The U.S. avoided plunging over the "Fiscal Cliff" by enacting the American Taxpayer Relief Act of 2012 on January 2, 2013. The Act makes broad changes affecting income, estate, gift and GST taxes, including extending a majority of the Bush-Era tax cuts. This article highlights some of the more substantive changes that we feel will affect our clients.

1. Latimer LeVay Fyock LLC TAX UPDATE - JAN 2013
January 2013 SUMMARY OF TAX PROVISIONS IN
The American Taxpayer Relief Act of 2012
On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012
(the “Act”). Below is a very brief description of some of the salient provisions
of the Act as well as other tax measures that may impact our clients. If you
Special points of have any questions, please feel free to contact any of our attorneys.
Interest:
 New tax bracket of Relevant Definitions:
39.6% for income
earners making “EGTRRA” means the Economic Growth and Tax Relief Reconciliation Act of 2001
$400,000 (individual)
or $450,000 “TRUIRJCA” means the Tax Relief, Unemployment Insurance Reauthorization and
(married) Job Creation Act of 2010
 Estate, Gift and GST
Tax Exemptions at “PPACA” means the Patient Protection and Affordable Care Act of 2010
$5,000,000 (indexed)
with portability be- I. Income Tax Matters
tween spouses
 Tax rate for the Es- Reductions in Individual Income Tax Rates For Most Taxpayers
tate, Gift and GST tax The Act makes permanent1 the 10%, 15%, 25%, 28%, 33% and 35% marginal
increased from 35%
rates on income at or below $400,000 (individual filers), $425,000 (heads of house-
to 40%
holds) and $450,000 (married filing jointly) for taxable years beginning after Decem-
 Capital gains rates for ber 31, 2012.
top income earners
(over $400,000) in- The Act increases the rates for taxpayers earning above the $400,000, $425,000
creased to 20%, plus and $450,000 income threshold, respectively, from 35% to 39.6%.
3.8% Medicare tax
The Act repeals the personal exemption phase-outs on income at or below
 Increase of 0.9% on $250,000 (individual filers), $275,000 (heads of households) and $300,000 (married
Medicare surtax for
taxpayers earning
filing jointly) for taxable years beginning after December 31, 2012.
$200,000 or more
Estimated Tax Rates for 20132
Single Individuals
If taxable income is: The tax will be:
Not over $8,925 10% of taxable income
Over $8,925 but not over $36,250 $892.50 plus 15% of the excess over $8,925
Over $36,250 but not over $87,850 $4,991.25 plus 25% of the excess over $36,250
Over $87,850 but not over $183,250 $17,891.25 plus 28% of the excess over $87,850
Over $183,250 to $398,350 $44,603.25 plus 33% of the excess over $183,250
Over $398,350 to $400,000 $115,586.25 plus 35% of the excess over $398,350
Over $400,000 $116,163.75 plus 39.6% of the excess over $400,000
1
Although the TRUIRJCA makes these marginal tax rates “permanent,” Congress could reconsider the entire tax structure in the future
as part of an overall reform of the tax code or in the upcoming debt ceiling negotiations scheduled to get underway shortly.
2
Per CCH projections. The IRS is expected to release official 2013 tax rate tables now that the Act has been finalized.

2. TAX UPDATE - JAN 2013 Page 2
Married Couples, Filling Jointly
If taxable income is: The tax will be:
Not over $17,850 10% of taxable income
Over $17,850 but not over $72,500 $1,785 plus 15% of the excess over $17,850
Over $72,500 but not over $146,400 $9,982.50 plus 25% of the excess over $72,500
Over $146,400 but not over $223,050 $28,457.50 plus 28% of the excess over $146,400
Over $223,050 to $398,350 $49,919.50 plus 33% of the excess over $223,050
Over $398,350 to $450,000 $107,768.50 plus 35% of the excess over $398,350
Over $450,000 $125,846 plus 39.6% of the excess over $450,000
Medicare Surtax
The Act does not affect the PPACA which adds an additional 0.9% Medicare surtax on wages received
in connection with employment (including those self-employed) for taxpayers earning above $200,000
(single filers) or $250,000 (married, filing jointly). Therefore, these higher income earning will see their
Medicare contributions increase from 1.45% to 2.35%. in 2013.
Capital Gains and Dividends
Under the Act, the long-term capital gains and dividend rates for taxpayers in the 10% and 15% brackets
is equal to 0%. For those taxpayers in the 25%, 28% and 35% brackets, the long-term capital gains and
dividend rates is equal to 15%. For those taxpayers in the highest bracket, 39.6%, the long-term capital
gains and dividend rates is equal to 20%. Short-term capital gains will continue to be taxed at the indi-
vidual income tax rate.
Please keep in mind that the Act does not affect the provisions of the PPACA scheduled to become ef-
fective on January 1, 2013, which requires taxpayers earning $200,000 (individual filers) and $250,000
(married, filing jointly) to also pay an additional 3.8% on Net Investment Income (such as capital gains
and other income from passive investments). Therefore, the effective top rate for many higher-income
taxpayers becomes 23.8% for long-term capital gains and 43.4% for short-term capital gains starting in
2013.
Alternative Minimum Tax (AMT)
The Act permanently patches the AMT, increasing the 2012 exemption amounts to $51,900 (individual
filers) and $80,800 (married, filing jointly), indexed for inflation.
Personal Exemption Phase-Out (PEP) and Pease Limitations
The Act increases the threshold whereby a taxpayer would be subject to the PEP. Taxpayers with AGI
over $300,000 (married, filing jointly) $275,000 (head of households) and $250,000 (single filers) will
have their personal and dependency exemptions reduced or eliminated. Further, the Pease limitations
on itemized deductions (which was eliminated by EGTRRA) are reinstated at the same threshold levels
as the PEP.

3. TAX UPDATE - JAN 2013 Page 3
Credits
The new Act extends the expanded child tax credit and earned income tax credits for five additional
years.
Payroll Tax
The new Act raises taxes for all wage earners (including those self-employed) by failing to renew the
2012 payroll tax holiday. Therefore all wage earners will be contributing 6.2% (instead of 4.2%) of their
earned income towards Social Security.
II. Permanent Federal Estate, Gift and Generation-Skipping Transfer (GST) Tax Relief
Federal Exemptions from Estate, Gift and GST
The Act permanently provides for a $5 million estate, gift and generation-skipping transfer (GST) tax ex-
emptions (indexed for inflation). On January 11, 2013, the IRS adjusted these exemptions for inflation to
$5.25 million. The Act also increases the top tax rate for taxpayers who exceed the exemption amount
from 35% to 40% for estate, gift and GST tax, effective January 1, 2013.
As with the TRUIRJCA, the Act unifies the estate and gift tax exemption, thereby creating a single gradu-
ated rate schedule for both taxes. That single lifetime exemption could be used for gifts and/or bequests.
In addition, the Act extends a number of other GST related provisions which were set to expire, including
the deemed allocation and retroactive allocation rules.
Finally, the IRS has adjusted the annual gift tax exclusion for inflation from $13,000 per recipient to
$14,000 per recipient for 2013.
Portability
The TRUIRJCA allowed the executor of a deceased spouse’s estate to transfer any unused exemption to
the surviving spouse for estates of decedents dying after December 31, 2010, and before December 31
2012. The Act makes permanent this provision and is effective for estates for decedents dying after De-
cember 31, 2012.
Charitable Rollovers for IRAs
The Act reinstates for 2012 and extends until the end of 2013 the ability of qualifying taxpayers (over 70
1/2 years of age) to direct up to $100,000 from their IRA accounts to certain charities (other than private
foundations and donor-advised funds). By taking advantage of this technique, a taxpayer can exclude
from income tax up to $100,000 each year to a qualified charity.
In order to take advantage of this opportunity retroactively for the 2012 tax year, taxpayers can direct a
distribution to charity by February 1, 2013. Also, if a taxpayer received a distribution from an IRA in De-
cember of 2012, he or she can make a cash distribution to a charitable organization during January of
2013 and treat that amount as if it had been transferred to the charity directly from the IRA.
III. Individual and Business Extenders
The Act extends a huge amount of individual and business provisions through at least the end of 2013,
including unemployment benefits, the Doc Fix (i.e. physician payment update), 50% “bonus” deprecia-
tion, research and work tax credits, the $1,000 child tax credit, the $2,500 tax credit for college tuitions,
and treatment of mortgage insurance premiums.

4. Latimer LeVay Fyock LLC Dear clients, colleagues and friends,
55 West Monroe Street We hope that this update helps with your income, estate, gift
Suite 1100 and GST tax and corporate planning. As always, our Wealth
Management and Corporate Services Groups are available to
Phone: 312-422-8000
assist you.
Fax: 312-422-8001
E-mail: pcham@llflegal.com If you have any questions regarding this update or any other
Website: www.llflegal.com matter, please do not hesitate to contact me.
Sincerely,
Puneet Cham
Puneet Cham
About Latimer LeVay Fyock LLC
Latimer LeVay Fyock LLC is committed to providing sophisticated and at-
tentive legal services to its clients over a diverse spectrum of legal disci-
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