Estate Tax Repeal for Family-Owned Farms and Businesses Act of 2005 - Amends the Internal Revenue Code to revise the estate tax exclusion for family-owned business interests. Repeals the maximum $675,000 deduction for such interests and allows heirs of qualified interests to exclude the adjusted value of such interests from the gross estate. Defines "qualified family-owned business interests" and revises ownership requirements and material participation rules applicable to family-owned business interests qualifying for the estate tax exclusion.
Provides that qualified family-owned business interests and spousal property acquired from a decedent shall be treated as transferred by gift and that the basis of such property shall be the lesser of the adjusted basis of the decedent, or the fair market value of such property at the date of the decedent's death (thus eliminating estate tax on such property).