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

What is thetrust's total taxliability? 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 otherincome). Assume the individual claims the standard deduction. (Round interim calculations and your final answers to the nearest wholedollar.)

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. . . . . . . . $367.50, plus 25% of the excess over $2,450.

Over $5,700 but not over $8,750. . . . . . . . $1,180.00, plus 28% of the excess over $5,700.

Over $8,750 but not over $11,950. . . . . . $2,034.00, plus 33% of the excess over $8,750.

Over $11,950. . . . . . . . . . . . . . . . . . . . . . .$3,090.00, plus 39.6% 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. . . . . . . $892.50 + 15% of the excess over $8,925.

Over $36,250 but not over $87,850. . . . . . . $4,991.25 + 25% of the excess over $36,250.

Over $87,850 but not over $183,250. . . . . . $17,891.25 + 28% of the excess over $87,850.

Over $183,250 but not over $398,350. . . . . $44,603.25 + 33% of the excess over $183,250.

Over $398,350 but not over $400,000. . . . . $115,586.25 + 35% of the excess over $398,350.

Over $400,000. . . . . . . . . . . . . . . . . . . . . . . .$116,163.75 + 39.6% 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 andlosses:

Ordinary income tax rates(up to 39.6% 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(fortaxpayers whose regular tax bracket is 39.6%)

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 39.6%)

0% 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 filingjointly) also may be subject to an additional tax of 3.8%.

Net investment income includes dividends and capitalgains, along with other types of investment income.

Estates and trusts potentially owe the 3.8% incremental tax on net investmentincome, 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) theentity'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 39.6% begins $11,950 in 2013). MAGI is AGI reduced by the personalexemption, expenses that would not have been incurred if the property were not held by an estate ortrust, and the distribution deduction. Net investment incomeincludes, among otherthings, interest,dividends, annuities,royalties, rents, and net gains from certain propertydispositions, all reduced by allocable deductions.

STANDARD DEDUCTION

Filing Status

Married individuals filing joint returns and surviving spouse

$12,200

Heads of households 8,950

Unmarried individuals (other than surviving spouses and heads of

households) 6,100

Married individuals filing separate returns 6,100

Additional standard deduction for the aged and the blind

Individual who is married and surviving spouses1,200 *

Individual who is unmarried and not a surviving spouse1,500 *

Taxpayer claimed as dependent on another taxpayer's return:

Greater of (1) earned income plus $350 or (2) $1,000.

* These amounts are $2,400 and $3,000, respectively, for a

taxpayer who is both aged and blind.

PERSONAL AND DEPENDENCY

EXEMPTION AND PHASE-OUTS

Personal and dependency exemption 3,900

Phase-outs for high income taxpayers:

Personal and dependency exemptions are reduced by 2% for each

$2,500 increment (or part of increment)

for AGI above the threshold amount.

Itemized deductions are reduced by 3% for each dollar of AGI

above the threshold amounts (taxpayers cannot

lose more than 80% of their allowable itemized deductions).

For both provisions, the AGI threshold amounts are:

Married individuals filing joint returns and surviving spouses

$300,000

Heads of households 275,000

Unmarried individuals (other than surviving spouses and heads of

households)250,000

Married individuals filing separate returns 150,000

What is thetrust's total taxliability?

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 otherincome). Assume the individual claims the standard deduction.

The trust's income tax liability is (higher/lower) than the $_______ tax an individual filing a joint return would pay