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

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

    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.)
    "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

    #2
    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.

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      #3
      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.

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        #4
        I've done those...

        Originally posted by Gretel View Post
        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....
        "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

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