Okay i have a question but my English isn't really good so please understand.
(also please do not make this post about why it does not make sense to hold property in an S corp, i already know why, and this is not the point of this post)
Also note i live in MA, and so does everyone in this example, and we're playing with about 8 mill making 70 in rental income yearly. No corp or llc property held in name.
The Question
so based on what this website below said
http://www.thetaxadviser.com/issues/2014/nov/tax-clinic-06.html
"The downside to using an ESBT is that the income is taxed at the highest marginal rate rather than the beneficiary's tax rate, which could be lower."
and what this website said
http://www.thetaxadviser.com/issues/2014/nov/tax-clinic-06.html
says "One shortcoming of an ESBT is that its S corporation portion is subject to the highest rate of income tax on ordinary income (currently, 39.6%). "
Hypotheically, lets say there is a trust with 3 UNMARRIED people in it.
Person A Makes 150,000 a year pays 28% income tax
Person B and C make 30,000 a year pays 15% income tax
Okay so what im trying to get at is could you make the argument that it is unfair for Person B and C because they could be taxed at a lower rate personally instead of having the whole trust taxed at the high 39.6 rate
(note Person A, Person B, And Person C all have 33 percent shareholding and the get the same dividends)
It just seems like the savings within the S CORP work out good for Person a since his income tax is already high and the s corp saves within itself.
Is this all sound? is it unfair to person b and c?
