forth in paragraph (1) shall be increased by an
amount equal to—
‘‘(A) $750,000, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 2002’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any amount as adjusted under the preceding sen-
tence is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of
$10,000.’’
(c) UNIFIED GIFT TAX CREDIT.—Paragraph (1) of
section 2505(a) of such Code is amended by striking
‘‘$192,800’’ and inserting ‘‘the applicable credit amount
in effect under section 2010(c) for such calendar year’’.
(d) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 6018(a) of such
Code is amended by striking ‘‘$600,000’’ and insert-
ing ‘‘the applicable exclusion amount in effect under
section 2010(c) (as adjusted under paragraph (2)
thereof) for the calendar year which includes the
date of death’’.
(2) Paragraph (2) of section 2001(c) of such
Code is amended by striking ‘‘$21,040,000’’ and in-
serting ‘‘the amount at which the average tax rate
under this section is 55 percent’’.
(3) Subparagraph (A) of section 2102(c)(3) of
such Code is amended by striking ‘‘$192,800’’ and
inserting ‘‘the applicable credit amount in effect
under section 2010(c) for the calendar year which
includes the date of death’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to the estates of decedents dying,
and gifts made, after December 31, 1997.
SEC. 3. INCREASE IN AMOUNT OF ESTATE TAX DEFERRAL
AVAILABLE TO OWNERS OF SMALL BUSI-
NESSES.
(a) IN GENERAL.—Subsection (a) of section 6166 of
the Internal Revenue Code of 1986 (relating to extension
of time for payment of estate tax where estate consists
largely of interest in closely held business) is amended by
adding at the end the following new paragraph:
‘‘(4) INTEREST NOT REQUIRED TO BE PAID IF
CLOSELY HELD BUSINESS IS SMALL BUSINESS.—
‘‘(A) IN GENERAL.—In the case of an in-
terest in a closely held business which is a small
business at all times on or after the date of the
enactment of this paragraph, no interest shall
be required to be paid on any installment per-
mitted made within five years of decedent’s
death under this section to the extent the
amount of such installment is attributable to
such interest.
‘‘(B) SMALL BUSINESS.—For purposes of
subparagraph (A), the term ‘small business’
means any closely held business with aggregate
gross assets (determined in accordance with
section 
1202(d)) 
which 
do 
not 
exceed
$20,000,000.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to estates of decedents dying after
December 31, 1997.
SEC. 4. UNIFIED CREDIT INCREASED BY UNUSED UNIFIED
CREDIT OF PREDECEASED SPOUSE.
(a) IN GENERAL.—Section 2010 of the Internal Rev-
enue Code of 1986 (relating to unified credit against es-
tate tax) is amended by redesignating subsections (b) and
(c) as subsections (c) and (d), respectively, and by insert-
ing after subsection (a) the following new subsection:
‘‘(b) INCREASE IN CREDIT FOR UNUSED UNIFIED
CREDIT OF PREDECEASED SPOUSE.—
‘‘(1) IN GENERAL.—The amount of the credit
allowable under subsection (a) shall be increased by
the aggregate of the amounts of the unused pre-
deceased spouse credit.
‘‘(2) UNUSED
PREDECEASED
SPOUSE
CRED-
IT.—For purposes of paragraph (1)—
‘‘(A) IN GENERAL.—The term ‘unused pre-
deceased spouse credit’ means, with respect to
any predeceased spouse of the decedent, the
amount equal to the excess of—
‘‘(i) the maximum amount allowable
under subsection (a) to the estate of such
spouse, over
‘‘(ii) the tax imposed by section 2001
reduced by the credits against such tax
other than the credit allowed by this sec-
tion.
‘‘(B) LIMITATION
BASED
ON
CREDIT
EQUIVALENT OF VALUE OF PROPERTY PASSING
TO DECEDENT FROM PREDECEASED SPOUSE.—
The amount of the unused predeceased spouse
credit with respect to any predeceased spouse
shall not exceed the credit equivalent of the ag-
gregate value of property acquired from or
passing from (within the meaning of section
1014) the predeceased spouse to the decedent.
‘‘(C) CREDIT EQUIVALENT.—For purposes
of subparagraph (B), the credit equivalent is
the amount of the tentative tax which would be
determined under the rate schedule set forth in
section 2001(c) if the amount with respect to
which the tentative tax is to be computed were
the aggregate value of the property referred to
in subparagraph (B).
‘‘(3) LIMITATION
ON
AGGREGATE
INCREASE
WHERE MORE THAN 1 PREDECEASED SPOUSE.—In
no event may the amount of the increase under
paragraph (1) exceed the dollar amount contained in
subsection (a).
‘‘(4) PREDECEASED SPOUSE.—For purposes of
this subsection, the term ‘predeceased spouse’
means, with respect to the decedent, an individual
who was married to the decedent on the date of such
individual’s death.’’
(b) GIFT TAX.—Section 2505 of such Code is amend-
ed by redesignating subsections (b) and (c) as subsections
(c) and (d), respectively, and by inserting after subsection
(a) the following new subsection:
‘‘(b) INCREASE IN CREDIT FOR UNUSED UNIFIED
CREDIT OF PREDECEASED SPOUSE.—Rules similar to the
rules of section 2010(b) shall apply with respect to cal-