Nit tax

[TAX4US]

what if the 1120-s (H&W owned 100% participation)sells out, complete liquidation. Passes out through the K-1 a large amount of capital gain due to the sale of the assets. Is this income then subject to the NIT tax?

[Roland Slugg]

I believe it is, but my confidence level is not high. If you have read, or TRIED to read Code §1411(c)(4)(A), it is a rather daunting task. That Code section, in turn, then references §1411(c)(1)(A)(iii), and it's not easy to grasp their combined meaning. (Who writes this stuff, anyway???)

My understanding of the NIIT is, essentially, that all recognized net capital gains are subject to that tax.

[kathyc2]

what if the 1120-s (H&W owned 100% participation)sells out, complete liquidation. Passes out through the K-1 a large amount of capital gain due to the sale of the assets. Is this income then subject to the NIT tax?

Exempt.

From 8960 instructions: "Additionally, net investment income includes 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 that is not (a) a passive activity or (b) a trade or business of trading in financial instruments or commodities."