Tax relief for victims of terrorist attacks. The Victims of Terrorism Tax Relief Act of 2001 is explained in Publication 3920, Tax Relief for Victims of Terrorist Attacks. (This publication should be available by March 2002.) Under the Act, the federal income tax liability of those killed in the following attacks is forgiven for certain tax years.

• The April 19, 1995, terrorist attack on the Alfred P. Murrah Federal Building (Oklahoma City).
• The September 11, 2001, terrorist attacks.
• The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002.

The Act also exempts from federal income tax the following types of income.

• Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack.
• Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack.
• Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack.
• Debt cancellations made after September 10, 2001, and before January 1, 2002, if the debts were cancelled because an individual died as a result of the September 11 attacks or anthrax attacks.
• Payments from the September 11th Victim Compensation Fund of 2001.

The Act also allows the IRS to postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack and reduces the estate tax of individuals who die as a result of a terrorist attack.

Afghanistan designated a combat zone. By Executive Order No. 13239, Afghanistan is designated as a combat zone beginning September 19, 2001. Special rules apply if a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone. See Tax Forgiveness for Deaths Due to Military or Terroristic Actions, later. For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide.

Reduced tax rates. The income tax rates have been reduced.

10% tax rate. Beginning in 2001, a portion of an individual's income that would be subject to the 15% tax rate is subject to a reduced rate of 10%. (See Rate reduction credit, later.) This new 10% rate does not apply to an estate's income.

Other tax rates. The other tax rates have been reduced as shown in the following table. These new rates apply to both individuals and estates.

Old Rates	2001 Rates	2002 Rates
28%	27.5%	27%
31%	30.5%	30%
36%	35.5%	35%
39.6%	39.1%	38.6%

Advance payment of income tax. If the decedent received an advance payment of income tax in 2001, you do not have to report this payment as income on the decedent's final federal income tax return. This payment was based on the decedent's 2000 tax return and reduces the rate reduction credit allowed on the final return.

Rate reduction credit. Generally, the decedent receives the benefits of the new 10% tax rate through the rate reduction credit. If the decedent did not receive the maximum advance payment (before offset) in 2001, you may be able to claim the rate reduction credit on the final return. Use the Rate Reduction Credit Worksheet in the forms instructions to figure the credit based on the decedent's 2001 tax return. You cannot claim the rate reduction credit on the estate's income tax return.

Benefits for public safety officer's survivors. For tax years beginning after 2001, a survivor annuity received by the spouse, former spouse, or child of a public safety officer killed in the line of duty will generally be excluded from the recipient's income regardless of the date of the officer's death. Survivor benefits received before 2002 are excludable only if the officer died after 1996. For more information, see Public safety officers, later.

Rollovers by surviving spouses. For distributions after 2001, an employee's surviving spouse who receives an eligible rollover distribution may roll it over into an eligible retirement plan, including an IRA, a qualified plan, a section 403(b) annuity, or a section 457 plan. For plan distributions before 2002, surviving spouses could only roll the distribution over into an IRA.

Estate tax return. Generally, if the decedent died during 2001, an estate tax return (Form 706) must be filed if the gross estate is more than $675,000. If death occurs in 2002, Form 706 must be filed if the gross estate is more than $1,000,000.

Estate tax repeal. The estate tax is repealed for decedents dying after 2009.

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