H. R. 8
One Hundred Sixth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Monday,
the twenty-fourth day of January, two thousand
An Act
To amend the Internal Revenue Code of 1986 to phaseout the estate and gift
taxes over a 10-year period.
Be it enacted by the Senate and House of Representatives 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 2000’’.
(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.
TITLE I—REPEAL OF ESTATE, GIFT, AND
GENERATION-SKIPPING 
TAXES; 
RE-
PEAL OF STEP UP IN BASIS AT DEATH
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(a) IN GENERAL.—Subtitle B is hereby repealed.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, 2009.
SEC. 102. TERMINATION OF STEP UP IN BASIS AT DEATH.
(a) TERMINATION OF APPLICATION OF SECTION 1014.—Section
1014 (relating to basis of property acquired from a decedent) is
amended by adding at the end the following:
‘‘(f ) TERMINATION.—In the case of a decedent dying after
December 31, 2009, this section shall not apply to property for
which basis is provided by section 1022.’’.
(b) CONFORMING AMENDMENT.—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 1022 (relating to
basis for certain property acquired from a decedent dying after
December 31, 2009).’’.
H. R. 8—2
SEC. 103. CARRYOVER BASIS AT DEATH.
(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 DYING AFTER DECEMBER 31, 2009.
‘‘(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 December 31, 2009, 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 subpara-
graph (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,
‘‘(B) property of the decedent to the extent that the
aggregate adjusted fair market value of such property does
not exceed $1,300,000, and
‘‘(C) property which was acquired from the decedent
by the surviving spouse of the decedent (and which would
be carryover basis property without regard to this subpara-
graph) but only if the value of such property would have
been deductible from the value of the taxable estate of
the decedent under section 2056, as in effect on the day
before the date of the enactment of the Death Tax Elimi-
nation Act of 2000.
For purposes of this subsection, the term ‘adjusted fair market
value’ means, with respect to any property, fair market value
reduced by any indebtedness secured by such property.
‘‘(3) LIMITATION
ON
EXCEPTION
FOR
PROPERTY
ACQUIRED
BY SURVIVING SPOUSE.—The adjusted fair market value of prop-
erty which is not carryover basis property by reason of para-
graph (2)(C) shall not exceed $3,000,000.
‘‘(4) ALLOCATION
OF
EXCEPTED
AMOUNTS.—The executor
shall allocate the limitations under paragraphs (2)(B) and (3).
‘‘(5) INFLATION
ADJUSTMENT
OF
EXCEPTED
AMOUNTS.—In
the case of decedents dying in a calendar year after 2010,
the dollar amounts in paragraphs (2)(B) and (3) shall each
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 sub-
stituting ‘2009’ 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.
‘‘(c) REGULATIONS.—The Secretary shall prescribe such regula-
tions as may be necessary to carry out the purposes of this section.’’.
H. R. 8—3
(b) 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 deter-
mined’’.
(B) COORDINATION WITH SECTION 170.—Paragraph (1)
of section 170(e) (relating to certain contributions of ordi-
nary 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 posses-
sion 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
dying after December 31, 2009.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to estates of decedents dying after December 31, 2009.
TITLE II—REDUCTIONS OF ESTATE 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 PERCENT.—
(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 para-
graph:
‘‘(3) PHASE-IN OF REDUCED RATE.—In the case of decedents
dying, and gifts made, during 2001, 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 paragraph (2) and redesig-
nating paragraph (3), as added by subsection (a), as paragraph
(2).
H. R. 8—4
(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 calendar year
after 2002 and before 2010—
‘‘(A) IN GENERAL.—Except as provided in subparagraph
(C), the tentative tax under this subsection shall be deter-
mined 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 reduced 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 adjust-
ments under clause (i).
‘‘(B) PERCENTAGE POINTS OF REDUCTION.—
The number of
‘‘For calendar year:
percentage points is:
2003 .............................................................................................
1.0
2004 .............................................................................................
2.0
2005 .............................................................................................
3.0
2006 .............................................................................................
4.0
2007 .............................................................................................
5.5
2008 .............................................................................................
7.5
2009 .............................................................................................
9.5.
‘‘(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 section 1(c), and
‘‘(ii) shall not reduce the highest rate under para-
graph (1) below the highest rate in section 1(c).
‘‘(D) COORDINATION
WITH
CREDIT
FOR
STATE
DEATH
TAXES.—Rules similar to the rules of subparagraph (A)
shall apply to the table contained in section 2011(b) except
that the Secretary shall prescribe percentage point reduc-
tions 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 amendments made by
subsections (a) and (b) shall apply to estates of decedents dying,
and gifts made, after December 31, 2000.
(2) SUBSECTION (c).—The amendment made by subsection
(c) shall apply to estates of decedents dying, and gifts made,
after December 31, 2002.
TITLE III—UNIFIED CREDIT REPLACED
WITH UNIFIED EXEMPTION AMOUNT
SEC. 301. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES
REPLACED WITH UNIFIED EXEMPTION AMOUNT.
(a) IN GENERAL.—
H. R. 8—5
(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 section 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 December 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 paragraph (1), the
tentative tax determined under this paragraph is a tax com-
puted 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 taxable 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 following table:
‘‘In the case of
The exemption
calendar year:
amount is:
2001 ..........................................................................................
$675,000
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), over
‘‘(B) the tax paid under this section for all prior cal-
endar periods.
‘‘(2) TENTATIVE TAX.—For purposes of paragraph (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 preceding 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.
H. R. 8—6
(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 credit 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 enactment of the Death Tax Elimination
Act of 2000) or the exemption amount allowable under
section 2001(b) with respect to the decedent as a credit
under section 2505 (as so in effect) or exemption under
section 2521 (as the case may be) allowable to such
surviving spouse for purposes of determining the
amount of the exemption allowable under section 2521
with respect to taxable gifts made by the surviving
spouse during the year in which the spouse becomes
a citizen or any subsequent year,’’.
(6) Subsection (a) of section 2057 is amended by striking
paragraphs (2) and (3) and inserting the following new para-
graph:
‘‘(2) MAXIMUM DEDUCTION.—The deduction allowed by this
section shall not exceed the excess of $1,300,000 over the
exemption amount (as defined in section 2001(b)(3)).’’.
(7)(A) Subsection (b) of section 2101 is amended to read
as follows:
‘‘(b) COMPUTATION OF TAX.—
‘‘(1) IN GENERAL.—The tax imposed by this section 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 paragraph (1), the
tentative tax determined under this paragraph is a tax com-
puted 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 taxable 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.
H. R. 8—7
‘‘(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 exemption 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 decedent’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 wherever
situated.
‘‘(C) SPECIAL RULES.—
‘‘(i) COORDINATION WITH TREATIES.—To the extent
required under any treaty obligation of the United
States, the exemption amount allowed under this para-
graph 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 entire
gross estate wherever situated. For purposes 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 2521 (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 2000) 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
2521 (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 subsection (c).
(9)(A) Subsection (a) of section 2107 is amended by adding
at the end the following new paragraph:
‘‘(3) LIMITATION ON EXEMPTION AMOUNT.—Subparagraphs
(B) and (C) of section 2101(b)(3) shall not apply in applying
section 2101 for purposes of this section.’’.
(B) Subsection (c) of section 2107 is amended—
(i) by striking paragraph (1) and by redesignating para-
graphs (2) and (3) as paragraphs (1) and (2), respectively;
and
(ii) by striking the second sentence of paragraph (2)
(as so redesignated).
(10) Paragraph (1) of section 6018(a) is amended by striking
‘‘the applicable exclusion amount in effect under section 2010(c)’’
and inserting ‘‘the exemption 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
H. R. 8—8
2001(c) if the amount with respect to which such tentative
tax is to be computed were $1,000,000, or’’.
(12) The table of sections for part II of subchapter 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—
(1) insofar as they relate to the tax imposed by chapter
11 of the Internal Revenue Code of 1986, shall apply to estates
of decedents dying after December 31, 2000; and
(2) insofar as they relate to the tax imposed by chapter
12 of such Code, shall apply to gifts made after December
31, 2000.
TITLE IV—MODIFICATIONS OF
GENERATION-SKIPPING TRANSFER TAX
SEC. 401. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME
TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.
(a) IN GENERAL.—Section 2632 (relating to special rules for
allocation of GST exemption) is amended by redesignating sub-
section (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 extent necessary to make the inclusion ratio
for such property zero. If the amount of the indirect skip
exceeds such unused portion, the entire unused portion shall
be allocated to the property transferred.
‘‘(2) UNUSED PORTION.—For purposes of paragraph (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-skipping 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 individual attains
age 46,
H. R. 8—9
‘‘(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 regulations 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 individuals;
‘‘(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 subject to a general
power of appointment exercisable by one or more of
such individuals;
‘‘(iv) the trust is a trust any portion of which
would be included in the gross estate of a non-skip
person (other than the transferor) if such person died
immediately after the transfer;
‘‘(v) the trust is a charitable lead annuity trust
(within the meaning of section 2642(e)(3)(A)) or a chari-
table 
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 section 2522 for the
amount of an interest in the form of the right to
receive annual payments of a fixed percentage of the
net fair market value of the trust property (determined
yearly) and which is required to pay principal to a
non-skip person if such person is alive when the yearly
payments for which the deduction was allowed termi-
nate.
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 person 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 respect
to any transferor, and it shall be assumed that powers
of appointment held by non-skip persons will not be exer-
cised.
‘‘(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 transfer shall be the fair market value of the
trust property at the close of the estate tax inclusion period.
‘‘(5) APPLICABILITY AND EFFECT.—
H. R. 8—10
‘‘(A) IN GENERAL.—An individual—
‘‘(i) may elect to have this subsection not apply
to—
‘‘(I) an indirect skip, or
‘‘(II) any or all transfers made by such indi-
vidual to a particular trust, and
‘‘(ii) may elect to treat any trust as a GST trust
for purposes of this subsection with respect to any
or all transfers made by such individual to such trust.
‘‘(B) ELECTIONS.—
‘‘(i) ELECTIONS WITH RESPECT TO INDIRECT SKIPS.—
An election under subparagraph (A)(i)(I) shall be
deemed to be timely if filed on a timely filed gift
tax return for the calendar year in which the transfer
was made or deemed to have been made pursuant
to paragraph (4) or on such later date or dates as
may be prescribed by the Secretary.
‘‘(ii) OTHER ELECTIONS.—An election under clause
(i)(II) or (ii) of subparagraph (A) may be made on
a timely filed gift tax return for the calendar year
for which the election is to become effective.
‘‘(d) RETROACTIVE ALLOCATIONS.—
‘‘(1) IN GENERAL.—If—
‘‘(A) a non-skip person has an interest or a future
interest in a trust to which any transfer has been made,
‘‘(B) such person—
‘‘(i) is a lineal descendant of a grandparent of
the transferor or of a grandparent of the transferor’s
spouse or former spouse, and
‘‘(ii) is assigned to a generation below the genera-
tion assignment of the transferor, and
‘‘(C) such person predeceases the transferor,
then the transferor may make an allocation of any of such
transferor’s unused GST exemption to any previous transfer
or transfers to the trust on a chronological basis.
‘‘(2) SPECIAL
RULES.—If the allocation under paragraph
(1) by the transferor is made on a gift tax return filed on
or before the date prescribed by section 6075(b) for gifts made
within the calendar year within which the non-skip person’s
death occurred—
‘‘(A) the value of such transfer or transfers for purposes
of section 2642(a) shall be determined as if such allocation
had been made on a timely filed gift tax return for each
calendar year within which each transfer was made,
‘‘(B) such allocation shall be effective immediately
before such death, and
‘‘(C) the amount of the transferor’s unused GST exemp-
tion available to be allocated shall be determined imme-
diately before such death.
‘‘(3) FUTURE INTEREST.—For purposes of this subsection,
a person has a future interest in a trust if the trust may
permit income or corpus to be paid to such person on a date
or dates in the future.’’.
(b) CONFORMING AMENDMENT.—Paragraph (2) of section 2632(b)
is amended by striking ‘‘with respect to a direct skip’’ and inserting
‘‘or subsection (c)(1)’’.
(c) EFFECTIVE DATES.—
H. R. 8—11
(1) DEEMED ALLOCATION.—Section 2632(c) of the Internal
Revenue Code of 1986 (as added by subsection (a)), and the
amendment made by subsection (b), shall apply to transfers
subject to chapter 11 or 12 made after December 31, 1999,
and to estate tax inclusion periods ending after December 31,
1999.
(2) RETROACTIVE
ALLOCATIONS.—Section 2632(d) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to deaths of non-skip persons occurring after
December 31, 1999.
SEC. 402. SEVERING OF TRUSTS.
(a) IN GENERAL.—Subsection (a) of section 2642 (relating to
inclusion ratio) is amended by adding at the end the following
new paragraph:
‘‘(3) SEVERING OF TRUSTS.—
‘‘(A) IN GENERAL.—If a trust is severed in a qualified
severance, the trusts resulting from such severance shall
be treated as separate trusts thereafter for purposes of
this chapter.
‘‘(B) QUALIFIED SEVERANCE.—For purposes of subpara-
graph (A)—
‘‘(i) IN GENERAL.—The term ‘qualified severance’
means the division of a single trust and the creation
(by 
any 
means 
available 
under 
the 
governing
instrument or under local law) of two or more trusts
if—
‘‘(I) the single trust was divided on a fractional
basis, and
‘‘(II) the terms of the new trusts, in the aggre-
gate, provide for the same succession of interests
of beneficiaries as are provided in the original
trust.
‘‘(ii) TRUSTS WITH INCLUSION RATIO GREATER THAN
ZERO.—If a trust has an inclusion ratio of greater
than zero and less than 1, a severance is a qualified
severance only if the single trust is divided into two
trusts, one of which receives a fractional share of the
total value of all trust assets equal to the applicable
fraction of the single trust immediately before the
severance. In such case, the trust receiving such frac-
tional share shall have an inclusion ratio of zero and
the other trust shall have an inclusion ratio of 1.
‘‘(iii) REGULATIONS.—The term ‘qualified severance’
includes any other severance permitted under regula-
tions prescribed by the Secretary.
‘‘(C) TIMING AND MANNER OF SEVERANCES.—A sever-
ance pursuant to this paragraph may be made at any
time. The Secretary shall prescribe by forms or regulations
the manner in which the qualified severance shall be
reported to the Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to severances after December 31, 1999.
SEC. 403. MODIFICATION OF CERTAIN VALUATION RULES.
(a) GIFTS FOR WHICH GIFT TAX RETURN FILED OR DEEMED
ALLOCATION MADE.—Paragraph (1) of section 2642(b) (relating to
valuation rules, etc.) is amended to read as follows:
H. R. 8—12
‘‘(1) GIFTS FOR WHICH GIFT TAX RETURN FILED OR DEEMED
ALLOCATION
MADE.—If the allocation of the GST exemption
to any transfers of property is made on a gift tax return
filed on or before the date prescribed by section 6075(b) for
such transfer or is deemed to be made under section 2632
(b)(1) or (c)(1)—
‘‘(A) the value of such property for purposes of sub-
section (a) shall be its value as finally determined for
purposes of chapter 12 (within the meaning of section
2001(f )(2)), or, in the case of an allocation deemed to have
been made at the close of an estate tax inclusion period,
its value at the time of the close of the estate tax inclusion
period, and
‘‘(B) such allocation shall be effective on and after
the date of such transfer, or, in the case of an allocation
deemed to have been made at the close of an estate tax
inclusion period, on and after the close of such estate
tax inclusion period.’’.
(b) TRANSFERS
AT
DEATH.—Subparagraph (A) of section
2642(b)(2) is amended to read as follows:
‘‘(A) TRANSFERS AT DEATH.—If property is transferred
as a result of the death of the transferor, the value of
such property for purposes of subsection (a) shall be its
value as finally determined for purposes of chapter 11;
except that, if the requirements prescribed by the Secretary
respecting allocation of post-death changes in value are
not met, the value of such property shall be determined
as of the time of the distribution concerned.’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to transfers subject to chapter 11 or 12 of the Internal
Revenue Code of 1986 made after December 31, 1999.
SEC. 404. RELIEF PROVISIONS.
(a) IN GENERAL.—Section 2642 is amended by adding at the
end the following new subsection:
‘‘(g) RELIEF PROVISIONS.—
‘‘(1) RELIEF FROM LATE ELECTIONS.—
‘‘(A) IN GENERAL.—The Secretary shall by regulation
prescribe such circumstances and procedures under which
extensions of time will be granted to make—
‘‘(i) an allocation of GST exemption described in
paragraph (1) or (2) of subsection (b), and
‘‘(ii) an election under subsection (b)(3) or (c)(5)
of section 2632.
Such regulations shall include procedures for requesting
comparable relief with respect to transfers made before
the date of the enactment of this paragraph.
‘‘(B) BASIS
FOR
DETERMINATIONS.—In determining
whether to grant relief under this paragraph, the Secretary
shall take into account all relevant circumstances,
including evidence of intent contained in the trust
instrument or instrument of transfer and such other factors
as the Secretary deems relevant. For purposes of deter-
mining whether to grant relief under this paragraph, the
time for making the allocation (or election) shall be treated
as if not expressly prescribed by statute.
H. R. 8—13
‘‘(2) SUBSTANTIAL
COMPLIANCE.—An allocation of GST
exemption under section 2632 that demonstrates an intent
to have the lowest possible inclusion ratio with respect to
a transfer or a trust shall be deemed to be an allocation
of so much of the transferor’s unused GST exemption as pro-
duces the lowest possible inclusion ratio. In determining
whether there has been substantial compliance, all relevant
circumstances shall be taken into account, including evidence
of intent contained in the trust instrument or instrument of
transfer and such other factors as the Secretary deems rel-
evant.’’.
(b) EFFECTIVE DATES.—
(1) RELIEF FROM LATE ELECTIONS.—Section 2642(g)(1) of
the Internal Revenue Code of 1986 (as added by subsection
(a)) shall apply to requests pending on, or filed after, December
31, 1999.
(2) SUBSTANTIAL COMPLIANCE.—Section 2642(g)(2) of such
Code (as so added) shall apply to transfers subject to chapter
11 or 12 of the Internal Revenue Code of 1986 made after
December 31, 1999. No implication is intended with respect
to the availability of relief from late elections or the application
of a rule of substantial compliance on or before such date.
TITLE V—CONSERVATION EASEMENTS
SEC. 501. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION EASE-
MENTS.
(a) WHERE LAND IS LOCATED.—
(1) IN
GENERAL.—Clause (i) of section 2031(c)(8)(A)
(defining land subject to a conservation easement) is amended—
(A) by striking ‘‘25 miles’’ both places it appears and
inserting ‘‘50 miles’’; and
(B) by striking ‘‘10 miles’’ and inserting ‘‘25 miles’’.
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to estates of decedents dying after December
31, 1999.
(b) CLARIFICATION OF DATE FOR DETERMINING VALUE OF LAND
AND EASEMENT.—
(1) IN
GENERAL.—Section 2031(c)(2) (defining applicable
percentage) is amended by adding at the end the following
new sentence: ‘‘The values taken into account under the pre-
ceding sentence shall be such values as of the date of the
contribution referred to in paragraph (8)(B).’’.
H. R. 8—14
(2) EFFECTIVE DATE.—The amendment made by this sub-
section shall apply to estates of decedents dying after December
31, 1997.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.