Prior to 1998, a unified credit of $192,800
allowed each taxpayer to transfer $600,000 free of federal estate and gift
tax. The exclusion amount increased to $625,000 in 1998; and will phase in
to $1 million by 2006. The exclusion for 2000 gift tax returns and for
estate tax returns for decedents dying in 2000 is $675,000. See the Unified
Credit Table.
Coordination with Family Owned Business
Deduction: The maximum family owned business tax deduction is $675,000 regardless
of the year of death. An estate claiming the family owned business deduction is allowed a
unified credit exclusion of only $625,000 regardless of the year of death.
If the full family owned business deduction is not used,
the estate’s unified credit exclusion is the lower of:
• $625,00 plus the unused portion of the
family owned business deduction, or
• The unified credit exclusion for the year of death.
