Instructions For Form 8960 - Net Investment Income Tax - Individuals, Estates, And Trusts - 2017

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2017
Department of the Treasury
Internal Revenue Service
Instructions for Form 8960
Net Investment Income Tax—
Individuals, Estates, and Trusts
Wages,
election). See
Regulations Section
Section references are to the Internal Revenue
Code unless otherwise noted.
Unemployment compensation,
1.1411-10(g)
Election, later.
Alaska Permanent Fund Dividends,
Future Developments
Section 1411 trade or business.
Alimony,
Generally, a trade or business that’s either
Social Security benefits,
For the latest information about
a passive activity for the taxpayer or is a
Tax-exempt interest income,
developments related to Form 8960 and
trade or business of trading in financial
Income from certain qualified retirement
its instructions, such as legislation
instruments or commodities. See section
plan distributions, and
enacted after they were published, go to
1411(c)(2) and Regulations section
Income subject to self-employment
IRS.gov/Form8960.
1.1411-5(a).
taxes.
General Instructions
Recordkeeping
Net investment income. Generally, net
investment income includes gross income
For the NIIT, certain items of investment
from interest, dividends, annuities,
Reminder
income and investment expense receive
royalties, and rents, unless they’re derived
different treatment than for the regular
These instructions are based mostly on
from the ordinary course of a trade or
income tax. Therefore, you need to keep
Regulations sections 1.1411-1 through
business that isn’t (a) a passive activity or
all records and worksheets for the items
1.1411-10.
(b) a trade or business of trading in
you need to include on Form 8960. Keep
financial instruments or commodities. In
all records for the entire life of the
Who Must File
addition, net investment income includes
investment to show how you calculated
other gross income derived from a trade or
Attach Form 8960 to your return if your
basis. You’ll need to know what you did in
business that’s (a) a passive activity or (b)
modified adjusted gross income (MAGI) is
prior years if the investment was part of a
a trade or business of trading in financial
greater than the applicable threshold
carryback or carryforward.
instruments or commodities. Additionally,
amount.
net investment income includes net gain
Application to Individuals
Purpose of Form
(to the extent taken into account in
computing taxable income) attributable to
U.S. citizens and residents. Individuals
Use Form 8960 to figure the amount of
the disposition of property other than
who have for the tax year (a) modified
your Net Investment Income Tax (NIIT).
property held in a trade or business that’s
adjusted gross income (MAGI) that’s over
Definitions
not (a) a passive activity or (b) a trade or
an applicable threshold amount, and (b)
business of trading in financial instruments
net investment income, must pay 3.8% of
Controlled foreign corporation (CFC).
or commodities. To arrive at net
the smaller of (a) or (b) as their NIIT.
Generally, a CFC is any foreign
investment income, the above items are
The applicable threshold amount is
corporation if more than 50% of its voting
reduced by deductions allowed against
based on your filing status:
power or stock value is owned or
the income tax which are properly
Married Filing Jointly or Qualifying
considered owned by U.S. shareholders
allocable to those items of gross income
Widow(er) is $250,000,
(as defined in section 951(b)) on any day
or net gain. See section 1411(c) and
Married Filing Separately is $125,000,
during the tax year. Certain foreign
Regulations sections 1.1411-4 and
or
insurance companies are considered
1.1411-10(c).
Single or Head of Household is
CFCs if more than 25% of their voting
$200,000.
Passive foreign investment company
power or stock value is owned or
(PFIC). Generally, a PFIC is any foreign
considered owned by U.S. shareholders
Nonresidents. The NIIT doesn’t apply to
corporation if at least 75% of its gross
(as defined in section 951(b)) on any day
nonresident alien (NRA) individuals. If
income is passive income or an average
during the tax year. See section 957(a)
you’re a U.S. citizen or resident married to
of at least 50% of its assets produce
and (b). Additionally, certain foreign
an NRA, your filing status will be married
passive income or are held for the
insurance companies with related person
filing separately for purposes of
production of passive income. See section
insurance income may be CFCs. See
determining your MAGI, net investment
1297(a).
section 953(c).
income, and whether you’re subject to the
NIIT. However, see information, later,
Qualified electing fund (QEF).
Excluded income. Excluded income
about certain elections to file jointly with
Generally, a QEF is a PFIC for which the
means:
NRA spouses.
taxpayer has made an election under
Income excluded from gross income in
section 1295(b) and the PFIC complies
chapter 1 of the Internal Revenue Code
Dual-resident individual. If you’re a
with IRS requirements for determining
(IRC),
dual-resident individual, within the
ordinary earnings and net capital gain.
Income not included in net investment
meaning of Regulations section
See section 1295(a).
income, and
301.7701(b)-7(a)(1), generally you’ll be
Gross income and net gain specifically
treated as a U.S. resident for purposes of
Section 1.1411-10(g) election. An
excluded by section 1411, related
the NIIT. However, you’ll be treated as an
election made under Regulations section
regulations, or other guidance published in
NRA for purposes of the NIIT if:
1.1411-10(g) (section 1.1411-10(g)
the Internal Revenue Bulletin.
You determine you would be treated as
a resident of a foreign country for
Examples of excluded items are:
Jan 02, 2018
Cat. No. 53783S

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