Instructions For Form 8960 (2015) (Page 2 of 20) in pdf

computing your U.S. income tax liability,

If you elect to apply a section 6013(g)

685) by treating each beneficiary's interest

and

election for NIIT purposes and later

in that beneficiary's contract as a separate

determine that you did not meet the

trust. Complete one consolidated Form

You file Form 1040NR, U.S.

Nonresident Alien Income Tax Return,

criteria for doing so in that tax year, your

8960 for all beneficiary contracts subject

election for NIIT purposes will have no

to NIIT.

and Form 8833, Treaty-Based Return

effect that year and for all future years.

Position Return Disclosure Under Section

If a QFT has one or more beneficiary

However, if, in a later year, you meet the

6114 or 7701(b), as provided in

contracts that have net investment income

criteria to elect to apply your section

Regulations section 301.7701(b)-7(b).

in excess of the threshold amount:

6013(g) election for NIIT purposes, you

Complete Form 8960, lines 1-12, using

Dual-status individual. If you were a

will be treated as though you did elect to

only the sum of the net investment income

dual-status individual — i.e., an individual

apply your section 6013(g) election in that

of the beneficiary contracts that have net

who was a resident of the United States

later year unless you file (or amend) your

investment income in excess of the

for part of the year and an NRA for the

return for that later year to report your NIIT

threshold amount, and

other part of the year — you are subject to

without the election for NIIT purposes.

On line 19b:

the NIIT only for the portion of the year you

were a U.S. resident. The relevant

Application to Estates and

1. Insert the number of beneficiary

threshold amount is not reduced or

contracts that have net investment income

Trusts

prorated for a dual-status individual.

in excess of the threshold amount next to

the entry on the line, and

If you were a U.S. resident on the last

Domestic estates and trusts. The NIIT

day of the tax year, file Form 1040 and

2. Multiply the number of beneficiary

applies to estates and trusts that have

attach a statement showing your income

contracts that have net investment income

undistributed net investment income and

for the part of the year you were a

in excess of the threshold amount by the

adjusted gross income (AGI) in excess of

nonresident. You can use Form 1040NR

threshold amount for the year and enter

the threshold amount. The NIIT is 3.8% of

as the statement.

that amount on line 19b.

the lesser of:

If you were a nonresident on the last

the undistributed net investment income

Example. For 2015, a QFT has a

day of the tax year, file Form 1040NR and

for the tax year, or

beneficiary contract with $14,000 of

attach a statement showing your income

the excess, if any, of AGI (as defined in

interest income and another beneficiary

for the part of the year you were a U.S.

section 67(e)) over the applicable

contract with $13,000 of dividend income.

resident. You can use Form 1040 as the

threshold amount.

Neither contract has any properly

statement.

The applicable threshold amount is the

allocable deductions. The threshold

For more information, see Instructions

dollar amount at which the highest tax

amount for the 2015 tax year is $12,300.

for Form 1040NR and Pub. 519, Tax

bracket in section 1(e) begins for the tax

Therefore, the QFT has 2 beneficiary

Guide for Aliens.

year. See the instructions for Form 1041,

contracts with net investment income in

Schedule G, line 1a, and the instructions

excess of the threshold amount for the

Election To File Jointly With

for Form 1041-QFT, line 13, for the dollar

year.

Nonresident Spouse—Section

amount at which the highest tax bracket

The QFT will report $14,000 on line 1

6013(g) or 6013(h)

begins for the tax year.

(interest) and $13,000 on line 2

If you and your spouse elect to file a joint

(dividends). Lines 12, 18a, and 19 would

Exception for certain domestic trusts.

return under section:

each be $27,000 ($14,000 plus $13,000).

The following trusts are not subject to the

Enter “2” on the dotted line at the end of

6013(g) (where an NRA is married to a

NIIT:

line 19b and enter $24,600 ($12,300 × 2)

U.S. citizen or resident at the end of the

Trusts that are exempt from income

on the entry line for 19b. Lines 19c and 20

tax year); or

taxes imposed by Subtitle A of the Internal

will be $2,400 ($27,000 less $24,600). On

6013(h) (where at least one spouse was

Revenue Code:

line 21, enter the NIIT liability of $91.20

an NRA at the beginning of the tax year,

1. Charitable trusts and qualified

($2,400 × 3.8%).

but is a U.S. citizen or resident married to

retirement plan trusts exempt from tax

a U.S. citizen or resident at the end of the

under section 501, and

Special computational rules for elect-

tax year);

ing small business trusts (ESBTs).

2. Charitable Remainder Trusts

you can also elect to apply the joint return

The NIIT has special computational rules

exempt from tax under section 664;

election for NIIT purposes.

for ESBTs. In general, ESBTs compute

A trust or decedent's estate in which all

To make either election for NIIT

their NIIT in 3 steps:

of the unexpired interests are devoted to

purposes, use your combined items of

1. The ESBT separately calculates

one or more of the purposes described in

income, gain, loss, and deduction from

the undistributed net investment income of

section 170(c)(2)(B);

your joint return to figure your net

the S portion and non-S portion according

investment income and MAGI; use the

Trusts that are classified as “grantor

to the general rules for trusts under

trusts” under sections 671-679;

married filing joint return applicable

chapter 1 of the IRC, and then combines

threshold amount ($250,000); and check

Electing Alaska Native Settlement

the undistributed net investment income of

the appropriate checkbox near the top of

Funds (described in section 646);

the S portion and the non-S portion. In the

Form 8960, Part I.

Perpetual Care (Cemetery) Trusts

case of an ESBT that has an S portion and

(described in section 642(i)); and

a non-S portion, complete lines 1-11 of

Once you make either election, its

Trusts that are not classified as “trusts”

Form 8960 using the items from the non-S

duration and termination is governed by

for federal income tax purposes. For

portion, and add undistributed net

sections 6013(g) and 6013(h),

example:

investment income of the S portion to net

respectively, and related regulations.

investment income on line 7.

1. Real Estate Investment Trusts, and

You can make either election on an

2. The ESBT determines its AGI,

amended return only if the tax year for

2. Common Trust Funds.

solely for purposes of NIIT, by adding the

which you are making the election, and all

Special computational rules for quali-

net income or net loss from the S portion

tax years affected by the election, are not

to the AGI of the non-S portion as a single

fied funeral trusts (QFTs). The NIIT

closed by the period of limitations on

applies to the QFT (as defined in section

assessment under section 6501.

Instructions for Form 8960 (2015)

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Instructions For Form 8960 (2015) Page 2

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