Form 8960

What is the election for Reg 1.1411–10(g)?

An estate or trust elects for Reg. 1.1411-10(g) if they want to exclude certain passive income from net investment income calculation and tax.

What are passive foreign investment companies (PFICs)?

Passive Foreign Investment Companies (PFICs) are foreign entities that generate income primarily from investing in U.S. assets. If a trust or estate distributes net investment income derived from PFICs, they're subject to the special Net Operating Loss rules of IRC section 1291.

What is economic grouping?

Economic grouping refers to the aggregation of multiple trusts or estates into a single reporting entity. This can be done if they have the same taxpayer-appointed fiduciary, same trustee, or are closely related.

What are the income thresholds for individuals?

The income thresholds for individuals determine whether they're subject to the Net Investment Income Tax (NIIT). The thresholds vary depending on filing status.

What is net investment income?

Net investment income includes interest, dividends, rents, royalties, and other income that isn't effectively connected with the conduct of a trade or business.

What is disposition of property, gains and losses?

Disposition of Property refers to the sale, exchange, or other disposal of an asset during a tax year. The result could be ordinary gain or loss depending on the taxpayer's situation, and whether it relates to passive income or investment income.

What are estates and trusts, application of Net Investment tax?

Estates and trusts calculate and report their net investment income tax in accordance with IRC section 1411. They do this if they have net investment income and distribute it or are required to file a return.

What is the election, Form 8814?

Form 8814 is an estate or trust's application for changes to their tax year status. They may use it to elect out of a passive activity, change their reporting entity, or request permission from the IRS to use a simpler method for calculating NIIT.

What should be reported on Form 8960, Schedule G and Schedule F?

Form 8960 filers report their net investment income tax, Schedule G includes the calculation and payment of NIIT, while Schedule F shows the trust's or estate's expenses related to the calculation and payment of NIIT.

What is the Net Investment Income Tax (NIIT)?

The Net Investment Income Tax (NIIT) is a tax imposed on estates and trusts if they have net investment income and:

1. Distributed it during the tax year, or

2. Are required to file a return.

Who needs to file Form 8960?

An estate or trust files Form 8960 if it has net investment income and either: (1) distributed net investment income during the tax year, or (2) is required to file a return of income.

What is Form 8960 used for?

Form 8960 is used by estates and trusts to calculate and report the net investment income tax (NIIT) imposed by section 1411 of the Internal Revenue Code.

What is Section 1291?

Section 1291 refers to a special provision in the Internal Revenue Code for Passive Foreign Investment Companies (PFICs). PFIC distributions to estates and trusts are subject to the Net Operating Loss rules of this section.

What is disposition of interest?

Disposition of Interest refers to the transfer or sale of an asset generating income, such as interest, during a tax year. This could result in either ordinary gain or loss depending on the taxpayer's situation.

What are the elections for investment income?

Estate and trusts have the option to elect different methods to calculate and report their net investment income tax. These options include using section 1411-10(g), or electing out of passive activities.