NIIT Planning

§ 1411. Imposition of tax(a) In generalExcept as provided in subsection (e)—(1) Application to individualsIn the case of an individual, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax equal to 3.8 percent of the lesser of—(A) net investment income for such taxable year, or (B) the excess (if any) of—(i) the modified adjusted gross income for such taxable year, over (ii) the threshold amount. (2) Application to estates and trustsIn the case of an estate or trust, there is hereby imposed (in addition to any other tax imposed by this subtitle) for each taxable year a tax of 3.8 percent of the lesser of—(A) the undistributed net investment income for such taxable year, or (B) the excess (if any) of—(i) the adjusted gross income (as defined in section 67(e)) for such taxable year, over (ii) the dollar amount at which the highest tax bracket in section 1(e) begins for such taxable year. (b) Threshold amountFor purposes of this chapter, the term “threshold amount” means—(1) in the case of a taxpayer making a joint return under section 6013 or a surviving spouse (as defined in section 2(a)), $250,000, (2) in the case of a married taxpayer (as defined in section 7703) filing a separate return, ½ of the dollar amount determined under paragraph (1), and (3) in any other case, $200,000. (c) Net investment incomeFor purposes of this chapter—(1) In generalThe term “net investment income” means the excess (if any) of—(A) the sum of—(i) gross income from interest, dividends, annuities, royalties, and rents, other than such income which is derived in the ordinary course of a trade or business not described in paragraph (2), (ii) other gross income derived from a trade or business described in paragraph (2), and (iii) net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property other than property held in a trade or business not described in paragraph (2), over (B) the deductions allowed by this subtitle which are properly allocable to such gross income or net gain. (2) Trades and businesses to which tax appliesA trade or business is described in this paragraph if such trade or business is—(A) a passive activity (within the meaning of section 469) with respect to the taxpayer, or (B) a trade or business of trading in financial instruments or commodities (as defined in section 475(e)(2)). (3) Income on investment of working capital subject to taxA rule similar to the rule of section 469(e)(1)(B) shall apply for purposes of this subsection.