Net Investment Income Tax (IRC § 1411) for Fiduciaries

Presented by

Joe Lancaster, CPA

I. Net Investment Income (NII) Tax

A. What is it?

B. Trusts to Which It Applies

C. Trusts That Are Exempted

II. Investment Income Under §1411

A. Gross Income from Interest, Dividends,

Annuities, Royalties & Rents

B. Other Trade or Business Gross Income

C. Net Gain from Disposition of Property

III. Net Investment Income

Under §1411

Deductions from Investment Income

1. Rent & Royalty Expenses

2. Trading Business Expenses

3. Investment Interest Expense

4. Investment Expenses

5. Taxes

6. §691(c) Deduction

7. §212 Expenses

IV. Calculation of Undistributed Net Investment Income

V. Beneficiary's Share of Net Investment Income from Estates

and Trusts

VI. Ordinary Course of a Trade or Business Exception

Non-Passive (Material Participation) Entities

1. Mattie K. Carter Trust, 256 F. Supp.2d 536 (N.D. Tex. 2003)

2. Frank Aragona Trust, 142 T.C. 9 (2014)

VII. Dispositions of Certain Active Interests in S Corporations and

Partnerships

VIII. Other Issues

A. Application of §1411 to Electing Small Business Trusts (ESBTs)

B. Application of §1411 to Charitable Remainder Trusts

C. Strategies to Reduce Net Investment Income Tax

1. Income & Expense Planning

2. Rate “Arbitrage”

If you have any questions please feel free to contact

Joe at:

214-635-2563

jlancaster@gppcpa.com