ESTATE TAX, GIFT TAX

REG-118913-21, page 1089. Section 11061 of TCJA amended § 2010(c)(3) to provide that, for estates of decedents dying and gifts made beginning in 2018 and through 2025, the basic

exclusion amount (BEA) is $10 million as adjusted for inflation. On January 1, 2026, the BEA will revert to $5 million as adjusted for inflation. Treas. Reg. § 20.20101(c) provides a special estate tax rule applicable in cases where a decrease in the BEA occurring after a gift was made causes the credit that was allowable against the gift tax to exceed that allowable against the estate tax. In that case, the estate tax formula will result in the imposition of an estate tax on the gifts that were sheltered from gift tax when made. The special rule eliminates the problem by allowing a credit against the estate tax based on the larger of the credit allowable in computing the estate tax and the total of the credits

allowable in computing the gift tax payable on the decedent’s post-1976 gifts. This NPRM proposes to limit the application of the special rule by excluding from its coverage certain gifts that are includible or treated as inclludible in the gross estate for estate tax purposes.