Instructions For Form 8960 (2015) (Page 4 of 20) in pdf

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

2013 and you do not regroup, you may

The amount of the transferor's gain or

examples.

make the election for the first tax year

loss on the disposition of the interest for

beginning after 2013 that you are subject

regular income tax purposes included on

Disposition of Entire Interest

to the NIIT.

line 5a,

If you disposed of your entire interest in a

The information provided by the

You may regroup on an amended

passive activity or a former passive activity

partnership or S corporation to the

return, but only if you were not subject to

to an unrelated person in a fully taxable

transferor relating to the disposition (if

the NIIT on your original return (or

transaction, your losses allocable to the

any), and

previously amended return), and if,

activity for that year are not limited by the

The amount of adjustment to gain or

because of a change to the original return,

passive activity loss rules for income tax

loss due to basis adjustments attributable

you owe NIIT for the year. For additional

purposes. A fully taxable transaction is a

to ownership in certain CFCs and QEFs.

rules regarding regrouping on amended

transaction in which you recognize all

returns, see Regulations section

Deferred recognition sales (install-

realized gain or loss. For purposes of

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

ment sales and private annuities). If

calculating your net investment income,

you disposed of a partnership interest or S

Disclosure requirements. Regroupings

these losses may be properly allocable

corporation stock in an installment sale

under the NIIT “fresh start” are subject to

deductions, depending on the underlying

transaction to which section 453 applies,

the disclosure requirements of Rev. Proc.

character and origin of the losses.

you need to calculate your adjustment to

2010-13.

net gain in the year of the disposition,

Note. If you dispose of an activity that has

Disposition of Partnership

even if the disposition occurred prior to

always been a passive activity, the

2013. The difference between the amount

suspended passive losses from that

Interest or S Corporation

reported for regular income tax and NIIT

activity are allowed in full as a properly

Stock

will be taken into account when each

allocable deduction.

payment is received. You must attach the

In general, an interest in a partnership or S

Note. If you dispose of an activity that is a

statement described above to your return

corporation is not property held for use in

in the first year you are subject to NIIT. In

former passive activity, any suspended

a trade or business and, therefore, gain or

subsequent years, attach a statement to

passive losses allowed in the year of

loss from the sale of a partnership interest

your return that provides “Adjustment

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

or S corporation stock is included in your

(A) are included as properly allocable

relates to a deferred recognition sale first

net investment income.

deductions, but only to the extent the gain

reported on line 5c of the (enter year)

Adjustment

return.”

on the disposition of the activity is

included in net investment income (before

The amount of the gain or loss from the

Regulations Section

taking into account any suspended

disposition for regular income tax

losses). Any suspended passive losses

1.1411-10(g) Election

purposes is included on Form 8960,

that are allowed by reason of section

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

In general, you may make the election

469(g) are allowed as additional properly

participated (as defined under the passive

provided in Regulations section

allocable deductions.

activity loss rules) in a trade or business

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

activity of the partnership or S corporation

Economic Grouping

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

(or one of its subsidiaries) and that trade

in effect for stock of a CFC or QEF,

You can treat one or more trade or

or business activity is not the trade or

generally, the amounts you include in

business activities, or rental activities, as a

business of trading in financial instruments

income for regular income tax purposes

single activity if those activities form an

or securities, then you must calculate the

under sections 951 and 1293 from the

appropriate economic unit for measuring

adjustment to report on line 5c. The

stock of the CFC or QEF are included in

gain or loss under the passive activity loss

adjustment described below only applies

net investment income, and distributions

rules. For additional information on

to dispositions of equity interests in

from the stock of the CFC or QEF

passive activity grouping rules, see Pub.

partnerships and stock in S corporations

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

925.

and does not apply to gain or loss

excluded from net investment income.

recognized on, for example, indebtedness

Regrouping rules. The passive activity

owed to the taxpayer by a partnership or S

Your election applies only to the

grouping rules determine the scope of

corporation.

specific stock of the CFC or QEF for which

your trade or business and whether that

it is made and stock of the CFC or QEF

trade or business is a passive activity for

For more information on how to

that you subsequently acquire. If you own

purposes of the NIIT. The proper grouping

calculate the adjustment to report on

a CFC or QEF through certain domestic

of a rental activity with a trade or business

line 5c, see Proposed Regulations section

pass-through entities, such as a domestic

activity generally will not convert any gross

1.1411-7.

partnership, the entity may make the

income from rents into gross income

election for the stock of the CFC or QEF

derived from a trade or business.

Note. If the tax basis of the interest in the

and you will be considered as having

Generally, you may not regroup

partnership or S corporation for NIIT

made the election with respect to the

activities unless your grouping was clearly

purposes is different than for regular

stock of the CFC or QEF owned or

inappropriate when originally made, or has

income tax purposes due to certain

subsequently acquired by the

become clearly inappropriate because of

adjustments associated with income from

pass-through entity. The election by the

changed facts and circumstances.

CFCs or QEFs, the amount of gain or loss

pass-through entity applies only to stock

However, under the NIIT “fresh start”

may exceed the amount reported for

of the CFC or QEF held or subsequently

election you may regroup for the first tax

regular income tax purposes.

acquired directly or indirectly by the

year you are subject to the NIIT (without

pass-through entity. The pass-through

Required statements. Attach a

the effect of the regrouping). You may

entity's election does not apply to any

statement to your return for the year of

regroup only once under this election and

stock of the CFC or QEF that you

disposition. Your statement must include:

that regrouping will apply to the tax year

personally hold or subsequently acquire. If

The name and taxpayer identification

for which you regroup and all future tax

the entity does not make the election, you

number of the partnership or S corporation

years. If you are subject to the NIIT for

of which the interest was transferred,

Instructions for Form 8960 (2015)

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Instructions For Form 8960 (2015) Page 4

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