COST-OF-LIVING ADJUSTMENTS RELATING TO ESTATE AND GIFT TAX PROVISIONS.

SEC. 501. COST-OF-LIVING ADJUSTMENTS RELATING TO ESTATE AND GIFT TAX PROVISIONS. (a) Increase in Unified Estate and Gift Tax Credit.— (1) Estate tax credit.— (A) In general.—Subsection (a) of section 2010 (relating to unified credit against estate tax) is amended by striking “$192,800” and inserting “the applicable credit amount”. (B) Applicable credit amount.—Section 2010 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: “(c) Applicable Credit Amount.—For purposes of this section, the applicable credit amount is the amount of the tentative tax which would be determined under the rate schedule set forth in section 2001(c) if the amount with respect to which such tentative tax is to be computed were the applicable exclusion amount determined in accordance with the following table: “In the case of estates of decedents dying, and gifts made, during: The applicable exclusion amount is: 1998 $625,000 1999 $650,000 2000 and 2001 $675,000 2002 and 2003 $700,000 2004 $850,000 2005 $950,000 2006 or thereafter $1,000,000.”. (C) Estate tax returns.—Paragraph (1) of section 6018(a) is amended by striking “$600,000” and inserting “the applicable exclusion amount in effect under section 2010(c) for the calendar year which includes the date of death”. (D) Phaseout of graduated rates and unified credit.—Paragraph (2) of section 2001(c) is amended by striking “$21,040,000” and inserting “the amount at which the average tax rate under this section is 55 percent”. (E) Estates of nonresidents not citizens.—Subparagraph (A) of section 2102(c)(3) is amended by striking “$192,800” and inserting “the applicable credit amount in effect under section 2010(c) for the calendar year which includes the date of death”. (2) Unified gift tax credit.—Paragraph (1) of section 2505(a) is amended by striking “$192,800” and inserting “the applicable credit amount in effect under section 2010(c) for such calendar year”. (b) Alternate Valuation of Certain Farm, Etc., Real Property.—Subsection (a) of section 2032A is amended by adding at the end the following new paragraph: “(3) Inflation adjustment.—In the case of estates of decedents dying in a calendar year after 1998, the $750,000 111 STAT. 846amount contained in paragraph (2) shall be increased by an amount equal to— “(A) $750,000, multiplied by “(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof. If any amount as adjusted under the preceding sentence is not a multiple of $10,000, such amount shall be rounded to the next lowest multiple of $10,000”. (c) Annual Gift Tax Exclusion.—Subsection (b) of section 2503 is amended— (1) by striking the subsection heading and inserting the following: “(b) Exclusions From Gifts.— “(1) In general.—”, (2) by moving the text 2 ems to the right, and (3) by adding at the end the following new paragraph: “(2) Inflation adjustment.—In the case of gifts made in a calendar year after 1998, the $10,000 amount contained in paragraph (1) shall be increased by an amount equal to— “(A) $10,000, multiplied by “(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof. If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.”. (d) Exemption From Generation-Skipping Tax.—Section 2631 (relating to GST exemption) is amended by adding at the end the following new subsection: “(c) Inflation Adjustment.—In the case of an individual who dies in any calendar year after 1998, the $1,000,000 amount contained in subsection (a) shall be increased by an amount equal to— “(1) $1,000,000, multiplied by “(2) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof. If any amount as adjusted under the preceding sentence is not a multiple of $10,000, such amount shall be rounded to the next lowest multiple of $10,000.”. (e) Amount Subject to Reduced Rate Where Extension of Time for Payment of Estate Tax on Closely Held Business.—Subsection (j) of section 6601 is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph 2) the following new paragraph: “(3) Inflation adjustment.—In the case of estates of decedents dying in a calendar year after 1998, the $1,000,000 amount contained in paragraph (2)(A) shall be increased by an amount equal to— “(A) $1,000,000, multiplied by “(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting ‘calendar year 1997’ for ‘calendar year 1992’ in subparagraph (B) thereof.111 STAT. 847 If any amount as adjusted under the preceding sentence is not a multiple of $10,000, such amount shall be rounded to the next lowest multiple of $10,000.”. (f) Effective date.—The amendments made by this section shall apply to the estates of decedents dying, and gifts made, after December 31, 1997.