shall
not apply where, on the lapse of time, on the oc-
currence of an event or contingency, or on the
failure of an event or contingency to occur, an
interest passing to the surviving spouse will ter-
minate or fail—
‘‘(i)(I) if an interest in such property
passes or has passed (for less than an ade-
quate and full consideration in money or
money’s worth) from the decedent to any
person other than such surviving spouse (or
the estate of such spouse), and
‘‘(II) if by reason of such passing such
person (or his heirs or assigns) may possess
or enjoy any part of such property after
such termination or failure of the interest so
passing to the surviving spouse, or
‘‘(ii) if such interest is to be acquired
for the surviving spouse, pursuant to direc-
tions of the decedent, by his executor or by
the trustee of a trust.
For purposes of this subparagraph, an interest
shall not be considered as an interest which will
terminate or fail merely because it is the owner-
ship of a bond, note, or similar contractual obli-
gation, the discharge of which would not have the
effect of an annuity for life or for a term.
‘‘(C) INTEREST OF SPOUSE CONDITIONAL ON
SURVIVAL FOR LIMITED PERIOD.—For purposes
of this paragraph, an interest passing to the sur-
viving spouse shall not be considered as an inter-
est which will terminate or fail on the death of
such spouse if—
‘‘(i) such death will cause a termi-
nation or failure of such interest only if it
occurs within a period not exceeding 6
months after the decedent’s death, or only if
it occurs as a result of a common disaster
resulting in the death of the decedent and
the surviving spouse, or only if it occurs in
the case of either such event; and
‘‘(ii) such termination or failure does
not in fact occur.
‘‘(5) QUALIFIED TERMINABLE INTEREST PROP-
ERTY.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘qualified ter-
minable interest property’ means property—
‘‘(i) which passes from the decedent,
and
‘‘(ii) in which the surviving spouse has
a qualifying income interest for life.
‘‘(B) QUALIFYING
INCOME
INTEREST
FOR
LIFE.—The surviving spouse has a qualifying in-
come interest for life if—
‘‘(i) the surviving spouse is entitled to
all the income from the property, payable
annually or at more frequent intervals, or
has a usufruct interest for life in the prop-
erty, and
‘‘(ii) no person has a power to appoint
any part of the property to any person
other than the surviving spouse.
Clause (ii) shall not apply to a power exercisable
only at or after the death of the surviving spouse.
To the extent provided in regulations, an annu-
ity shall be treated in a manner similar to an
income interest in property (regardless of wheth-
er the property from which the annuity is pay-
able can be separately identified).
‘‘(C) 
PROPERTY
INCLUDES
INTEREST
THEREIN.—The term ‘property’ includes an in-
terest in property.
‘‘(D) SPECIFIC PORTION TREATED AS SEPA-
RATE PROPERTY.—A specific portion of property
shall be treated as separate property. For pur-
poses of the preceding sentence, the term ‘specific
portion’ only includes a portion determined on a
fractional or percentage basis.
‘‘(d) DEFINITIONS AND SPECIAL RULES FOR APPLICA-
TION OF SUBSECTIONS (b) AND (c).—
‘‘(1) PROPERTY TO WHICH SUBSECTIONS (b) AND
(c) APPLY.—
‘‘(A) IN GENERAL.—The basis of property
acquired from a decedent may be increased
under subsection (b) or (c) only if the property
was owned by the decedent at the time of death.
‘‘(B) RULES RELATING TO OWNERSHIP.—
‘‘(i) JOINTLY HELD PROPERTY.—In the
case of property which was owned by the
decedent and another person as joint ten-
ants with right of survivorship or tenants
by the entirety—
‘‘(I) if the only such other person
is the surviving spouse, the decedent
shall be treated as the owner of only 50
percent of the property,
‘‘(II) in any case (to which sub-
clause (I) does not apply) in which the
decedent furnished consideration for
the acquisition of the property, the de-
cedent shall be treated as the owner to
the extent of the portion of the property
which is proportionate to such consid-
eration, and
‘‘(III) in any case (to which sub-
clause (I) does not apply) in which the
property has been acquired by gift, be-
quest, devise, or inheritance by the de-
cedent and any other person as joint
tenants with right of survivorship and
their interests are not otherwise speci-
fied or fixed by law, the decedent shall
be treated as the owner to the extent of
the value of a fractional part to be de-
termined by dividing the value of the
property by the number of joint ten-
ants with right of survivorship.
‘‘(ii) REVOCABLE TRUSTS.—The dece-
dent shall be treated as owning property
transferred by the decedent during life to a
revocable trust to pay all of the income dur-
ing the decedent’s life to the decedent or at
the direction of the decedent.
‘‘(iii) POWERS OF APPOINTMENT.—The
decedent shall not be treated as owning any
property by reason of holding a power of
appointment with respect to such property.
‘‘(iv) COMMUNITY
PROPERTY.—Prop-
erty which represents the surviving spouse’s
one-half share of community property held
by the decedent and the surviving spouse
under the community property laws of any
State or possession of the United States or
any foreign country shall be treated for pur-
poses of this section as owned by, and ac-
quired from, the decedent if at least one-half
of the whole of the community interest in
such property is treated as owned by, and
acquired from, the decedent without regard
to this clause.
‘‘(C) PROPERTY
ACQUIRED
BY
DECEDENT
BY GIFT WITHIN 3 YEARS OF DEATH.—
‘‘(i) IN GENERAL.—Subsections (b) and
(c) shall not apply to property acquired by
the decedent by gift or by inter vivos trans-
fer for less than adequate and full consider-
ation in money or money’s worth during
the 3-year period ending on the date of the
decedent’s death.
‘‘(ii) EXCEPTION FOR CERTAIN GIFTS
FROM SPOUSE.—Clause (i) shall not apply
to property acquired by the decedent from
the decedent’s spouse unless, during such 3-
year period, such spouse acquired the prop-
erty in whole or in part by gift or by inter
vivos transfer for less than adequate and
full consideration in money or money’s
worth.
‘‘(D) STOCK OF CERTAIN ENTITIES.—Sub-
sections (b) and (c) shall not apply to—
‘‘(i) stock or securities a foreign per-
sonal holding company,
‘‘(ii) stock of a DISC or former DISC,
‘‘(iii) stock of a foreign investment
company, or
‘‘(iv) stock of a passive foreign invest-
ment company unless such company is a
qualified electing fund (as defined in section
1295) with respect to the decedent.
‘‘(2) FAIR MARKET VALUE LIMITATION.—The ad-
justments under subsection (b) and (c) shall not in-
crease the basis of any interest in property acquired
from the decedent above its fair market value in the
hands of the decedent as of the date of the decedent’s
death.
‘‘(3) ALLOCATION RULES.—
‘‘(A) IN GENERAL.—The executor shall allo-
cate the adjustments under subsections (b) and
(c) on the return required by section 6018.
‘‘(B) CHANGES IN ALLOCATION.—Any allo-
cation made pursuant to subparagraph (A) may
be changed only as provided by the Secretary.
‘‘(4) INFLATION ADJUSTMENT OF BASIS ADJUST-
MENT AMOUNTS.—
‘‘(A) IN GENERAL.—In the case of decedents
dying in a calendar year after 2011, the
$1,300,000, $60,000, and $3,000,000 dollar
amounts in subsections (b) and (c)(2)(B) shall
each be increased by an amount equal to the
product of—
‘‘(i) such dollar amount, and
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such cal-
endar year, determined by substituting
‘2010’ for ‘1992’ in subparagraph (B) there-
of.
‘‘(B) ROUNDING.—If any increase deter-
mined under subparagraph (A) is not a multiple
of—
‘‘(i) $100,000 in the case of the
$1,300,000 amount,
‘‘(ii) $5,000 in the case of the $60,000
amount, and
‘‘(iii) $250,000 in the case of the
$3,000,000 amount,
such increase shall be rounded to the next lowest
multiple thereof.
‘‘(e) PROPERTY ACQUIRED FROM THE DECEDENT.—
For purposes of this section, the following property shall
be considered to have been acquired from the decedent:
‘‘(1) Property acquired by bequest, devise, or in-
heritance, or by the decedent’s estate from the dece-
dent.
‘‘(2) Property transferred by the decedent during
his lifetime in trust to pay the income for life to or
on the order or direction of the decedent, with the
right reserved to the decedent at all times before his
death—
‘‘(A) to revoke the trust, or
‘‘(B) to make any change in the enjoyment
thereof through the exercise of a power to alter,
amend, or terminate the trust.
‘‘(3) Any other property passing from the dece-
dent by reason of death to the extent that such prop-
erty passed without consideration.
‘‘(f) COORDINATION WITH SECTION 691.—This section
shall not apply to property which constitutes a right to re-
ceive an item of income in respect of a decedent under sec-
tion 691.
‘‘(g) CERTAIN LIABILITIES DISREGARDED.—In deter-
mining whether gain is recognized on the acquisition of
property—
‘‘(1) from a decedent by a decedent’s estate or
any beneficiary, and
‘‘(2) from the decedent’s estate by any bene-
ficiary,
and in determining the adjusted basis of such property, li-
abilities in excess of basis shall be disregarded.
‘‘(h) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pur-
poses of this section.’’.
(b) INFORMATION RETURNS, ETC.—
(1) IN GENERAL.—Subpart C of part II of sub-
chapter A of chapter 61 is amended to read as follows:
‘‘Subpart C—Returns Relating to Transfers During
Life or at Death
‘‘Sec. 6018. Returns relating to large transfers at death.
‘‘Sec. 6019. Returns relating to large lifetime gifts.
‘‘SEC. 6018. RETURNS RELATING TO LARGE TRANSFERS AT
DEATH.
‘‘(a) IN GENERAL.—If this section applies to property
acquired from a decedent, the executor of the estate of such
decedent shall make a return containing the information
specified in subsection (c) with respect to such property.
‘‘(b) PROPERTY TO WHICH SECTION APPLIES.—
‘‘(1) LARGE
TRANSFERS.—This section shall
apply to all property (other than cash) acquired from
a decedent if the fair market value of such property
acquired from the decedent exceeds the dollar amount
applicable under section 1022(b)(2)(B) (without re-
gard to section 1022(b)(2)(C)).
‘‘(2) TRANSFERS OF CERTAIN GIFTS RECEIVED
BY DECEDENT WITHIN 3 YEARS OF DEATH.—This sec-
tion shall apply to any appreciated property acquired
from the decedent if—
‘‘(A) subsections (b) and (c) of section 1022
do not apply to such property by reason of sec-
tion 1022(d)(1)(C), and
‘‘(B) such property was required to be in-
cluded on a return required to be filed under sec-
tion 6019.
‘‘(3) NONRESIDENTS
NOT
CITIZENS
OF
THE
UNITED STATES.—In the case of a decedent who is a
nonresident not a citizen of the United States, para-
graphs (1) and (2) shall be applied—
‘‘(A) by taking into account only—
‘‘(i) tangible property situated in the
United States, and
‘‘(ii) other property acquired from the
decedent by a United States person, and
‘‘(B) by substituting the dollar amount ap-
plicable under section 1022(b)(3) for the dollar
amount referred to in paragraph (1).
‘‘(4) 
RETURNS
BY
TRUSTEES
OR
BENE-
FICIARIES.—If the executor is unable to make a com-
plete return as to any property acquired from or
passing from the decedent, the executor shall include
in the return a description of such property and the
name of every person holding a legal or beneficial in-
terest therein. Upon notice from the Secretary such
person shall in like manner make a return as to such
property.
‘‘(c) INFORMATION REQUIRED TO BE FURNISHED.—
The information specified in this subsection with respect
to any property acquired from the decedent is—
‘‘(1) the name and TIN of the recipient of such
property,
‘‘(2) an accurate description of such property,
‘‘(3) the adjusted basis of such property in the
hands of the decedent and its fair market value at the
time of death,
‘‘(4) the decedent’s holding period for such prop-
erty,
‘‘(5) sufficient information to determine whether
any gain on the sale of the property would be treated
as ordinary income,
‘‘(6) the amount of basis increase allocated to the
property under subsection (b) or (c) of section 1022,
and
‘‘(7) such other information as the Secretary
may by regulations prescribe.
‘‘(d) PROPERTY ACQUIRED FROM DECEDENT.—For
purposes of this section, section 1022 shall apply for pur-
poses of determining the property acquired from a decedent.
‘‘(e) STATEMENTS TO BE FURNISHED TO CERTAIN
PERSONS.—Every person required to make a return under
subsection (a) shall furnish to each person whose name is
required to be set forth in such return (other than the person
required to make such return) a written statement
showing—
‘‘(1) the name, address, and phone number of the
person required to make such return, and
‘‘(2) the information specified in subsection (c)
with respect to property acquired from, or passing
from, the decedent to the person required to receive
such statement.
The written statement required under the preceding sen-
tence shall be furnished not later than 30 days after the
date that the return required by subsection (a) is filed.
‘‘SEC. 6019. RETURNS RELATING TO LARGE LIFETIME GIFTS.
‘‘(a) IN GENERAL.—If the value of the aggregate gifts
of property made by an individual to any United States
person during a calendar year exceeds $25,000, such indi-
vidual shall make a return for such year setting forth—
‘‘(1) the name and TIN of the donee,
‘‘(2) an accurate description of such property,
‘‘(3) the adjusted basis of such property in the
hands of the donor at the time of the gift,
‘‘(4) the donor’s holding period for such prop-
erty,
‘‘(5) sufficient information to determine whether
any gain on the sale of the property would be treated
as ordinary income, and
‘‘(6) such other information as the Secretary
may by regulations prescribe.
‘‘(b) EXCEPTIONS.—Subsection (a) shall not apply
to—
‘‘(1) CASH.—Any gift of cash.
‘‘(2) GIFTS TO CHARITY.—Any gift to an organi-
zation described in section 501(c) and exempt from
tax under section 501(a) but only if no interest in the
property is held for the benefit of any person other
than such an organization.
‘‘(3) WAIVER OF CERTAIN PENSION RIGHTS indi-
vidual waives, before the death of a participant, any
survivor benefit, or right to such benefit, under section
401(a)(11) or 417, subsection (a) shall not apply to
such waiver.
‘‘(4) REPORTING
ELSEWHERE.—Any gift re-
quired to be reported to the Secretary under any other
provision of this title.
‘‘(c) STATEMENTS TO BE FURNISHED TO CERTAIN
PERSONS.—Every person required to make a return under
subsection (a) shall furnish to each person whose name is
required to be set forth in such return a written statement
showing—
‘‘(1) the name, address, and phone number of the
person required to make such return, and
‘‘(2) the information specified in subsection (a)
with respect to property received by the person re-
quired to receive such statement.
The written statement required under the preceding sen-
tence shall be furnished on or before January 31 of the year
following the calendar year for which the return under sub-
section (a) was required to be made.’’
(2) TIME FOR FILING SECTION 6018 RETURNS.—
(A) RETURNS RELATING TO LARGE TRANS-
FERS AT DEATH.—Subsection (a) of section 6075
is amended to read as follows:
‘‘(a) RETURNS RELATING TO LARGE TRANSFERS AT
DEATH.—The return required by section 6018 with respect
to a decedent shall be filed with the return of the tax im-
posed by chapter 1 for the decedent’s last taxable year or
such later date specified in regulations prescribed by the
Secretary.’’
(B) RETURNS RELATING TO LARGE LIFE-
TIME GIFTS.—
(i) The heading for section 6075(b) is
amended to read as follows:
‘‘(b) RETURNS
RELATING
TO
LARGE
LIFETIME
GIFTS.—’’.
(ii) Paragraph (1) of section 6075(b) is
amended by striking ‘‘(relating to gift
taxes)’’ and inserting ‘‘(relating to returns
relating to large lifetime gifts)’’.
(iii) Paragraph (3) of section 6075(b)
is amended—
(I) by striking ‘‘ESTATE TAX RE-
TURN’’ and inserting ‘‘SECTION
6018
RETURN’’, and
(II) by striking ‘‘(relating to es-
tate tax returns)’’ and inserting ‘‘(re-
lating to returns relating to large
transfers at death)’’.
(3) PENALTIES.—Part I of subchapter B of
chapter 68 (relating to assessable penalties) is amend-
ed by adding at the end the following new section:
‘‘SEC. 6716. FAILURE TO FILE INFORMATION WITH RESPECT
TO CERTAIN TRANSFERS AT DEATH AND
GIFTS.
‘‘(a) INFORMATION REQUIRED TO BE FURNISHED TO
THE SECRETARY.—Any person required to furnish any in-
formation under section 6018 or 6019 who fails to furnish
such information on the date prescribed therefor (deter-
mined with regard to any extension of time for filing) shall
pay a penalty of $10,000 ($500 in the case of information
required to be furnished under section 6018(b)(2) or 6019)
for each such failure.
‘‘(b) INFORMATION REQUIRED TO BE FURNISHED TO
BENEFICIARIES.—Any person required to furnish in writ-
ing to each person described in section 6018(e) or 6019(c)
the information required under such section who fails to
furnish such information shall pay a penalty of $50 for
each such failure.
‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty
shall be imposed under subsection (a) or (b) with respect
to any failure if it is shown that such failure is due to
reasonable cause.
‘‘(d) INTENTIONAL DISREGARD.—If any failure under
subsection (a) or (b) is due to intentional disregard of the
requirements under sections 6018 and 6019, the penalty
under such subsection shall be 5 percent of the fair market
value (as of the date of death or, in the case of section 6019,
the date of the gift) of the property with respect to which
the information is required.
‘‘(e) DEFICIENCY PROCEDURES NOT TO APPLY.—Sub-
chapter B of chapter 63 (relating to deficiency procedures
for income, estate, gift, and certain excise taxes) shall not
apply in respect of the assessment or collection of any pen-
alty imposed by this section.’’
(4) CLERICAL AMENDMENTS.—
(A) The table of sections for part I of sub-
chapter B of chapter 68 is amended by adding
at the end the following new item:
‘‘Sec. 6716. Failure to file information with respect to certain
transfers at death and gifts.’’
(B) The item relating to subpart C in the
table of subparts for part II of subchapter A of
chapter 61 is amended to read as follows:
‘‘Subpart C. Returns relating to transfers during life or at death.’’
(c) EXCLUSION OF GAIN ON SALE OF PRINCIPAL RESI-
DENCE MADE AVAILABLE TO HEIR OF DECEDENT IN CER-
TAIN CASES.—Subsection (d) of section 121 (relating to ex-
clusion of gain from sale of principal residence) is amended
by adding at the end the following new paragraph:
‘‘(9) PROPERTY ACQUIRED FROM A DECEDENT.—
The exclusion under this section shall apply to prop-
erty sold by—
‘‘(A) the estate of a decedent, and
‘‘(B) any individual who acquired such
property from the decedent (within the meaning
of section 1022),
determined by taking into account the ownership and
use by the decedent.’’
(d) TRANSFERS OF APPRECIATED CARRYOVER BASIS
PROPERTY TO SATISFY PECUNIARY BEQUEST.—
(1) IN
GENERAL.—Section 1040 (relating to
transfer of certain farm, etc., real property) is
amended to read as follows:
‘‘SEC. 1040. USE OF APPRECIATED CARRYOVER BASIS PROP-
ERTY TO SATISFY PECUNIARY BEQUEST.
‘‘(a) IN GENERAL.—If the executor of the estate of any
decedent satisfies the right of any person to receive a pecu-
niary bequest with appreciated property, then gain on such
exchange shall be recognized to the estate only to the extent
that, on the date of such exchange, the fair market value
of such property exceeds such value on the date of death.
‘‘(b) SIMILAR RULE FOR CERTAIN TRUSTS.—To the
extent provided in regulations prescribed by the Secretary,
a rule similar to the rule provided in subsection (a) shall
apply where—
‘‘(1) by reason of the death of the decedent, a
person has a right to receive from a trust a specific
dollar amount which is the equivalent of a pecuniary
bequest, and
‘‘(2) the trustee of a trust satisfies such right
with property.
‘‘(c) BASIS OF PROPERTY ACQUIRED IN EXCHANGE
DESCRIBED IN SUBSECTION (a) OR (b).—The basis of prop-
erty acquired in an exchange with respect to which gain
realized is not recognized by reason of subsection (a) or (b)
shall be the basis of such property immediately before the
exchange increased by the amount of the gain recognized
to the estate or trust on the exchange.’’
(2) The item relating to section 1040 in the table
of sections for part III of subchapter O of chapter 1
is amended to read as follows:
‘‘Sec. 1040. Use of appreciated carryover basis property to satisfy
pecuniary bequest.’’
(e) ANTI-ABUSE RULES.—Section 7701 is amended by
redesignating subsection (n) as subsection (o) and by insert-
ing after subsection (m) the following new subsection:
‘‘(n) PURPORTED GIFTS MAY BE DISREGARDED.—For
purposes of subtitle A, the Secretary may treat a transfer
which purports to be a gift as having never been transferred
if, in connection with such transfer—
‘‘(1)(A) the transferor (or any person related to
or designated by the transferor or such person) has re-
ceived anything of value in connection with such
transfer from the transferee directly or indirectly, or
‘‘(B) there is an understanding or expectation
that the transferor (or such person) will receive any-
thing of value in connection with such transfer from
the transferee directly or indirectly, and
‘‘(2) the Secretary determines that such treat-
ment is appropriate to prevent avoidance of tax im-
posed by subtitle A.’’
(f) MISCELLANEOUS AMENDMENTS RELATED TO CAR-
RYOVER BASIS.—
(1) RECOGNITION OF GAIN ON TRANSFERS TO
NONRESIDENTS.—
(A) Subsection (a) of section 684 is amend-
ed by inserting ‘‘or to a nonresident not a citizen
of the United States’’ after ‘‘or trust’’.
‘‘(B) Subsection (b) of section 684 is
amended by striking ‘‘any person’’ and inserting
‘‘any United States person’’.
(C) The section heading for section 684 is
amended by inserting ‘‘AND
NONRESIDENT
ALIENS’’ after ‘‘ESTATES’’.
(D) The item relating to section 684 in the
table of sections for subpart F of part I of sub-
chapter J of chapter 1 is amended by inserting
‘‘and nonresident aliens’’ after ‘‘estates’’.
(2) 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 cer-
tain contributions of ordinary income and cap-
ital gain property) is amended by adding at the
end the following: ‘‘For purposes of this para-
graph, 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.’’.
(3) 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.’’.
(4) CERTAIN TRUSTS.—Subparagraph (A) of sec-
tion 4947(a)(2) is amended by inserting ‘‘642(c),’’
after ‘‘170(f)(2)(B),’’.
(5) OTHER AMENDMENTS.—
(A) Section 1246 is amended by striking
subsection (e).
(B) Subsection (e) of section 1291 is
amended—
(i) by striking ‘‘(e),’’, and
(ii) by striking ‘‘; except that’’ and all
that follows and inserting a period.
(C) Section 1296 is amended by striking
subsection (i).
(6) CLERICAL AMENDMENT.—The table of sec-
tions for part II of subchapter O of chapter 1 is
amended by inserting after the item relating to sec-
tion 1021 the following new item:
‘‘Sec. 1022. Treatment of property acquired from a decedent dying
after December 31, 2010.’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to estates of decedents dying after December 31,
2010.
(2) PURPORTED GIFTS, ETC.—The amendments
made by subsections (e) and (f)(1) shall apply to
transfers after December 31, 2010.
(3) SECTION
4947.—The amendment made by
subsection (f)(4) shall apply to deductions for taxable
years beginning after December 31, 2010.
(h) STUDY.—The Secretary of the Treasury or the Sec-
retary’s delegate shall conduct a study of—
(1) opportunities for avoidance of the income
tax, if any, and
(2) potential increases in income tax revenues,
by reason of the enactment of this Act. The study shall be
submitted to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance
of the Senate not later than December 31, 2002.
TITLE V—CONSERVATION
EASEMENTS
SEC. 501. EXPANSION OF ESTATE TAX RULE FOR CON-
SERVATION EASEMENTS.
(a) WHERE LAND IS LOCATED.—Clause (i) of section
2031(c)(8)(A) (defining land subject to a conservation ease-
ment) is amended—
(1) by striking ‘‘25 miles’’ each place it appears
and inserting ‘‘50 miles’’; and
(2) striking ‘‘10 miles’’ and inserting ‘‘25 miles’’.
(b) CLARIFICATION
OF
DATE
FOR
DETERMINING
VALUE OF LAND AND EASEMENT.—Section 2031(c)(2) (de-
fining applicable percentage) is amended by adding at the
end the following new sentence: ‘‘The values taken into ac-
count under the preceding sentence shall be such values as
of the date of the contribution referred to in paragraph
(8)(B).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to estates of decedents dying after De-
cember 31, 2000.
TITLE 
VI—MODIFICATIONS 
OF
GENERATION-SKIPPING
TRANSFER TAX
SEC. 601. DEEMED ALLOCATION OF GST EXEMPTION TO
LIFETIME TRANSFERS TO TRUSTS; RETRO-
ACTIVE ALLOCATIONS.
(a) IN GENERAL.—Section 2632 (relating to special
rules for allocation of GST exemption) is amended by redes-
ignating subsection (c) as subsection (e) and by inserting
after subsection (b) the following new subsections:
‘‘(c) DEEMED ALLOCATION
TO CERTAIN LIFETIME
TRANSFERS TO GST TRUSTS.—
‘‘(1) IN GENERAL.—If any individual makes an
indirect skip during such individual’s lifetime, any
unused portion of such individual’s GST exemption
shall be allocated to the property transferred to the ex-
tent necessary to make the inclusion ratio for such
property zero. If the amount of the indirect skip ex-
ceeds such unused portion, the entire unused portion
shall be allocated to the property transferred.
‘‘(2) UNUSED PORTION.—For purposes of para-
graph (1), the unused portion of an individual’s GST
exemption is that portion of such exemption which
has not previously been—
‘‘(A) allocated by such individual,
‘‘(B) treated as allocated under subsection
(b) with respect to a direct skip occurring during
or before the calendar year in which the indirect
skip is made, or
‘‘(C) treated as allocated under paragraph
(1) with respect to a prior indirect skip.
‘‘(3) DEFINITIONS.—
‘‘(A) INDIRECT SKIP.—For purposes of this
subsection, the term ‘indirect skip’ means any
transfer of property (other than a direct skip)
subject to the tax imposed by chapter 12 made
to a GST trust.
‘‘(B) GST TRUST.—The term ‘GST trust’
means a trust that could have a generation-skip-
ping transfer with respect to the transferor
unless—
‘‘(i) the trust instrument provides that
more than 25 percent of the trust corpus
must be distributed to or may be withdrawn
by one or more individuals who are non-
skip persons—
‘‘(I) before the date that the indi-
vidual attains age 46,
‘‘(II) on or before one or more
dates specified in the trust instrument
that will occur before the date that
such individual attains age 46, or
‘‘(III) upon the occurrence of an
event that, in accordance with regula-
tions prescribed by the Secretary, may
reasonably be expected to occur before
the date that such individual attains
age 46;
‘‘(ii) the trust instrument provides that
more than 25 percent of the trust corpus
must be distributed to or may be withdrawn
by one or more individuals who are non-
skip persons and who are living on the date
of death of another person identified in the
instrument (by name or by class) who is
more than 10 years older than such individ-
uals;
‘‘(iii) the trust instrument provides
that, if one or more individuals who are
non-skip persons die on or before a date or
event described in clause (i) or (ii), more
than 25 percent of the trust corpus either
must be distributed to the estate or estates
of one or more of such individuals or is sub-
ject to a general power of appointment exer-
cisable by one or more of such individuals;
‘‘(iv) the trust is a trust any portion
of which would be included in the gross es-
tate of a non-skip person (other than the
transferor) if such person died immediately
after the transfer;
‘‘(v) the trust is a charitable lead an-
nuity trust (within the meaning of section
2642(e)(3)(A)) or a charitable remainder
annuity trust or a charitable remainder
unitrust (within the meaning of section
664(d)); or
‘‘(vi) the trust is a trust with respect
to which a deduction was allowed under sec-
tion 2522 for the amount of an interest in
the form of the right to receive annual pay-
ments of a fixed percentage of the net fair
market value of the trust property (deter-
mined yearly) and which is required to pay
principal to a non-skip person if such per-
son is alive when the yearly payments for
which the deduction was allowed terminate.
For purposes of this subparagraph, the value of
transferred property shall not be considered to be
includible in the gross estate of a non-skip per-
son or subject to a right of withdrawal by reason
of such person holding a right to withdraw so
much of such property as does not exceed the
amount referred to in section 2503(b) with re-
spect to any transferor, and it shall be assumed
that powers of appointment held by non-skip
persons will not be exercised.
‘‘(4) AUTOMATIC ALLOCATIONS TO CERTAIN GST
TRUSTS.—For purposes of this subsection, an indirect
skip to which section 2642(f) applies shall be deemed
to have been made only at the close of the estate tax
inclusion period. The fair market value of such trans-
fer shall be the fair market value of the trust property
at the close of the estate tax inclusion period.
‘‘(5) APPLICABILITY AND EFFECT.—
‘‘(A) IN GENERAL.—An individual—
‘‘(i) may elect to have this subsection
not apply to—
‘‘(I) an indirect skip, or