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Thursday, February 3, 2011

A History of Federal Estate, Gift, and Generation-Skipping Taxes

John R. Luckey
Legislative Attorney

In 2010, the first year since 1916, there was no federal estate tax. There was also a year hiatus for the generation-skipping tax. The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) provided for a phaseout of the estate and generation-skipping taxes over a 10-year period, leaving the gift tax as the only federal transfer tax in 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) marked, at least, the suspension, if not the termination, of the movement away from the transfer taxes. The act temporarily (through the end of 2012) reinstated the estate and generation-skipping taxes with lower top rates (35%) and larger exemptions ($5,000,000) and reunified the estate and gift taxes. The act was effective on January 1, 2011, but estates of decendents dying in 2010 were given the option of electing coverage by the reinsted estate tax or keeping the carry-over basis for inherited assets.

In this report, the history of the federal transfer taxes has been divided into five parts: (1) the federal death and gift taxes used between 1789 and 1915; (2) the development, from 1916 through 1975, of the modern estate and gift taxes; (3) the creation and refinement of a unified estate and gift tax system, supplemented by a generation-skipping transfer tax; (4) the phaseout and repeal of the estate and generation-skipping taxes, with the gift tax being retained as a device to protect the integrity of the income tax; and (5) the return of the full complement of transfer taxes with lower top rates and larger exemptions.

Date of Report: January 24, 2011
Number of Pages: 30
Order Number: 95-444
Price: $29.95

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