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information, see Regulations section

line 7 to report additions and modifications

Other section 62(a)(1) deductions.

1.1411-10.

to net investment income such as:

Use line 7 to report additional deductions

Section 1411 net operating loss (NOL)

attributable to a section 1411 trade or

CFCs and QEFs without a section

(enter as a negative amount). See

Section

business that aren’t included on lines 4–6.

1.1411-10(g) election in effect. If you

1411

NOL, later.

Generally, these deductions are

don’t have a section 1.1411-10(g) election

Any deductions described in section

above-the-line deductions reported on

in effect for a CFC or QEF, generally,

62(a)(1) that are properly allocable to a

Form 1040, lines 23–35.

you’ll include in net investment income

passive activity or trading business, but

certain distributions of previously taxed

aren’t taken into account on lines 4a or 5a

Note. Expenses associated with the trade

income from the CFC or QEF that aren’t

(enter as a negative amount). See

Other

or business of trading in financial

subject to regular income tax. In addition,

section 62(a)(1)

deductions, later.

instruments or commodities that are

other special rules may apply, including

Adjustments for distributions from

reported on your Schedule C (Form 1040)

rules that provide, as applicable,

estates and trusts. See

Distributions from

are reported on Form 8960, line 10. See

alternative basis calculations for your

estates and

trusts, later.

Special rule for traders in financial

basis in the CFC or QEF, or your basis in a

Section 404(k) dividends reported on

instruments or

commodities, later.

domestic partnership or S corporation that

line 2 (enter as a negative amount). See

owns the interest in the CFC or QEF. Also,

Line 2—Ordinary

Dividends, earlier.

Note. Early withdrawal penalty (Form

the amount of investment interest expense

Interest income reported on line 1

1040, line 30) is reported on Form 8960,

you take into account for NIIT purposes

received from certain nonpassive activities

line 10.

may be increased or decreased from the

(entered as a negative amount). See

amount taken into account for regular

Use line 7 to report the amount of

Self-charged

interest, later.

income tax purposes. (For additional

your domestic production

TIP

Recoveries of deductions taken on a

information on all of these rules, see

activities deduction from Form

prior year's Form 8960. See

Deduction

Regulations section 1.1411-10.) As a

1040, line 35, attributable to a section

recoveries, later.

result of these rules, you may need to

1411 trade or business. Using Form 8903,

Other items of net investment income

include amounts in net investment income

Domestic Production Activities Deduction,

(or properly allocable deductions) not

that aren't otherwise reported on Form

as a worksheet, compute the domestic

otherwise included on Form 8960 reported

8960 or make adjustments to amounts

production activities deduction using only

on Form 1040, line 21; Form 1041, line 8;

reported elsewhere on Form 8960. For

the information from your section 1411

Form 1041-QFT, lines 4 and 9; Form

example, you may need to include

trade or business. On line 7, enter the

1040NR, amount on statement reporting

distributions from a CFC or a QEF in net

lesser of the amount on Form 1040,

tax items for your period of U.S. residency

investment income. Use line 6 to make

line 35, or the amount of the deduction

corresponding to Form 1040, line 21. For

increases or decreases to net investment

reported on the recomputed Form 8903

example, these items could include:

income as a result of the application of this

worksheet. Keep the recomputed Form

1. Amounts reported on Form 8814,

rule (for items that aren’t otherwise

8903 for your records; don’t include it with

Parents' Election To Report Child's

reflected on Form 8960).

your return.

Interest and Dividends, line 12. See

Form

8814

election, later;

Note. Use line 5b to deduct inclusions

Form 8814 election. Parents electing to

under section 1293(a)(1)(B) that are

include their child's dividends and capital

2. Substitute interest and dividend

allowed on line 5a, or to adjust the amount

gain distribution in their income by filing

payments (generally reported on Form

of gain or loss derived from the disposition

Form 8814 include on Form 8960, line 7,

1099-MISC, Miscellaneous Income); and

of shares of a CFC or QEF. However, if

the amount on Form 8814, line 12,

3. Net positive periodic payments

the gain included in net investment

excluding Alaska Permanent Fund

received from a notional principal contract

income is higher than the amount reported

Dividends.

(NPC) that’s referenced to property

for regular income tax (or the loss is

(including an index) that produces (or

Distributions from estates and trusts.

greater), report the adjustment on line 6.

would produce if the property were to

Enter the amount from Schedule K-1,

produce income) interest, dividends,

Form 1041, Beneficiary's Share of

Note. Even if you don’t have a section

royalties, or rents. For example, an

Income, Deductions, Credits, etc., box 14,

1.1411-10(g) election in place for a CFC

interest rate swap, cap, or floor and an

code “H.”

or QEF, there are certain instances in

equity swap would be treated as an NPC

which distributions to you from the CFC or

that produces net investment income.

Note. If the amount reported on

QEF may not be subject to NIIT. For

Schedule K-1, Form 1041, box 14, with a

Gains and losses from the disposition

example, if a prior holder of the CFC or

code “H” is a positive number, enter it on

of property not included on line 5a that are

QEF had made a section 1.1411-10(g)

taken into account in computing taxable

Form 8960, line 7, and increase your

election for that CFC or QEF and you

income. For example:

MAGI on Form 8960, line 13 (or Form

receive a distribution of earnings and

8960, line 19a) by the same amount.

1. Gain or loss from the disposition of

profits which were previously included in

If the amount reported on

an annuity or life insurance contract. See

the net investment income of the prior

Schedule K-1, Form 1041, box 14, with a

Line

3—Annuities, earlier.

holder, you may not be subject to NIIT on

code “H” is a negative number, and the

that distribution. For more information, see

2. Casualty and theft losses reported

trust has indicated some (or all) of the

Regulations section 1.1411-10.

on Schedule A (Form 1040), Itemized

adjustment also requires a MAGI

Deductions, line 20 (enter as a negative

adjustment, enter it on Form 8960, line 7,

Line 7—Other Modifications to

amount).

and make the applicable increase or

However, gains and losses attributable to

Investment Income

decrease to your MAGI on Form 8960,

assets held in a non-section 1411 trade or

line 13 (or Form 8960, line 19a) as

Use line 7 to report additional net

business aren’t included in net investment

necessary.

investment income modifications to net

income. For more information, see

investment income that aren’t otherwise

Line 5b—Net Gain or Loss From

Section 1411 NOL. If you have an NOL

specified in lines 1–6. For example, use

Disposition of Property That Isn’t Subject

allowed under section 172 for purposes of

to Net Investment Income

Tax, earlier.

determining your regular income tax, you

Instructions for Form 8960 (2017)

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Instructions For Form 8960 - Net Investment Income Tax - Individuals, Estates, And Trusts - 2017 Page 10

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