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income from the activity. For purposes of

However, under the NIIT “fresh start”

Required statements. Attach a

determining your net investment income,

election you may regroup for the first tax

statement to your return for the year of

suspended losses from former passive

year you’re subject to the NIIT (without the

disposition. Your statement must include:

activities are allowed as a properly

effect of the regrouping). You may regroup

The name and taxpayer identification

allocable deduction, but only to the extent

only once under this election and that

number of the partnership or S corporation

nonpassive income from the same activity

regrouping will apply to the tax year for

of which the interest was transferred,

is included in your net investment income

which you regroup and all future tax years.

The amount of the transferor's gain or

in that year. For more information, see

If you’re subject to the NIIT for 2013 and

loss on the disposition of the interest for

Regulations section 1.1411-4(g)(8) and

you don’t regroup, you may make the

regular income tax purposes included on

examples.

election for the first tax year beginning

line 5a,

after 2013 that you’re subject to the NIIT.

The information provided by the

Disposition of Entire Interest

You may regroup on an amended

partnership or S corporation to the

If you disposed of your entire interest in a

return, but only if you weren’t subject to

transferor relating to the disposition (if

passive activity or a former passive activity

the NIIT on your original return (or

any), and

to an unrelated person in a fully taxable

previously amended return), and if,

The amount of adjustment to gain or

transaction, your losses allocable to the

because of a change to the original return,

loss due to basis adjustments attributable

activity for that year aren’t limited by the

you owe NIIT for the year. For additional

to ownership in certain CFCs and QEFs.

passive activity loss rules for income tax

rules regarding regrouping on amended

Deferred recognition sales (install-

purposes. A fully taxable transaction is a

returns, see Regulations section

ment sales and private annuities). If

transaction in which you recognize all

1.469-11(b)(3)(iv)(C).

you disposed of a partnership interest or S

realized gain or loss. For purposes of

Disclosure requirements. Regroupings

corporation stock in an installment sale

calculating your net investment income,

under the NIIT “fresh start” are subject to

transaction to which section 453 applies,

these losses may be properly allocable

the disclosure requirements of Rev. Proc.

you need to calculate your adjustment to

deductions, depending on the underlying

2010-13.

net gain in the year of the disposition,

character and origin of the losses.

even if the disposition occurred prior to

Disposition of Partnership

Note. If you dispose of an activity that’s

2013. The difference between the amount

always been a passive activity, the

reported for regular income tax and NIIT

Interest or S Corporation

suspended passive losses from that

will be taken into account when each

Stock

activity are allowed in full as a properly

payment is received. You must attach the

allocable deduction.

statement described above to your return

In general, an interest in a partnership or S

in the first year you’re subject to NIIT. In

corporation isn’t property held for use in a

Note. If you dispose of an activity that’s a

subsequent years, attach a statement to

trade or business and, therefore, gain or

former passive activity, any suspended

your return that provides “Adjustment

loss from the sale of a partnership interest

passive losses allowed in the year of

relates to a deferred recognition sale first

or S corporation stock is included in your

disposition by reason of section 469(f)(1)

reported on line 5c of the (enter year)

net investment income.

(A) are included as properly allocable

return.”

Adjustment

deductions, but only to the extent the gain

Regulations Section

on the disposition of the activity is

The amount of the gain or loss from the

included in net investment income (before

disposition for regular income tax

1.1411-10(g) Election

taking into account any suspended

purposes is included on Form 8960,

In general, you may make the election

losses). Any suspended passive losses

line 5a, as a gain or loss. If you materially

provided in Regulations section

that are allowed by reason of section

participated (as defined under the passive

1.1411-10(g) if you own stock of a CFC or

469(g) are allowed as additional properly

activity loss rules) in a trade or business

QEF. If a section 1.1411-10(g) election is

allocable deductions.

activity of the partnership or S corporation

in effect for stock of a CFC or QEF,

(or one of its subsidiaries) and that trade

Economic Grouping

generally, the amounts you include in

or business activity isn’t the trade or

income for regular income tax purposes

You can treat one or more trade or

business of trading in financial instruments

under sections 951 and 1293 from the

business activities, or rental activities, as a

or securities, then you must calculate the

stock of the CFC or QEF are included in

single activity if those activities form an

adjustment to report on line 5c. The

net investment income, and distributions

appropriate economic unit for measuring

adjustment described below only applies

from the stock of the CFC or QEF

gain or loss under the passive activity loss

to dispositions of equity interests in

described in section 959(d) or 1293(c) are

rules. For additional information on

partnerships and stock in S corporations

excluded from net investment income.

passive activity grouping rules, see Pub.

and doesn’t apply to gain or loss

925.

recognized on, for example, indebtedness

Your election applies only to the

owed to the taxpayer by a partnership or S

Regrouping rules. The passive activity

specific stock of the CFC or QEF for which

corporation.

grouping rules determine the scope of

it’s made and stock of the CFC or QEF

your trade or business and whether that

that you subsequently acquire. If you own

For more information on how to

trade or business is a passive activity for

a CFC or QEF through certain domestic

calculate the adjustment to report on

purposes of the NIIT. The proper grouping

pass-through entities, such as a domestic

line 5c, see Proposed Regulations section

of a rental activity with a trade or business

partnership, the entity may make the

1.1411-7.

activity generally won’t convert any gross

election for the stock of the CFC or QEF

income from rents into gross income

Note. If the tax basis of the interest in the

and you’ll be considered as having made

derived from a trade or business.

partnership or S corporation for NIIT

the election with respect to the stock of the

purposes is different than for regular

CFC or QEF owned or subsequently

Generally, you may not regroup

income tax purposes due to certain

acquired by the pass-through entity. The

activities unless your grouping was clearly

adjustments associated with income from

election by the pass-through entity applies

inappropriate when originally made, or has

CFCs or QEFs, the amount of gain or loss

only to stock of the CFC or QEF held or

become clearly inappropriate because of

may exceed the amount reported for

subsequently acquired directly or

changed facts and circumstances.

regular income tax purposes.

indirectly by the pass-through entity. The

Instructions for Form 8960 (2017)

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Instructions For Form 8960 - Net Investment Income Tax - Individuals, Estates, And Trusts - 2017 Page 4

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