New Form 8960 for NIIT (3.8%)

Most draft forms for tax year 2013 won't be available until later this year. I doubt that Form 8960 will be ready before then. We might have a Rev Proc or a Notice but regulations? Don't hold your breath.

The Proposed Regs were published 12/5/12.

1. Taxpayer Reliance on Proposed Regulations These regulations are proposed to be effective for taxable years beginning after December 31,

Thanks. Now we wait for the instructions.

Questions: for a real estate professional, who meets the IRS tests, is real estate income from a trust (not a living trust) considered net income derived in the ordinary course of a non-section 1411 trade or business? Does it matter if the taxpayer is a trustee of the trust?

Also see page 3 of

You can find the answer in the following Forbes article on NII tax and net rental income. The relevant part starts on the second page when it discusses the proposed regulations and the requirement that professionals have a third test that must be met: each rental activity must rise to the level of a trade or business. This is followed by examples. I believe the analysis in the article is correct. As such, the income from the trust would not be a trade or business and I don't believe that being a trustee would change that conclusion unless as a trustee your involvement in the trust renatl activity is regular, continuous, and substantial. Please read the article.

I have read that and similar articles, but thanks for the refresher. I suppose my question should have been: can a taxpayer include property held in a trust (not his trust and not a living trust) in a real estate "grouping"? Does it matter if the taxpayer is a trustee of the trust?

Trusts are either living trusts or testementary trusts. Trusts are also either revocable (or otherwise grantor truts) or not.

In addition, the purpose of the trust, who the trustee is in relationship to who the beneficiary is and perhaps other information will all be relevant to giving you a reasonable answer to your question. You have given us none of that information.

I will say that, assuming the trust is a testementary trust set up for the taxpayer by a parent, and the taxpayer is not the trustee, then sny income should be classified as investment interest and not from the active running of a business.

Also, the property belongs to the trust, not the taxpayer, and needs to be reported on the trust's tax return. So I seriously doubt the taxpayer can treat the trust as his own in that situation.

I would tend to agree, but it never hurts to ask.

And, I did provide the information you say I failed to provide: Not a living trust, not taxpayer's trust, and either yes or no as to taxpayer being the trustee - does the answer change depending on this item?

Thank you. I will watch for any other opinions as well.

If the taxpayer is both the trustee and beneficiary, it might well be treated as a grantor trust (see 678). If he is, then trust property would be treated as belonging to him, and all things that would ordinarily go on a trust's tax return would go on his tax return. In that case it could very well be appropriate to treat property as his, and even as business property if he provides sufficient services.

I don't think the answer changes.

I tend to agree, but as I said before, it doesn't hurt to ask. Thanks.