Clarifying the estate tax repeal.

• Position: Committee on Taxation

The 2001 Economic Growth and Tax Relief Reconciliation Act repealed the estate tax for individuals dying after Dec. 31, 2009. The law sunsets at the end of 2010, which means the 2001 estate tax law returns for 2011.

What This Means: No estate tax is assessed on the value of assets for individuals dying during calendar year 2010. In 2009 taxable estates in excess of $3.5 million were taxed at a maximum marginal rate of 45 percent.

If Congress fails to enact new estate tax legislation and make it retroactive to the beginning of this year, an unlimited amount of wealth could be transferred by decedents that will avoid the estate tax and generation skipping transfer tax. There is an open question as to whether a loss passed early this year and applied retroactively violates the U.S. Constitution.

Changes to Income Taxes: In 2009 and earlier years, recipients of inheritances received a "step-up" in their income tax basis because all of the assets were revalued as of the date of death. As long as there is no estate tax, this rule is only in effect on a limited...