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Of the. Are there any other cities in New York State that impose an income tax?

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New York State Personal Income Tax Rates for 2015*

New York Personal Income Tax

Although managing your portfolio is primarily an investment decision, tax considerations should also be taken into account. Accordingly, Morgan Stanley has prepared this New York Tax Report. It is not a complete description of New York tax law, but it does summarize many of the provisions of most interest to investors.

Your Morgan Stanley Financial Advisor is available to discuss investment strategies which take the New York tax law into account. Keep in mind that Morgan Stanley, its affiliates and employees are not in the business of providing tax or legal advice. Clients should consult their personal tax or legal advisors before making tax-related investment decisions.

New York Tax Report 2015 Edition

New York City Personal Income Tax Rates for 2015*

MARRIED FILING JOINTLY AND QUALIFYING WIDOW(ER) If taxable income is:

Over: But not over: Your tax is: Of the amount over:

$ 0 $16,950 $ 0+4.00% $ 0

16,950 23,300 678+4.50% 16,950 23,300 27,550 964+5.25% 23,300 27,550 42,450 1,187+5.90% 27,550 42,450 159,350 2,066+6.45% 42,450 159,350 318,750 9,606+6.65% 159,350 318,750 2,125,450 20,206+6.85% 318,750 2,125,450 … 143,965+8.82% 2,125,450

SINGLE AND MARRIED FILING SEPARATELY If taxable income is:

Over: But not over: Your tax is: Of the amount over:

$ 0 $ 8,400 $ 0+4.00% $ 0

8,400 11,600 336+4.50% 8,400

11,600 13,750 480+5.25% 11,600 13,750 21,150 593+5.90% 13,750 21,150 79,600 1,029+6.45% 21,150 79,600 212,500 4,800+6.65% 79,600 212,500 1,062,650 13,637+6.85% 212,500 1,062,650 … 71,873+8.82% 1,062,650

MARRIED FILING JOINTLY AND QUALIFYING WIDOW(ER) If taxable income is:

Over: But not over: Your tax is: Of the amount over:

$ 0 $ 21,600 $ 0+2.907% $ 0 21,600 45,000 628+3.534% 21,600 45,000 90,000 1,455+3.591% 45,000 90,000 500,000 3,071+3.648% 90,000 500,000 … 18,028+3.876% 500,000

SINGLE AND MARRIED FILING SEPARATELY If taxable income is:

Over: But not over: Your tax is: Of the amount over:

$ 0 $ 12,000 $ 0+2.907% $ 0 12,000 25,000 349+3.534% 12,000 25,000 50,000 808+3.591% 25,000 50,000 500,000 1,706+3.648% 50,000 500,000 … 18,122+3.876% 500,000

* New York does not provide a benefit for a graduated rate schedule for high income taxpayers. Refer to the tax computation worksheets in Instructions to Form IT-201

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Page 2 of 5 Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “Fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in a written agreement with Morgan Stanley. Individuals are encouraged to consult their tax and legal advisors (s) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.

The tax information herein is based on laws in effect as of March 01, 2015.

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What are the retirement plan, IRA and Coverdell contribution limits for 2015?

Contribution Limits IRA SIMPLE

401(k), 403(b), 457 Plans

Coverdell Education Savings Account

Simplified Employee Pension (SEP), Profit Sharing or Money Purchase Plan Basic Limits $5,500 $12,500 $18,000 $2,000 Lesser of 25%** of compensation or $53,000

Catch-up Limit (age 50 or older) 1,000 3,000 6,000* 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 after an adjustment for self-employment tax up to a maximum of $53,000.

What is the New York personal income tax standard deduction for 2015?

Filing Status Standard Deduction

Single (and can be claimed as a dependent on another taxpayer’s return) $3,100 Single (and cannot be claimed as a dependent on another taxpayer’s return) 7,900

Married filing joint return 15,850

Married filing separate return 7,900

Head of household 11,100

Qualifying widow(er) with depedent child 15,850

What itemized deductions does New York allow?

New York State (NYS) taxpayers who itemize deductions for federal income tax purposes may elect to take those same deductions (with certain modifications) for NYS tax purposes. For taxpayers with NYS adjusted gross income over $525,000 the modifications include a disallowance of 50% of the taxpayers’ itemized deductions for federal income tax purposes. Those with NYS adjusted gross income over $1 million are barred from claiming any itemized deductions except 50% of the charitable contribution deduction.

Interest income from United States government and agency obligations is taxable at the federal level. How are these obligations treated for New York personal income tax purposes?

ExEMPT FROM NEW YORk PERSONAL INCOME TAx

• U.S. Treasury Bills, Notes, Bonds • Federal Intermediate Credit Banks

• U.S. Savings Bonds • Banks for Cooperatives

• Federal Home Loan Banks (FHLBs) • Federal Farm Credit Banks

• Financing Corporation (FICO) • Student Loan Marketing Association

• General Services Administration • Export — Import Bank of the U.S. Series 1978-B

• Tennessee Valley Authority • Puerto Rico, Guam and the Virgin Islands

• ETRs, STRIPs, CATs, TIGRs • Resolution Funding Corporation (REFCORP)

• Federal Land Banks • Federal Housing Authority Debentures

TAxABLE FOR NEW YORk PERSONAL INCOME TAx

• Government National Mortgage Association (GNMA)

• Federal National Mortgage Association (FNMA)

• Federal Home Loan Mortgage Corporation (FHLMC)

• International Bank for Reconstruction and Development (World Bank)

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Is municipal bond income exempt from New York personal income taxes?

Interest on bonds issued by the State of New York or on municipal bonds issued by a county, city, town or other local government unit in the state is exempt from New York personal income tax.

If a mutual fund invests in either federal obligations or New York municipal bonds, may a shareholder exclude the interest attributable to these obligations?

Mutual fund shareholders may exclude the portion of the distribution derived from interest on obligations of the United States government, exempt United States agencies and United States possessions if, at the close of each taxable quarter, at least 50% of the value of the fund’s assets are invested in any of these types of securities. Mutual fund distributions derived from New York state or local obligations are excludable. There is no percentage threshold requirement for New York obligations. Information on whether a fund qualifies for exclusion is available from the mutual fund company.

How are qualified dividends, capital gains and capital losses treated in New York?

Qualified dividends and capital gains are taxable as ordinary income.

Capital losses are deductible in full against capital gains. Net capital losses are deductible against ordinary income up to a maximum of

$3,000, with the remaining balance carried forward. There are some differences in New York and federal laws that may affect the amount of capital gain or loss to be reported.

How are IRA, pension and qualified annuity distributions taxed?

If you are age 59½ or older, you may subtract up to $20,000 of your IRA, pension and qualified annuity distributions from your federal adjusted gross income for purposes of determining your New York adjusted gross income. If you become age 59½ during the tax year, an exclusion is allowed only for the amount of IRA, pension and annuity income received on or after you became 59½, but not more than $20,000. Certain qualified pension benefits received by officers and employees of the United States, New York State and local governments within New York State are exempt from New York State, New York City, and Yonkers income taxes.

Does New York law provide for an exclusion on the sale of a principal residence by a New York resident?

Are Social Security benefits taxable in New York?

New York does not tax Social Security benefits.

Can a New York resident open a

Section 529 Qualified Tuition Program to help fund future education costs?

Yes. Most states have established qualified tuition programs, also known as Section 529 plans. Residents of New York are free to choose from New York’s plan or from a national plan offered through another state. The contribution limits, investment options and costs differ by program. New York allows a $5,000 per person (maximum $10,000 on a joint return) New York State tax deduction for Section 529 plan contributions to the New York State 529 College Savings Program.

There is no federal deduction. Section 529 plan distributions are federal and New York state income tax free if used to pay higher education expenses, such as tuition, room and board, books, supplies and equip- ment required for enrollment at an eligible educational institution. For more information about the features of any state’s Section 529 plan, go to www.collegesavings.org.

Residents of New York working in another state

Residents that live in New York and work in a different state are entitled to claim a credit for taxes paid to other jurisdictions, the credit is referred to as the New York State Resident Credit. The credit applies to taxpayers that have income from sources outside New York State and pay income tax to another state, a local government of another state, the District of Columbia, or to a province of Canada. The credit is allowable only for the portion of the tax that applies to income sourced to and taxed by the other taxing authority while you were a New York State resident. Form IT-112-R is filed with your New York State income tax return to claim the credit. Taxpayers that are liable for income tax in another state will need to file a non-resident return in that state, the amount withheld in the other state is claimed against their tax liability.

Residents of other states working in New York

Residents that live in other states and work in New York are required to file New York State non-resident income tax returns. Wages earned in New York are taxed in New York. Other states that levy an income tax have a similar credit available to New York’s Resident Credit.

What are the Rules for Same-Sex

Married Couples (SSMCs) Filing Status?

With the Supreme Court decision striking down the provision of the

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Page 4 of 5 Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “Fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in a written agreement with Morgan Stanley. Individuals are encouraged to consult their tax and legal advisors (s) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.

The tax information herein is based on laws in effect as of March 01, 2015.

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single filing status. They can either file a joint return or file as married filing separately. New York State has given equal treatment to individuals legally married to different-sex spouses and same-sex spouses since the enactment of the Marriage Equality Act, which took effect on July 24, 2011. Opportunities may exist for filing amended tax returns, clients affected should consult with their tax advisor.

Does New York State permit Transfer On Death Accounts?

Yes. On January 1, 2006, New York introduced Transfer On Death (TOD) accounts. A TOD account is a relatively easy-to-implement planning tool that generally avoids probate.

A TOD account permits the account owner to name beneficiaries to whom the account assets pass upon the account owner’s death.

Some attributes of a TOD account are:

• The account generally avoids probate since the assets are payable to a named beneficiary

• The account owner retains total control over the account during his or her lifetime

• The account owner may name anyone, including a minor, as beneficiary of the TOD account

• TOD may be used with single or joint accounts. If the account is registered as a joint account, then only on the death of the last surviving joint tenant, such as the surviving spouse, do the assets pass to the named beneficiaries

The beneficiary designation on a TOD account generally takes precedence over the account owner’s will.

How does New York Tax Non-Residents?

If you are a nonresident individual, estate, or trust, you are subject to tax on your New York source income. New York source income includes income derived from or connected with a business, trade, profession, or occupation carried on in New York State. If you are a partner in a partnership, New York source income also includes those items of income, gain, loss, and deduction included in your distributive share of partnership income that is derived from or connected with business carried on by the partnership in New York State.

To compute the amount of tax due, use New York Form IT-203, Nonresident and Part-Year Resident Income Tax Return. You will compute a base tax as if you were a full-year resident, then determine the percentage of your income that is subject to New York State tax and the amount of tax apportioned to New York State.

See New York State Department of Taxation and Finance publication 88 for more information.

Does New York impose an estate tax?

Yes, New York imposes an estate tax. New York made significant amend- ments to the tax effective for estates of individuals with dates of death on or after April 1, 2014. The filing threshold was increased and will gradually increase each year through 2019 to conform to the federal estate tax laws.

The top New York estate tax rate remains at 16%.

The estate of a New York resident must file a New York State estate tax return if:

• The amount of the resident’s federal gross estate, plus

• The amount of any includible gifts,

exceeds the basic exclusion amount applicable at the date of death.

The New York estate tax basic exclusion amounts through 2019 are:

Date of Death Exemption

Prior to 04/01/14 $1,000,000 04/01/14 to 03/31/15 $2,062,500 04/01/15 to 03/31/16 $3,125,000 04/01/16 to 03/31/17 $4,187,000 04/01/17 to 03/31/18 $5,250,000

On or after 01/01/19 $5MM indexed for inflation from 2010

Nonresident estates are required to file an estate tax return if they include real or tangible personal property with a situs in New York State, and the total of the federal gross estate and includible gifts exceeds the basic exclu- sion amount.

Where can a taxpayer obtain more information on New York taxes?

Information is available from the New York State Department of Taxation and Finance by calling 518-457-5181. Information and tax forms are also available on the New York State Department of Taxation and Finance Website at www.tax.ny.gov.

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How Do New York Tax-Exempt Yields Compare to Taxable Yields in Various Federal Income Tax Brackets for New York Residents?*

NEW YORk

Federal Tax Brackets 25.00% 28.00% 33.00% 35.00% 39.60%

Single $37,451-90,750 $90,751-189,300 $189,301-411,500 $411,501-413,200 $413,201- Joint $74,901-151,200 $151,201-230,450 $230,451-411,500 $411,501-464,850 $464,851- Assumed New York State Rate

Federal Rate Effective Combined Rate

6.85% 6.85% 6.85% 6.85% 8.82%

25.00% 28.00% 33.00% 35.00% 39.60%

30.14% 32.93% 37.59% 39.45% 44.93%

2.50% 3.58% 3.73% 4.01% 4.13% 4.54%

3.00% 4.29% 4.47% 4.81% 4.95% 5.45%

3.50% 5.01% 5.22% 5.61% 5.78% 6.36%

4.00% 5.73% 5.96% 6.41% 6.61% 7.26%

4.50% 6.44% 6.71% 7.21% 7.43% 8.17%

5.00% 7.16% 7.46% 8.01% 8.26% 9.08%

5.50% 7.87% 8.20% 8.81% 9.08% 9.99%

NEW YORk CITY & STATE COMBINED

Federal Tax Brackets 25.00% 28.00% 33.00% 35.00% 39.60%

Single $37,451-90,750 $90,751-189,300 $189,301-411,500 $411,501-413,200 $413,201- Joint $74,901-151,200 $151,201-230,450 $230,451-411,500 $411,501-464,850 $464,851-

(State / City) Assumed New York State Rate

Federal Rate Effective Combined Rate

10.73% 10.73% 10.73% 10.73% 12.70%

25.00% 28.00% 33.00% 35.00% 39.60%

33.04% 35.72% 40.19% 41.97% 47.27%

2.50% 3.73% 3.89% 4.18% 4.31% 4.74%

3.00% 4.48% 4.67% 5.02% 5.17% 5.69%

3.50% 5.23% 5.45% 5.85% 6.03% 6.64%

4.00% 5.97% 6.22% 6.69% 6.89% 7.59%

4.50% 6.72% 7.00% 7.52% 7.75% 8.53%

5.00% 7.47% 7.78% 8.36% 8.62% 9.48%

5.50% 8.21% 8.56% 9.20% 9.48% 10.43%

* Rates are estimated based on projections using formulas specified in the Internal Revenue Code and the New York State Tax Law. This matrix should be used as a general guideline when determining taxable equivalent yields for municipal bonds. Tax-exempt yields are for illustrative purposes only and do not represent any specific offerings. These tax rates are subject to change.

New York does have lower tax rates within each federal bracket with relation to income level and type of filing. If state tax rates are lower than posted, taxable equivalent yields may be lower than the actual number printed. The effective combined rate assumes the taxpayer itemizes his/her deductions. The factors do not adjust for: the imposition of the 3.8% Medicare surtax, nor the phase-out of itemized deductions, personal exemption phase-out, or the reduction of any credits that may occur for certain high-income taxpayers; the yield to maturity factoring in market discount or market premium, or the effect, if any, of the federal Alternative Minimum Tax (AMT).

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