A trust earns $8,000 in taxable income. Which tax rate would apply to the portion of income between $2,900 and $8,000?
Understand the Problem
The question is asking about the U.S. federal income tax rate applicable to a trust's taxable income falling within a specific range ($2,900 to $8,000). To answer this, one would need to consult the federal income tax brackets for trusts and estates for the relevant tax year. The question is essentially testing knowledge of these tax brackets.
Answer
24%
The portion of the trust's income between $2,900 and $8,000 would be taxed at a 24% rate.
Answer for screen readers
The portion of the trust's income between $2,900 and $8,000 would be taxed at a 24% rate.
More Information
Trusts are subject to different tax brackets than individuals, and these brackets are highly compressed. This means that even a relatively small amount of income can be taxed at a higher rate.
Tips
It's easy to assume trust income is taxed like individual income, but trust tax brackets are much more compressed and reach higher rates quicker.
Sources
- Are Trust Distributions Taxable? - Trust Tax Rates Explained - keystone-law.com
- Federal Trust Tax Rates for 2024 - dallolawgroup.com
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