Tax Tables to Help You

in Your Investment Decisions 2010 Edition

Federal Income Tax Rates

Married Couple Filing Joint Return individual Return
If taxable income is: If taxable income is:

Of the Of the
Over: But not over: Your tax is: amount over: Over: But not over: Your tax is: amount over:
$0 $16,750 $0+10% $0 $0 $8,375 $0+10% $0
16,750 68,000 1,675.00+15% 16,750 8,375 34,000 837.50+15% 8,375
68,000 137,300 9,362.50+25% 68,000 34,000 82,400 4,681.25+25% 34,000
137,300 209,250 26,687.50+28% 137,300 82,400 171,850 16,781.25+28% 82,400
209,250 373,650 46,833.50+33% 209,250 171,850 373,650 41,827.25+33% 171,850
373,650 ... 101,085.50+35% 373,650 373,650 ... 108,421.25+35% 373,650

Married Couple Filing separate Returns head of household Return

If taxable income is: If taxable income is:

Of the Of the
Over: But not over: Your tax is: amount over: Over: But not over: Your tax is: amount over:
$0 $8,375 $0+10% $0 $0 $11,950 $0+10% $0
8,375 34,000 837.50+15% 8,375 11,950 45,550 1,195.00+15% 11,950
34,000 68,650 4,681.25+25% 34,000 45,550 117,650 6,235.00+25% 45,500
68,650 104,625 13,343.75+28% 68,650 117,650 190,550 24,260.00+28% 117,650
104,625 186,825 23,416.00+33% 104,625 190,550 373,650 44,672.00+33% 190,550
186,825 ... 50,542.75+35% 186,825 373,650 ... 105,095.00+35% 373,650

If taxable income includes long-term capital gains and/or qualified dividend income, see “Compute Your Tax” on page two for special computation.

First-Time Homebuyer Credit Extended

The Worker, Homeownership and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from November 30, 2009, to
April 30, 2010. The maximum credit amount remains at $8,000 for a first-time homebuyer, that is, a buyer who has not owned a primary residence
during the three years up to the date of purchase.
The law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyer.” To qualify as a long-time
resident, a buyer must have owned and used the same home as a principal or primary residence for a least five consecutive years of the eight-year
period ending on the date of purchase of a new home as a primary residence. For all qualifying purchases in 2010, taxpayers have the option of
claiming the credit on either their 2009 or 2010 tax returns.
The full credit will be available to taxpayers with modified adjusted gross incomes (“MAGI”) up to $125,000, or $225,000 for joint filers. Those with
MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do
not qualify. No credit is available if the purchase price of a home is more than $800,000. A purchaser must be at least 18 years of age on the date of
purchase. Dependents are not eligible to claim the credit. Members of the Armed Forces and certain federal employees serving outside the U.S. have
NY CS 6175125 01/10

an extra year to buy a principal residence in the U.S. and still qualify for the credit.
Morgan Stanley Smith Barney does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be
used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws
are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.
The tax information herein is based on U.S. laws in effect as of December 15, 2009, for use in filing individual 2010 tax returns in 2011. Page 1 of 4
Retirement Plan Contribution Limits
401(k), Coverdell
403(b), Education Simplified Employee Pension (SEP), Profit Sharing or
Contribution Limits IRA SIMPLE 457 Plans Savings Account Money Purchase Plan
Basic Limits $5,000 $11,500 $16,500 $2,000 Lesser of 25%** of compensation or $49,000
Catch-up Limit (age 50 or older) 1,000 2,500 5,500* N/A 0

*A higher contribution limit may apply to 457 plan participants in the last three years before retirement.
**For self-employed the limit is 20% of net-earnings from self-employment up to a maximum of $49,000.

Exemption and Deductions

Every taxpayer (with the exception of one who can be claimed as a dependent on another’s return) is entitled to a personal exemption (subject to
phase outs — see below) and a standard deduction. An additional personal exemption can be claimed for each dependent. Elderly and blind taxpayers
are entitled to an additional standard deduction amount. The standard deduction is used by taxpayers who do not itemize.

Standard Deduction_______________________________________________________
Additional Standard Deduction_______________________
Filing Status Personal Exemption* Deduction 65 or Older† Blind†
Married Filing Jointly $7,300 $11,400 $1,100 $1,100

Single 3,650 5,700 1,400 1,400

Head of Household 3,650 8,400 1,400 1,400

Married Filing Separately 3,650 5,700 1,100 1,100

*Claim an additional $3,650 personal exemption for each dependent. †Per spouse 65 or older, or blind.

How to Do an Income Tax Calculation Compute Taxable Income

To calculate your tax, follow the instructions supplied with the return,
which outline in detail the following general steps:
Compute Gross Income
Total all income (salaries, wages, commissions, dividends, interest, capital
gains, etc.) and subtract business and investment losses. Capital losses
and passive losses (e.g., losses from limited partnerships and rental
activities) can fully offset capital gains and passive income, respectively.
Capital losses in excess of capital gains are deductible against other
income up to a maximum of $3,000 per year.
Compute Adjusted Gross Income
Subtract adjustments to income such as alimony, self-employed
retirement plan contributions, 100% of self-employed health insurance
costs, IRA contributions and one-half of self-employment tax. IRA
deductions are restricted for individuals covered by an employer
retirement plan once adjusted gross income exceeds $56,000 for single
taxpayers and $89,000 for married couples filing jointly. The $5,000
maximum deduction ($6,000 age 50 and over) is reduced over those
threshold amounts. However, a $200 minimum IRA deduction is
allowed for taxpayers whose adjusted gross income (“AGI”) does not
reach the upper limit of $66,000 for single filers and $109,000 for
married couples filing jointly.
First, subtract the greater of the standard deduction or total itemized
deductions. Miscellaneous deductions (including unreimbursed
employee business expenses) are only deductible to the extent they
exceed 2% of adjusted gross income; home mortgage interest is only
deductible on primary and secondary residences, and only if certain
conditions are met. Investment interest expense (margin interest) is
deductible only up to net investment income. Itemizers have a choice
of deducting either state and local income taxes or sales taxes. Real
estate taxes are also deductible.
Compute Your Tax
Use the tax tables in the IRS instruction booklet.
Special Computation for Long-Term Capital Gains and
Qualified Dividend Income
If taxable income includes a net long-term gain and/or qualified dividends,
subtract the gain and /or dividends from total taxable income. Then
determine the tax on the remaining taxable income. If taxable income,
after subtracting the net long-term gain and qualified dividends, is in
a tax bracket of 25% or higher, then net long-term capital gains and
qualified dividends are taxed at 15% with certain exceptions for
collectibles, unrecaptured section 1250 gain and section 1202 gain.
If taxable income, after subtracting the net long-term gain and/or
qualified dividends, is in the 15% bracket or lower, then net long-term
capital gains and qualified dividends are taxed at the 0% rate up to the
15% bracket limit. Any balance of long-term gain and qualified dividends
above the 15% bracket is taxed at 15%. The long-term capital gains rate
is scheduled to increase to 20% for sales after December 31, 2010.
NY CS 6175125 01/10

Morgan Stanley Smith Barney does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be
used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws
are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.
The tax information herein is based on U.S. laws in effect as of December 15, 2009, for use in filing individual 2010 tax returns in 2011. Page 2 of 4
 Certain Unearned Income of Children Taxed as if Parent ’s Income
Special rules apply to the taxation of unearned income (such as interest and dividends) of a child not filing a joint return regardless of whether
the child can be claimed as a dependent on a parent’s tax return.
The first $950 of the child’s unearned income is exempt. The next $950 is taxed at the child’s tax rate, generally 10% (0% rate on long-term
capital gains and qualified dividends). Unearned income in excess of $1,900 in a year in which the child has not yet attained the age of 19 (age
24 if a full-time student) is taxed as if it were the income of the parent, if doing so would result in a larger tax than if taxed at the child’s tax rate.
This is commonly referred to as the “Kiddie Tax.” If the child has attained age 19 (age 24 if a full-time student) by year-end, all unearned income
in excess of $950 is taxed at the child’s tax rate. The “Kiddie Tax” does not apply if neither parent is alive, or the child files a joint return, or the
child is age 19 (24 if a full-time student) and has income from working which exceeds one-half of the amount of the individual’s support.

Unique ROTH Conversion Opportunity in 2010

The income limitations of $100,000 and tax filing status requirements are eliminated starting in 2010 for those that wish to do a Roth conversion. If
you convert in 2010, you can take advantage of an opportunity to recognize the income across 2011 and 2012. In addition, if the assets being converted
are still depressed from the tumultuous markets we saw in 2008 and 2009, your tax due on the converted amount will be less than in a more robust
market. You also have the option of undoing (or “recharacterize”) the conversion until October 15, 2011 if the conditions do not turn out ideal.
Roth IRA contribution limits for those with MAGI of $167,000–$177,000 married filing jointly, and $105,000–$120,000 for single filers remain.
Those 50 or older may make catch-up contributions of an additional $1,000 in addition to the regular $5,000 Roth IRA contribution.

Income Taxation of Social Security Benefits

Eighty-five percent of Social Security benefits are generally taxable, but for taxpayers with relatively low Provisional Income (i.e., adjusted gross income
plus tax-exempt interest plus one-half of Social Security benefits received), the rate of tax, based on a fairly complicated two-tiered system, may be lower.

Earned Income Test for Loss of Social Security Benefits

Retirees who have not attained full retirement age (66 for those born in 1943–1954) in 2010 may have earnings of $14,160 without loss of benefits.
“Earnings” is defined as wages, bonuses, commissions, fees from all types of work and net earnings from self-employment. For those retirees, one
dollar in Social Security benefits is withheld for each $2 of earnings in excess of $14,160 during 2010. Retirees who attain full retirement age during
2010 may have earnings of up to $37,680 in the portion of 2010 prior to attaining full retirement age; one dollar in Social Security benefits will be
withheld for each $3 of earnings in excess of $37,680 earned during 2010 but prior to attaining full retirement age. There is no limit on the earnings
of retirees who have attained full retirement age.

Effect of Early Retirement on Social Security Benefits

Full retirement age for Social Security purposes is age 66, but reduced For early retirement purposes, a spouse is entitled to the higher of the
benefits can begin as early as age 62, as shown in the table below. amount shown in this table or the benefit computed on the basis of the
spouse’s own work record.
Percentage of Worker’s Benefit Available at
Full Retirement Age In addition, a worker retiring after full retirement age is entitled to an
Age When Benefits additional benefit for each year worked between full retirement age
Begin Worker Spouse and 70.
62 75.0% 35.0% The Social Security Act has increased the retirement age when unreduced
63 80.0% 37.5% benefits are available (originally 65) to age 66 for workers born in
1943–1954; increases by two months a year the retirement age for
64 86.7% 41.7%
workers born in 1955–1959; and maintains age 67 for workers born
65 93.3% 45.8% after 1959.
Full Retirement Age 100.0% 50.0%

Social Security and Medicare Taxes

Earnings Subject To Tax Amount To Be Paid By Employee & Employer Each Amount To Be Paid By Self-Employed Person*
Wage Base Rate Maximum Tax Rate Maximum Tax
Social Security Tax $106,800 6.20% $6,621.60 12.40% $13,243.20
Medicare Unlimited 1.45% Unlimited 2.90% Unlimited
NY CS 6175125 01/10

*One-half of self-employment tax is allowed as a deduction from gross income on Form 1040.

Morgan Stanley Smith Barney does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be
used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws
are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.
The tax information herein is based on U.S. laws in effect as of December 15, 2009, for use in filing individual 2010 tax returns in 2011. Page 3 of 4
Estate Tax Repeal Estate Tax Exclusion
The estate tax is repealed effective January 1, 2010. No estate tax will Year Exclusion Equivalent Credit
apply to estates of decedents dying in 2010. The stepped-up basis at
death rules are repealed and replaced with a modified carryover basis. 2006–2008 2,000,000 780,800
In 2011, the estate tax will be reinstated at the 2001 rate of 55% and 2009 3,500,000 1,455,800
exemption level of $1 million.
2010 (estate tax repealed) ...
Congress is reviewing the estate tax rules and new legislation may 2011 1,000,000 345,800
be enacted some time in 2010. Please consult with your legal or tax
advisors regarding your estate plans.
Gift Tax Rates
Estate and Gift Taxes If the taxable gift is:
The federal government levies a gift tax on the value of transfers taking Over: Your tax is: Of the amount over:
place during life and an estate tax on the value of transfers at death.
$1,000,000 35% $1,000,000
The tax rate on both types of transfers is the same, as shown in the table
at right. An individual can give away $13,000 annually to any number Income Tax Rates for Estates and Trusts
of people (including non-family members) without incurring a gift tax. A trust that is required to distribute all of its income currently is entitled to
An individual can give away $1 million over and above the $13,000 an- a $300 exemption (even for a year in which it makes a corpus distribution
nual gift tax exclusion during the individual’s lifetime without incurring a or a charitable contribution). All other trusts are allowed a $100 exemption,
gift tax, though the individual will have to file a gift tax return. while an estate is allowed an exemption of $600. There is no standard
deduction for estates and trusts.
In addition to any potential federal tax, some states impose their own
gift, estate and/or inheritance tax. These state tax provisions may or may Trusts and estates pay tax on long-term capital gains and qualified
not be similar to the federal law and should not be overlooked when an dividends at the same rate as individuals. See page 2.
individual is planning his or her estate.
2010 Estate and Trust Income Tax Rates
Basis of Gifted Assets If taxable income is:
A donee’s basis for property acquired by gift is the same as the property’s Of the
adjusted basis in the hands of the donor. If the donor was required to Over: But not over: Your tax is: amount over:
pay gift tax, the recipient’s basis is increased by the amount of gift tax
$0 $2,300 $0+15% $0
paid that is attributable to that gift. If the property’s fair market value
(“FMV”) at the date of the gift is lower than the adjusted basis, then 2,300 5,350 345.00+25% 2,300
the basis for determining loss is its fair market value on that date. It is 5,350 8,200 1,107.50+28% 5,350
possible that neither gain nor loss will be realized when the donee sells
the property. 8,200 11,200 1,905.50+33% 8,200

For Example: Stock with a $13,000 basis is gifted when the FMV on 11,200 ... 2,895.00+35% 11,200
the date of gift is $10,000. The stock is later sold for $11,000. There
is neither gain nor loss, since the basis for determining gain is $10,000
and the basis for determining loss is $13,000.
If the fair market value of stock or other property that you plan to gift
is less than your cost basis at the time of the gift, your best strategy
might be to simply sell the stock and recognize a loss, which you can
use to offset other gains.

Morgan Stanley Smith Barney does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be
used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws
are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation.
The tax information herein is based on U.S. laws in effect as of December 15, 2009, for use in filing individual 2010 tax returns in 2011.

© 2010 Morgan Stanley Smith Barney LLC. Member SIPC.

NY CS 6175125 01/10
CLF# 37030

Page 4 of 4