(A) Sections 2011, 2057, and 2604 of the 
Internal Revenue Code of 1986 are hereby re-
pealed. 
(B) The table of sections for part II of 
subchapter A of chapter 11 of such Code is 
amended by striking the item relating to section 
2011. 
(C) The table of sections for part IV of 
subchapter A of chapter 11 of such Code is 
amended by striking the item relating to section 
2057. 
(D) The table of sections for subchapter A 
of chapter 13 of such Code is amended by strik-
ing the item relating to section 2604. 
SEC. 3. UNIFIED CREDIT INCREASED BY UNUSED UNIFIED 
CREDIT OF DECEASED SPOUSE. 
(a) IN GENERAL.—Subsection (c) of section 2010 of 
the Internal Revenue Code of 1986 (defining applicable 
credit amount), as amended by section 2(b), is amended 
by striking paragraph (2) and inserting the following new 
paragraphs: 
‘‘(2) APPLICABLE
EXCLUSION
AMOUNT.—For 
purposes of this subsection, the applicable exclusion 
amount is the sum of—
‘‘(A) the basic exclusion amount, and
‘‘(B) in the case of a surviving spouse, the 
aggregate deceased spousal unused exclusion 
amount. 
‘‘(3) BASIC EXCLUSION AMOUNT.—
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the basic exclusion amount is 
$5,000,000. 
‘‘(B) INFLATION
ADJUSTMENT.—In the 
case of any decedent dying in a calendar year 
after 2010, the dollar amount in subparagraph 
(A) shall be increased by an amount equal to—
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for such 
calendar year by substituting ‘calendar 
year 2009’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof. 
If any amount as adjusted under the preceding 
sentence is not a multiple of $100,000, such 
amount shall be rounded to the nearest multiple 
of $100,000. 
‘‘(4) AGGREGATE DECEASED SPOUSAL UNUSED 
EXCLUSION
AMOUNT.—For purposes of this sub-
section, the term ‘aggregate deceased spousal unused 
exclusion amount’ means the lesser of—
‘‘(A) the basic exclusion amount, or 
‘‘(B) the sum of the deceased spousal un-
used exclusion amounts of the surviving spouse. 
‘‘(5) DECEASED SPOUSAL UNUSED EXCLUSION 
AMOUNT.—For purposes of this subsection, the term 
‘deceased spousal unused exclusion amount’ means, 
with respect to the surviving spouse of any deceased 
spouse dying after December 31, 2009, the excess (if 
any) of—
‘‘(A) the applicable exclusion amount of 
the deceased spouse, over 
‘‘(B) the amount with respect to which the 
tentative tax is determined under section 
2001(b)(1) on the estate of such deceased 
spouse. 
‘‘(6) SPECIAL RULES.—
‘‘(A) ELECTION
REQUIRED.—A deceased 
spousal unused exclusion amount may not be 
taken into account by a surviving spouse under 
paragraph (5) unless the executor of the estate 
of the deceased spouse files an estate tax return 
on which such amount is computed and makes 
an election on such return that such amount 
may be so taken into account. Such election, 
once made, shall be irrevocable. No election
may be made under this subparagraph if such 
return is filed after the time prescribed by law 
(including extensions) for filing such return. 
‘‘(B) EXAMINATION
OF
PRIOR
RETURNS 
AFTER EXPIRATION OF PERIOD OF LIMITATIONS 
WITH
RESPECT
TO
DECEASED
SPOUSAL
UN-
USED
EXCLUSION
AMOUNT.—Notwithstanding 
any period of limitation in section 6501, after 
the time has expired under section 6501 within 
which a tax may be assessed under chapter 11 
or 12 with respect to a deceased spousal unused 
exclusion amount, the Secretary may examine a 
return of the deceased spouse to make deter-
minations with respect to such amount for pur-
poses of carrying out this subsection. 
‘‘(7) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or ap-
propriate to carry out this subsection.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 2505(a) of such 
Code, as amended by section 2, is amended to read 
as follows: 
‘‘(1) the applicable credit amount under section 
2010(c) which would apply if the donor died as of 
the end of the calendar year, reduced by’’.
(2) Section 2631(c) of such Code is amended by 
striking ‘‘the applicable exclusion amount’’ and in-
serting ‘‘the basic exclusion amount’’. 
(3) Section 6018(a)(1) of such Code, after the 
application of section 2(g), is amended by striking 
‘‘applicable exclusion amount’’ and inserting ‘‘basic 
exclusion amount’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to estates of decedents dying, gen-
eration-skipping transfers, and gifts made, after Decem-
ber 31, 2009. 
SEC. 4. DEDUCTION FOR QUALIFIED TIMBER GAIN. 
(a) IN GENERAL.—Part I of subchapter P of chapter 
1 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new section: 
‘‘SEC. 1203. DEDUCTION FOR QUALIFIED TIMBER GAIN. 
‘‘(a) IN GENERAL.—In the case of a taxpayer which 
elects the application of this section for a taxable year, 
there shall be allowed a deduction against gross income 
equal to 60 percent of the lesser of—
‘‘(1) the taxpayer’s qualified timber gain for 
such year, or 
‘‘(2) the taxpayer’s net capital gain for such 
year.
‘‘(b) QUALIFIED TIMBER GAIN.—For purposes of 
this section, the term ‘qualified timber gain’ means, with 
respect to any taxpayer for any taxable year, the excess 
(if any) of—
‘‘(1) the sum of the taxpayer’s gains described 
in subsections (a) and (b) of section 631 for such 
year, over 
‘‘(2) the sum of the taxpayer’s losses described 
in such subsections for such year. 
‘‘(c) SPECIAL RULES FOR PASS-THRU ENTITIES.—
In the case of any qualified timber gain of a pass-thru 
entity (as defined in section 1(h)(10))—
‘‘(1) the election under this section shall be 
made separately by each taxpayer subject to tax on 
such gain, and 
‘‘(2) the Secretary may prescribe such regula-
tions as are appropriate to apply this section to such 
gain. 
‘‘(d) TERMINATION.—No disposition of timber after 
December 31, 2008, shall be taken into account under 
subsection (b).’’. 
(b) COORDINATION WITH MAXIMUM CAPITAL GAINS 
RATES.—
(1) 
TAXPAYERS
OTHER
THAN
CORPORA-
TIONS.—Paragraph (2) of section 1(h) of such Code 
is amended to read as follows: 
‘‘(2) REDUCTION OF NET CAPITAL GAIN.—For 
purposes of this subsection, the net capital gain for 
any taxable year shall be reduced (but not below 
zero) by the sum of—
‘‘(A) the amount which the taxpayer takes 
into account as investment income under sec-
tion 163(d)(4)(B)(iii), and 
‘‘(B) in the case of a taxable year with re-
spect to which an election is in effect under sec-
tion 1203, the lesser of—
‘‘(i) the amount described in para-
graph (1) of section 1203(a), or 
‘‘(ii) the amount described in para-
graph (2) of such section.’’. 
(2) CORPORATIONS.—Section 1201 of such 
Code is amended by redesignating subsection (b) as 
subsection (c) and inserting after subsection (a) the 
following new subsection: 
‘‘(b) QUALIFIED TIMBER GAIN NOT TAKEN INTO AC-
COUNT.—For purposes of this section, in the case of a 
corporation with respect to which an election is in effect 
under section 1203, the net capital gain for any taxable
year shall be reduced (but not below zero) by the corpora-
tion’s qualified timber gain (as defined in section 
1203(b)).’’. 
(c) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 
of section 62 of such Code is amended by inserting before 
the last sentence the following new paragraph: 
‘‘(21) QUALIFIED TIMBER GAINS.—The deduc-
tion allowed by section 1203.’’. 
(d) DEDUCTION
ALLOWED
IN
COMPUTING
AD-
JUSTED CURRENT EARNINGS.—Subparagraph (C) of sec-
tion 56(g)(4) of such Code is amended by adding at the 
end the following new clause: 
‘‘(vii) DEDUCTION
FOR
QUALIFIED 
TIMBER GAIN.—Clause (i) shall not apply 
to any deduction allowed under section 
1203.’’. 
(e) DEDUCTION ALLOWED IN COMPUTING TAXABLE 
INCOME OF ELECTING SMALL BUSINESS TRUSTS.—Sub-
paragraph (C) of section 641(c)(2) of such Code is amend-
ed by inserting after clause (iii) the following new clause: 
‘‘(iv) The deduction allowed under 
section 1203.’’. 
(f) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 172(d)(2) of 
such Code is amended to read as follows: 
‘‘(B) the exclusion under section 1202 and 
the deduction under section 1203 shall not be 
allowed.’’. 
(2) Paragraph (4) of section 642(c) of such 
Code is amended by striking the first sentence and 
inserting the following: ‘‘To the extent that the 
amount otherwise allowable as a deduction under 
this subsection consists of gain described in section 
1202(a) or qualified timber gain (as defined in sec-
tion 1203(b)), proper adjustment shall be made for 
any exclusion allowable to the estate or trust under 
section 1202 and for any deduction allowable to the 
estate or trust under section 1203.’’. 
(3) Paragraph (3) of section 643(a) of such 
Code is amended by striking the last sentence and 
inserting the following: ‘‘The exclusion under section 
1202 and the deduction under section 1203 shall not 
be taken into account.’’. 
(4) Subparagraph (C) of section 643(a)(6) of 
such Code is amended to read as follows: 
‘‘(C) Paragraph (3) shall not apply to a 
foreign trust. In the case of such a trust—
‘‘(i) there shall be included gains from 
the sale or exchange of capital assets, re-
duced by losses from such sales or ex-
changes to the extent such losses do not 
exceed gains from such sales or exchanges, 
and 
‘‘(ii) the deduction under section 1203 
shall not be taken into account.’’. 
(5) Paragraph (4) of section 691(c) of such 
Code is amended by inserting ‘‘1203,’’ after 
‘‘1202,’’. 
(6) Paragraph (2) of section 871(a) of such 
Code is amended by striking ‘‘section 1202’’ and in-
serting ‘‘sections 1202 and 1203’’. 
(7) The table of sections for part I of sub-
chapter P of chapter 1 of such Code is amended by 
adding at the end the following new item:
‘‘Sec. 1203. Deduction for qualified timber gain.’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years ending after 
the date of the enactment of this Act. 
(2) TAXABLE YEARS WHICH INCLUDE DATE OF 
ENACTMENT.—In the case of any taxable year which 
includes the date of the enactment of this Act, for 
purposes of the Internal Revenue Code of 1986, the
taxpayer’s qualified timber gain shall not exceed the 
excess that would be described in section 1203(b) of 
such Code, as added by this section, if only disposi-
tions of timber after such date were taken into ac-
count. 
Passed the House of Representatives June 22, 2006. 
Attest:
Clerk.
109TH CONGRESS 
2D SESSION 
H. R. 5638
AN ACT 
To amend the Internal Revenue Code of 1986 to 
increase the unified credit against the estate tax 
to an exclusion equivalent of $5,000,000 and to 
repeal the sunset provision for the estate and 
generation-skipping taxes, and for other pur-
poses.