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2. Gain or loss from the sale of

and certain PFICs you hold in a section

Adjustments to your capital loss carry-

property held in a non-section 1411 trade

1411 trade or business is generally

forwards. Starting in 2014, capital loss

or business doesn’t include substantially

reported on Form 8960, line 4a.

carryforwards must be adjusted if any sum

appreciated property that’s

of all capital gain or loss amounts

Line 6 is used for adjustments that are

recharacterized as portfolio income. See

excluded from net investment income on

the result of additional rules. These

Substantially appreciated

property, later.

lines 5b and 5c was a net loss (the sum of

additional rules may apply when you own

Gain attributable to net unrealized

all excluded capital losses was greater

an interest in a CFC or PFIC and may

appreciation (NUA) in employer securities

than the sum of all excluded capital gains).

require you to subtract or add amounts not

held by a qualified plan. See

Net gain

Generally, the annual adjustment to your

otherwise included on Form 8960. These

attributable to NUA in employer securities

capital losses carryforward is the lesser of:

additional rules vary depending on the set

held by a qualified

plan, later.

The amount of your capital loss

of anti-deferral rules that apply to you for

Adjustments to your capital loss

carryforward from the previous year (the

regular income tax purposes, and for

carryforwards for items of excluded loss.

sum of carryforward amounts reflected on

CFCs and QEFs, and depending on

See

Adjustments to your capital loss

Schedule D (Form 1040), Capital Gains

whether you have a section 1.1411-10(g)

carryforwards, later.

and Losses, lines 6 and 14, or

election in effect for the CFC or QEF. For

The amount of excluded capital losses

Substantially appreciated property.

more information about determining the

in excess of excluded capital gain in the

Generally, Regulations section 1.469-2(c)

amount to report on line 6, see

previous year.

(2)(iii)(A) provides that if an interest in

Regulations section 1.1411-10.

See

Lines 5a–5d — Net Gains and Losses

property previously used in a nonpassive

Worksheet, in these instructions, for

Section 1296 mark–to–market PFICs.

activity but not used in a passive activity

assistance with the calculation of capital

Generally, if you’re subject to the section

for more than 2 years prior to disposition is

loss carryforwards. In addition, see

1296 mark–to–market rules for a PFIC,

substantially appreciated at the time of

Proposed Regulations section 1.1411-4(d)

you’ll include in net investment income

disposition, any gain from the disposition

(4)(iii) for more information and a

any amounts included in income for

is treated as not from a passive activity.

comprehensive example of the application

regular income tax purposes under

The recharacterized gain may be taken

of this rule.

section 1296(a)(1) and deduct from net

into account under section 1411(c)(1)(A)

investment income any amounts deducted

(iii) if the gain is attributable to the

Pass-through entities. If you hold an

from income for regular income tax

disposition of property and

interest in a pass-through entity, the

purposes under section 1296(a)(2). Use

recharacterized as portfolio income.

determination of whether a trade or

line 6 to make increases or decreases to

business exists is made at that entity's

Net gain attributable to NUA in em-

net investment income as a result of this

level.

ployer securities held by a qualified

rule (for items that aren’t otherwise

plan. Any gain attributable to NUA (within

reflected on Form 8960).

the meaning of section 402(e)(4)) that you

Line 5c—Adjustment From

Section 1291 funds. If you’re subject to

realize on a disposition of employer

Disposition of Partnership Interest

the section 1291 rules for a PFIC, you’ll

securities held by a qualified plan is a

or S Corporation Stock

include in net investment income any

distribution within the meaning of section

“excess distributions that are dividends for

1411(c)(5) and isn’t included in net

Enter the amount from the worksheet for

NIIT purposes as well as any gains that

investment income. However, any gain

lines 5a–5d, Part II, line 3d. Attach a

are treated as excess distributions for

realized on a disposition of employer

statement as described in

Required

regular income tax purposes.” Use line 6

securities attributable to appreciation in

statements, earlier, to your return for the

to make the increases to net investment

the value of your employer securities after

year of the disposition.

income as a result of the application of this

the distribution from a qualified plan isn’t a

rule (for items that aren’t otherwise

distribution within the meaning of section

Line 6—Adjustments to

reflected on Form 8960).

1411(c)(5) and is included in net

Investment Income for Certain

investment income.

CFCs and QEFs with a section

CFCs and PFICs

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

Shareholders of CFCs and QEFs with-

If you own stock, directly or indirectly, in a

have a section 1.1411-10(g) election in

out a section 1.1411-10(g) election. In

CFC or a PFIC (other than certain CFCs

effect for a CFC or QEF, you’ll include in

the case of a QEF (other than a QEF held

net investment income any inclusions

and PFICs held in a section 1411 trade or

in a section 1411 trade or business) for

under section 951(a) or 1293(a) derived

business or PFICs marked to market

which a section 1.1411-10(g) election isn’t

under a provision of IRC chapter 1 other

from the CFC or QEF. Inclusions under

in effect, enter the amount treated as

than section 1296), use line 6 for

section 1293(a)(1)(B) may be reported

long-term capital gain for regular income

adjustments necessary to calculate your

elsewhere on Form 8960, such as on

tax purposes under section 1293(a)(1)(B).

line 5a. Use line 6 to make the increases

net investment income.

Also, in the case of a disposition of a

to net investment income as a result of the

CFC or QEF (other than a CFC or QEF

Income from investments in CFCs and

application of this rule (for items that aren’t

held in a section 1411 trade or business)

PFICs is generally included in the

otherwise reflected on Form 8960).

for which a section 1.1411-10(g) election

calculation of net investment income and,

isn’t in effect, enter the increase or

Note. If you included in income an

in many cases, will be included (in whole

decrease in the amount of gain or loss for

or in part) on other lines of Form 8960.

amount under section 951(a) or section

NIIT purposes over the amount of gain or

Generally, dividends from a CFC or a

1293(a) for a CFC or QEF in 2013 and

loss for regular income tax purposes.

PFIC that are included in your regular

made an election under Regulations

However, if the gain is higher (or the loss

section 1.1411-10(g) after 2013 for that

income tax base are included on Form

larger) for NIIT purposes compared to

CFC or QEF, special rules may apply to

8960, line 2, and gains and losses derived

regular income tax purposes, in which

from the stock of a CFC or a PFIC that are

certain distributions of previously taxed

case there’s no impact to the adjustment

included in your regular income tax base

income from the CFC or QEF that aren’t

for capital loss carryforwards for NIIT

generally are included on Form 8960,

subject to regular income tax. For more

purposes, enter the difference on line 6.

line 5. Also, income derived from CFCs

Instructions for Form 8960 (2017)

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Instructions For Form 8960 - Net Investment Income Tax - Individuals, Estates, And Trusts - 2017 Page 9

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