A complex trust has taxable income of $29,900 in 2013 The $29,900 includes $5,000 of? long-term capital gains and $25,000 of taxable interest? income, reduced by the $100 personal exemption The trust makes no distributions during the year

ESTATES AND TRUSTS

If taxable income is:

The tax is:

Not over $2,450

15% of taxable income

Over $2,450 but not over $5,700

$36750, plus 25% of the excess over $2,450

Over $5,700 but not over $8,750

$1,18000, plus 28% of the excess over $5,700

Over $8,750 but not over $11,950

$2,03400, plus 33% of the excess over $8,750

Over $11,950

$3,09000, plus 396% of the excess over $11,950

Single

If taxable income is:

The tax is:

Not over $8,925

10% of taxable income

Over $8,925 but not over $36,250

$89250 + 15% of the excess over $8,925

Over $36,250 but not over $87,850

$4,99125 + 25% of the excess over $36,250

Over $87,850 but not over $183,250

$17,89125 + 28% of the excess over $87,850

Over $183,250 but not over $398,350

$44,60325 + 33% of the excess over $183,250

Over $398,350 but not over $400,000

$115,58625 + 35% of the excess over $398,350

Over $400,000

$116,16375 + 396% of the excess over $400,000

Capital Gains and Dividends

Capital gains and losses are assigned to baskets Five possible tax rates will apply to most capital gains and? losses:

•

Ordinary income tax rates? (up to 396?% in 2013?) for gains on assets held one year or less

•

28?% rate on collectibles gains and includible Sec 1202 gains

•

20?% rate on gains on assets held for more than one year and qualified dividends? (for taxpayers whose regular tax bracket is 396?%)

•

15?% rate on gains on assets held for more than one year and qualified dividends? (for taxpayers whose regular tax bracket is higher than 15?% and less than 396?%)

•

00?% rate on gains on assets held for more than one year and qualified dividends? (for taxpayers whose regular tax bracket is not higher than 15?%)

?Note: The net investment income of higher income taxpayers? (modified AGI greater than $200,000 for single and $250,000 for married filing? jointly) also may be subject to an additional tax of 38?% Net investment income includes dividends and capital? gains, along with other types of investment income

Estates and trusts potentially owe the 38?% incremental tax on net investment? income, but the inception point for this tax is at a much lower amount than it is for individuals The tax is levied on the lesser of? (1) the? entity’s undistributed net investment income or? (2) its modified adjusted gross income? (MAGI) in excess of the amount at which the top tax rate of 396?% begins $11,950 in 2013?) MAGI is AGI reduced by the personal? exemption, expenses that would not have been incurred if the property were not held by an estate or? trust, and the distribution deduction Net investment income? includes, among other? things, interest,? dividends, annuities,? royalties, rents, and net gains from certain property? dispositions, all reduced by allocable deductions

a What is the? trust’s total tax? liability?

b Compare this tax to the amount of tax an unmarried individual filing single would pay on the same amount of rental and interest income? (with no other? income) Assume the individual claims the standard deduction

What is the tax an individual filing a joint return would pay?