So if you're like me you're reading the blogs and news reports that says that the estate tax law is virtually unchanged and the chaos predicted last year has not come to pass. Well, being technical as I am I don't believe all I read without verification. I pulled up the text of the law--the American Taxpayer Relief Act of 2012 (even though passed in 2013)--and found section 101(c) that tells us that the top estate and gift tax rate is now increased from 35% to 40%, kicking in at $1,000,000 and that there is a technical correction to the DSUEA. But where does it say that the applicable exclusion is still $5,000,000 plus the inflation increase ($5,120,000 in 2012)? It is not apparent on a first read without a bit of digging. But digging does yield pay dirt.
For those who need to trace it out, like me, here you go...Section 101(a)(2) of the 2012 Act says that section 304 of the 2010 Act (the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act) is stricken. Section 304 of the 2010 Act says that section 901 of the EGTRRA of 2001 shall apply to Code section 2010, among others. What does section 901 say? It says, among other things, that the tax provisions in the 2001 Act shall sunset for deaths and gifts after December 31, 2012. So, put it all together and the applicable tax provisions from the Bush era in 2001--including the $5 million applicable exclusion amount--are now permanent, except the top rate is now 40%.