Administration Again Proposes Making 2009 Estate and GST Taxes Permanent, and Making Other Technical Changes

In Dept. of Treas., “General Explanations of the Administration’s Fiscal Year 2011 Revenue Proposals,” (Feb. 1, 2010), the Administration’s fiscal year 2011 budget includes a presumption that the 2009 estate and GST tax rules are made permanent. This, if enacted, would bring back a $3.5 million applicable exclusion amount and GST exemption, a $1 million gift tax exemption, and a top tax rate of 45%.

The Administration also proposes to:

(1) authorize regulations under Code Sec. 2704(b) , creating a new category of “disregarded restrictions” that would be ignored in valuing interests in a family limited partnership, corporation or LLC, thereby eliminating or reducing many of the current valuation discounts for such interests;
(2) require a minimum term of 10 years for a GRAT and preclude zero-gift GRATs and GRATs with reducing payments;
(3) require the use of the values reported on an estate tax return as the basis of assets reported on income tax returns;
(4) increase the reporting requirements for sales of life insurance policies;
(5) establish a rebuttable presumption that any trust to which a U.S. person makes a transfer has a U.S. beneficiary, causing the trust to be a grantor trust under Code Sec. 679 ;
(6) treat loans of cash or marketable securities from a foreign trust to a U.S. grantor or beneficiary as the accumulation or payment of such amounts for the benefit of such persons, for purposes of the grantor trust rules; and
(7) increase the penalties for failing to file information returns relating to the creation of a foreign trust.

Posted in Status of Tax Legislation, WillPlan Blog.

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