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.