4 pages on are there ways to plan around the net investment income tax? add introduction,...

4 pages on are there ways to plan around the net investment income tax? add introduction, body and conclusion.

Expert Solution

The NIIT is imposed by section 1411 of the Internal Revenue Code. The NIIT only applies to some net investment income at a 3.8 percent rate. It also only applies to people, trusts or estates that exceed the statutory threshold amounts. The NIIT first went into effect at the beginning of 2013. Although it went into effect in 2013 it did not apply to the 2012 tax year.

Net investment income includes the following:

Interest
Dividends
Annuity distributions
Rents
Royalties
Income from the passive activity
Net capital gain from the disposition of property

Strategies for Reducing Exposure to Tax are as follows:

1.Sell securities with losses before year-end to offset gains during the year from the sale of securities.

2. Donate appreciated securities instead of cash to IRS-approved charities so that gains won’t be included on your return even though you will receive a tax deduction for the donation.

3.Use instalment sales or Section 1031 like-kind exchanges to either spread the gain recognition over several years or defer the gain on the sale of the property. These two strategies work best for investment real estate

ekkarill92 answered 1 year ago

4 pages on are there ways to plan around the net investment income tax?

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