United States

New section 1411 regulations answer a number of questions


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In November 2013, the IRS released final and newly proposed regulations on the 3.8 percent net investment income tax under section 1411.

The guidance contains significant taxpayer-friendly guidance, including the exclusion of certain self-rentals and other rental income from net investment income, a safe-harbor provision for qualified real estate professionals, and provisions that allow net losses from property dispositions to offset other investment income.

In this whitepaper, RSM tax professionals address changes in and clarifications provided by the final regulations and outline the major provisions of the new proposed regulations. The authors highlight some of the previous commentary on the 3.8 percent net investment income tax and bring to light how the final and proposed regulations address those comments.

Most provisions of the final regulations are effective for taxable years beginning after Dec. 31, 2013. For the 2013 tax year, taxpayers may rely on either the final regulations or the previous proposed regulations released in November 2012.Taxpayers and their advisors should review these new rules carefully, as there may be opportunities to mitigate the impact of the 3.8 percent tax.