The IRS issued proposed regulations Tuesday (REG-118913-21) that would provide an exception to the anti-“clawback” special rule that preserves the benefits of the temporarily higher gift and estate basic exclusion amount. The regulations would apply to certain transfers that are includible, or treated as includible, in a decedent’s gross estate under Sec. 2001(b).
Specifically, the proposed regulations would add a provision at Regs. Sec. 20.2010-1(c)(3), which was reserved for that purpose in final regulations issued in 2019 (T.D. 9884). Those final regulations addressed situations where the basic exclusion amount that applies at the time of a decedent’s death differs from the exclusion amount that applied with respect to any gifts made by the decedent.
This disparity occurred — and is scheduled to occur again, in reverse — as a result of the legislation known as the Tax Cuts and Jobs Act, P.L. 115-97, which temporarily increased the basic exclusion amount from $5 million to $10 million, both adjusted for inflation, for decedents dying and gifts made after Dec. 31, 2017, and before Jan. 1, 2026 (when it will revert to the lower level).