On December 21st, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the "Act") into law.

As anticipated in our last Tax Alert from December 7th, 2010, the Act extends the Bush era tax rates for individuals for the years 2011 and 2012 and contains important business incentives and temporary modifications to the estate, gift and generation-skipping transfer tax rules. Some of the changes that may affect you as an individual are:

• Marginal Tax Rates
  The marginal tax rates applicable to an individual's regular income will remain the same with the maximum rate of 35%, which will increase to 39.6% in 2013.
• Capital Gains & Dividend
  The maximum capital gains and dividend tax rates for individuals will be 15% which will increase to 20% for capital gains in 2013, while dividends will be subject to tax at ordinary income rates in 2013.
• Federal Estate Tax
  Federal estate tax is reinstated for the years 2010 through 2012 at the rate of 35% while the applicable exclusion amount is increased to $5,000,000. In addition, a surviving spouse is now allowed to take advantage of the unused exemption of a predeceased spouse. For those estates of decedents dying in 2010, the estates can choose between the Act's estate tax system or the law of 2001 that repealed the estate tax for 2010 but provided for a carryover basis system, depending on which system provides more of a benefit to the estate.
• Gift Tax
  The Act increases the gift tax exemption amount to $5,000,000 and gifts beyond this amount will be taxed at the rate of 35% through 2012.
• Generation Skipping Transfer (GST)
  The Act increases the generation-skipping transfer ("GST") exemption, which is an exemption from tax levied on gifts to persons two or more generations below the transferor, to $5,000,000 while at the same time lowering the GST tax rate to 35% for 2011 and 2012.