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box 7 of Form 1099-R, include on Form

activity rises to a section 162 trade or

aren’t taken into account in computing net

8960, line 3, the taxable amount reported

business.

investment income. For example, gain that

on Form 1099-R, box 2a. However, if the

Net rental income or loss that’s a

isn’t taxable by reason of section 121 (sale

payor checks box 2b indicating the taxable

nonpassive activity because it was

of a principal residence) or section 1031

amount can’t be determined, you may

grouped with a trade or business under

(like-kind exchanges) isn’t included in net

need to calculate the taxable portion of

Regulations section 1.469-4(d)(1). See

investment income.

your distribution. See Pub. 939, General

Special Rules for Certain Rental

Income,

See

Lines 5a–5d — Net Gains and

Rule for Pensions and Annuities, and Pub.

earlier.

Losses

Worksheet, in these instructions,

575, Pension and Annuity Income, for

Other rental income or loss from a

for assistance in calculating net gain or

details.

section 162 trade or business reported on

loss includable in net investment income.

Schedule K-1 (Form 1065), Partner's

Share of Income, Deductions, Credits,

Line 4a—Rental Real Estate,

etc., line 3, from a partnership, or

Royalties, Partnerships, S

Schedule K-1 (Form 1120S),

Line 5a—Net Gain or Loss From

Corporations, and Trusts

Shareholder's Share of Income,

Disposition of Property

Deductions, Credits, etc., line 3, from an S

Enter the following amount from your

corporation, where the activity isn’t a

properly completed return:

Calculate and enter the amount of net gain

passive activity.

Form 1040, line 17;

or loss from the disposition of property by

Net income that’s been recharacterized

Form 1041, line 5;

combining the following amounts from

as not from a passive activity under the

Form 1041-QFT, the portion of line 4

your properly completed return:

section 469 passive loss rules and is

that’s income and loss that properly would

Form 1040, lines 13 and 14;

derived in the ordinary course of a section

be reported by a trust filing Form 1041 on

Form 1041, lines 4 and 7;

162 trade or business. For example:

Form 1041, line 5;

Form 1041-QFT, line 3, and the portion

Form 1040NR, the amount properly

1. Net rental income or loss from a

of line 4 attributed to ordinary gain/(loss);

reported on the attachment to your Form

rental that meets an exception under

Form 1040NR, the amounts properly

1040NR representing the amount that you

Regulations section 1.469-1T(e)(3)(ii), the

reported on the attachment to your Form

would enter on Form 1040, line 17, if you

activity rises to a section 162 trade or

1040NR representing the amounts that

were filing Form 1040 and including

business, and you materially participated

you would enter on Form 1040, lines 13

income and loss only for your period of

in the activity, or

and 14, if you were filing Form 1040 and

U.S. residency.

including net gain or loss only for your

2. Net income from property rented to

period of U.S. residency.

a nonpassive activity. See

Special Rules

See

Special computational rules for

for Certain Rental

Income, earlier.

qualified funeral trusts (QFTs)

and

See

Special computational rules for

Dual-status

individual, earlier.

qualified funeral trusts (QFTs)

and

Note. Any income from an estate or trust

Dual-status

individual, earlier.

reported on Part III of Schedule E (Form

Line 4b—Adjustment for Net

1040), Supplemental Income and Loss,

Note. If you incur gain or loss from a

that excluded net investment income is

Income or Loss Derived in the

disposition that isn’t reported as described

taken into account on line 7. Don’t report

Ordinary Course of a Non-Section

in the previous paragraph, report it on

those adjustments on line 4b.

1411 Trade or Business

line 7. See

Line 7—Other Modifications to

For line 4b adjustments, enter net

Investment

Income, later.

Enter the net positive or net negative

positive amounts as a negative

amount for the following items included in

adjustment and enter net negative

Line 5b—Net Gain or Loss From

CAUTION

line 4a that aren’t included in determining

amounts as a positive adjustment.

net investment income:

Disposition of Property That Isn’t

Net income or loss from a section 162

Lines 5a-5d—Gains and Losses

Subject to Net Investment Income

trade or business that’s not a passive

on the Dispositions of Property

Tax

activity and isn’t engaged in a trade or

Generally, net gain from the disposition of

business of trading financial instruments

Use line 5b to adjust the amounts included

property not used in a trade or business

or commodities,

on line 5a for gains and losses that are

and net gain or loss from the disposition of

Net income or loss from a section 1411

excluded from the calculation of net

property held in a

Section 1411 trade or

trade or business that’s taken into account

investment income. Enter the amount of

business

is included in net investment

in determining self-employment income,

gains (as a negative number) and losses

income if included in taxable income.

Royalties derived in the ordinary course

(as a positive number) included on line 5a

of a section 162 trade or business that’s

that are excluded from net investment

Disposition usually means:

not a passive activity, and

income. For example, line 5b will include

Sale,

Passive losses of a former passive

amounts such as:

Exchange,

activity that are allowed as a deduction in

Gain or loss from the sale of property

Transfer,

the current year by reason of section

held in a non-section 1411 trade or

Conversion,

469(f)(1)(A).

business.

Cash settlement,

1. However, if the losses are

Cancellation,

In addition, use line 4b to adjust for

attributable to formerly suspended passive

Termination,

certain types of nonpassive rental income

losses of the non-section 1411 trade or

Lapse,

or loss derived in the ordinary course of a

business, such gains and losses are

Expiration,

section 162 trade or business. For

excluded from net investment income to

Deemed disposition, for example under

example, line 4b includes the following

the extent the nonpassive income from the

section 877A, or

items:

non-section 1411 trade or business is

Other disposition.

Nonpassive net rental income or loss of

excluded from net investment income.

a real estate professional where the rental

Gains and losses that aren’t taken into

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

account in computing taxable income

for more information and examples.

Instructions for Form 8960 (2017)

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Instructions For Form 8960 - Net Investment Income Tax - Individuals, Estates, And Trusts - 2017 Page 6

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