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Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.

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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