No tax on 45k income? Dazed and Confused...

[Possi]

I have a trust fund lady living in South Africa on her trust. No other income, so it is all taxable to the US. No questions there.

From passive income only, $7476 of her unearned income is from various foreign sources.Foreign tax paid was $1160. After entering everything on the 1116, there is no credit. So, I was thinking of putting it on the Sch A instead.

As I study the return further, I see that there is no credit because there is no TAX.

She has 40k in ordinary dividends and 22k of that is qualified dividends.

She also has a large cap loss carryforward.

I'm looking this Sch D over, and I swear, she doesn't owe any tax. Zero. Zilch. Nothing.

Can this be right? With all the continuing ed I went to, I just don't get it. How can she have all this unearned income and not owe taxes, all because of the Sch D? (She owes state tax.)

[outwest]

Sure that can happen..

my personal best is a couple with over 100K in mostly dividends and quite a bit of itemized deductions that paid $387 in tax on the federal. Our state got a lot more.

You read that right: three hundred eighty seven dollars.

[Gretel]

I find that worse than giving EIC to a working family. It's really interesting to see how different types of income produce totally different results.

Also, I just had my first experience with the new "Hope" credit, were the total paid was under $2,000 and taxpayer gets every dime back they paid. I guess in this scenario people don't even need to apply for grants since they are getting everything back anyway.

[Possi]

I've done those...

I find that worse than giving EIC to a working family. It's really interesting to see how different types of income produce totally different results.

Also, I just had my first experience with the new "Hope" credit, were the total paid was under $2,000 and taxpayer gets every dime back they paid. I guess in this scenario people don't even need to apply for grants since they are getting everything back anyway.

I've seen a lot of that. This is the first I've seen like this, dividend income in such abundance and no tax.

It IS worse than EIC....