The ABA Section on Real Property, Trust & Estate Law and ABA Tax Section have submitted a letter to Congress requesting action on pending Estate & Generation-Skipping Transfer Tax legislation:
We urge that Congress, before adjournment, address the limbo that legislative inaction has created for the nation’s taxpayers. Specially, we ask Congress to resolve the systemic uncertainties resulting from the one-year suspension of the estate and generation-skipping transfer (“GST”) taxes in 2010 and reinstatement of the 2001 transfer tax laws as of January 1, 2011, under the “sunset” provisions of Section 901 of the 2001 Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”). Our comments reflect our belief that taxpayers should not suffer worse tax consequences due to this one-year limbo than they would have otherwise, under either the pre-2010 or post-2010 law. We are concerned that the current uncertainty regarding application of the estate, gift and GST tax laws has created substantial obstacles for families and business owners trying to plan for the orderly transfer of their assets. Because the uncertainty was created legislatively, we believe its resolution requires legislative action, as it does not appear that the Treasury Department or the IRS would have the authority to resolve all of the numerous issues through rulings, regulations or other issuances.
By this letter, we seek to identify several of the most urgent issues requiring immediate resolution. We do not seek to review the extensive discussion of the numerous technical issues described in the comprehensive report that we submitted on December 7, 2004, as two of the sponsoring organizations of the Report on Reform of Federal Wealth Transfer Taxes. …
Members of Congress have voiced many different positions about the proper approach to the transfer tax laws during the past several years. We do not take a position on the policy decisions that Congress must make in fashioning these tax laws, but believe that Congress must provide certainty regarding the general structure of the unified estate, gift and GST tax system. Attorneys around the country tell us that many Americans have been paralyzed in their basic estate planning, for fear that the final regime that Congress enacts may result in adverse tax consequences or require a new estate plan.
An initial uncertainty that Congress should address is whether any legislative changes in the transfer tax system will be applied retroactively to events that occurred prior to the enactment of such changes. Given the significant time that has elapsed since the estate and GST tax were suspended on January 1, many of your colleagues have suggested that retroactive estate or GST taxation is no longer feasible. Alternatively, some have suggested that if the estate tax will be imposed retroactively, such taxation might be elective, so that an estate could opt for the estate tax with the normal basis adjustment rules of § 1014 or elect to be subject to the modified carryover basis rules of new § 1022. Although such an election might mitigate the public perception of unfairness and avoid the attendant litigation resulting from retroactive application of the federal estate tax, it would not resolve the myriad technical problems with application of modified carryover basis detailed in the Report.
However Congress chooses to proceed with respect to a retroactive application of estate or GST taxation, there are many technical issues that are important to resolve, the most significant of which are described below.
