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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