the preferential rate for qualified dividends. Do you agree with this? Please explain and give an in depth answer to your line of thinking Solution With the passage of the American Taxpayer Relief Act of 2012, P.L. 112-240, taxpayers can continue to save significant taxes on qualified dividends and long-term capital gains. Excluding the special 25% and 28% rates, Sec. 1(h)(1) now provides for three rates on qualified dividends and long-term capital gains (preferential income): 0%, 15%, and 20%. The 0% rate is available for preferential income in the 10% and 15% brackets. For qualified dividends and long-term capital gains in the 39.6% bracket, the tax rate is 20%. Preferential income in any other bracket is taxed at 15%. Certain of our distributions may be treated as qualified dividend income eligible for preferential rates of U.S. federal income tax to U.S. individual unitholders (and certain other U.S. unitholders). In the absence of legislation extending the term for these preferential tax rates, all dividends received by such U.S. taxpayers in tax years beginning on January 1, 2011, or later, will be taxed at graduated tax rates applicable to ordinary income. When taxpayers have both ordinary and preferential income, additional deductions can create a multiplier effect that enables them to save at higher rates than their marginal rates on ordinary income. This phenomenon occurs when a deduction offsets ordinary income and shifts preferential income from the 25% to 15% (or 10%) bracket or from the 39.6% to 35% (or lower) bracket. Qualified dividends are taxed at lower rates. Many ordinary dividends received are also classified as qualified dividends. The amount of the qualified dividends will be shown in box 1b of Form 1099-DIV or on a similar statement received from a fund or an individual stock. .

1. the preferential rate for qualified dividends. Do you agree with this? Please explain and give an
in depth answer to your line of thinking
Solution
With the passage of the American Taxpayer Relief Act of 2012, P.L. 112-240, taxpayers can
continue to save significant taxes on qualified dividends and long-term capital gains. Excluding
the special 25% and 28% rates, Sec. 1(h)(1) now provides for three rates on qualified dividends
and long-term capital gains (preferential income): 0%, 15%, and 20%. The 0% rate is available
for preferential income in the 10% and 15% brackets. For qualified dividends and long-term
capital gains in the 39.6% bracket, the tax rate is 20%. Preferential income in any other bracket is
taxed at 15%. Certain of our distributions may be treated as qualified dividend income eligible
for preferential rates of U.S. federal income tax to U.S. individual unitholders (and certain other
U.S. unitholders). In the absence of legislation extending the term for these preferential tax rates,
all dividends received by such U.S. taxpayers in tax years beginning on January 1, 2011, or later,
will be taxed at graduated tax rates applicable to ordinary income. When taxpayers have both
ordinary and preferential income, additional deductions can create a multiplier effect that enables
them to save at higher rates than their marginal rates on ordinary income. This phenomenon
occurs when a deduction offsets ordinary income and shifts preferential income from the 25% to
15% (or 10%) bracket or from the 39.6% to 35% (or lower) bracket. Qualified dividends are
taxed at lower rates. Many ordinary dividends received are also classified as qualified dividends.
The amount of the qualified dividends will be shown in box 1b of Form 1099-DIV or on a
similar statement received from a fund or an individual stock.