2010 has been one strange year for the U.S. tax code. We have a huge estate tax issue that is still not fully resolved. Let’s take a look at where things stand for the estate tax year in terms of changes, amendments, additions and considerations.
The estate tax and GSTT have been repealed for 2010, but they may be enforced retroactively.
Even though the Obama administration preferred having an estate tax in 2010, Congress was preoccupied with other matters as 2009 drew to a close. So no action was taken, and as EGGTRA stipulated in 2001, the estate tax is 0% in 2010. 
So far, anyway. The longer we go with no action taken, the harder it gets for Congress to take action and put a retroactive estate tax in place. (You could easily argue that a retroactive estate tax would be unconstitutional.)
Of course, the estate tax and the generation-skipping transfer tax (GSTT) are scheduled to return in 2011. Congress may restore things to 2009 levels, $3.5 million exemption for estate tax and GSTT with 45% estate, GSTT, and gift tax rates. By doing nothing, though, estate taxes would reset to pre-EGGTRA levels in 2011 (the exemption level at just $1 million with 55% estate, GSTT, and gift tax rates). 
With no estate tax in place for 2010, the step-up basis rules have been replaced by carryover basis rules.
This year, assets in an estate are subject to capital gains taxes when sold based on the original price paid for the asset. This could mean some big problems for heirs if an asset was bought by Mom or Dad 20 or 30 years ago. Let’s say the asset is a stock. If Mom or Dad purchased shares off and on through the years, you’ll have quite an assignment to find that paper trail, and you may end up paying capital gains tax on the appreciation if the estate is really large. Fortunately, each estate can exempt $1.3 million of gains from the carryover basis rule, and another $3 million exemption applies to assets inherited from a spouse – so as much as $4.3 million of an estate, if transferred to a spouse, can retain the step-up in 2010. 
The federal gift tax rate is 35% for 2010, not 45%.
Yes, there is still a gift tax in 2010 on gifts above the lifetime exemption amount of $1 million. However, the tax bite is just 35% for 2010. Of course, if you end up gifting less than $1 million during your lifetime, you won’t have to worry about the gift tax at all but you will need to be sure to file a gift tax return.
IRS CIRCULAR 230 DISCLOSURE: Tax advice contained in this communication (including any attachments) is neither intended nor written to be used, and cannot be used, to avoid penalties under the Internal Revenue Code or to promote, market or recommend to anyone a transaction or matter addressed in this communication.
 articles.moneycentral.msn.com/RetirementandWills/PlanYourEstate/5bigMythsAboutTheEstateTax.aspx [4/14/10]
 moneywatch.bnet.com/retirement-planning/blog/financial-independence/why-is-everyone-afraid-of-the-gift-tax/843/ [4/14/10]