Covell Financial

There are three major bills in Congress:

Senate Bill 722:

* Makes permanent the 2009 $3.5 million exemption and top 45% tax rate
* Reunifies the estate and gift tax exemption (the gift tax exemption is $1 million in 2009)
* Indexes the exemption for inflation
* Allows for exemption portability (i.e., allows the transfer of a decedent's unused exemption to his or her surviving spouse)

House Bill 2032:

* Makes permanent the exemption level at $2 million
* Establishes top tax rates of 45% for estates valued between $2 million and $5 million, 50% for estates valued at $5 to $10 million, and 55% for estates valued over $10 million
* Reunifies the estate and gift tax exemption
* Indexes the exemption for inflation
* Allows for exemption portability
* Restores the state death tax credit

House Bill 436:

* Makes permanent the 2009 $3.5 million exemption and top 45% tax rate
* Reunifies the estate and gift tax exemption
* Limits the valuation discount for family limited partnerships (FLPs)
* Provides strict valuation rules for the transfer of non-business assets

And, the Congressional Budget Office has modeled these four options for Congress:

Option 1:

* Makes permanent the exemption level at $5 million
* Establishes the tax rate to equal the top rate on capital gains (currently 15% in 2010 and 20% thereafter)
* Indexes the exemption for inflation
* Disallows the deduction for state death taxes

Option 2:

* Makes the same changes as Option 1, but a two-tiered rate would be used -- the first $25 million of taxable assets would be subject to the top capital gains rate, then taxable transfers above $25 million would be taxed at 30% (and the $25 million threshold would be indexed for inflation)

Option 3:

* Makes permanent the 2009 $3.5 million exemption and top 45% tax rate

Option 4:

* Repeals the estate tax in 2010
* Retains the $1 million gift tax exemption
* Institutes a carryover basis regime