1041-US: Capital gain is not taxed at zero-percent (FAQ)

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Question

Why is none of the capital gain taxed at a zero-percent rate when the ESBT ordinary taxable income is less than $2,550?

Answer

According to IRC section 1(h)(1)(B), the zero-percent rate applies to income that would have been taxed at a rate below 25 percent had it been ordinary income. Because all ESBT ordinary income is taxable at the highest trust rate, the zero-percent rate does not apply to ESBT capital gains.

Related topic: 1041-US: Electing small business trusts FAQs

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