It is interesting that Congress has not taken steps to "fix" the 2010 repeal of federal estate taxes, nor have they taken steps to increase the estate tax exemption for 2011 slated to be $1,000,000.  Meanwhile, the Obama Administration is attempting to provide some relief as to potential capital gains taxes on estates under $3,500,000 by providing an option to have the 2009 estate tax laws apply. 

Here is what they are saying:  Obama administration officials are considering a proposal to allow taxpayers to elect to apply 2009 rules to their 2010 estate tax bills, a Treasury Department official said in an interview that aired September 12.

This option could prove appealing to taxpayers who have inherited estates worth less than the $3.5 million estate tax exemption for 2009 but more than $1.3 million. The current law repeals the estate tax entirely but allows a basis step-up for only $1.3 million of the estate's assets, not for the entirety of the estate as under the 2009 law. Thus, heirs of decedents dying in 2010 may exempt only $1.3 million of capital gains when they dispose of the property and must calculate capital gains tax using the decedent's basis in the property.