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Net Investment Income Tax and US Territories – Confusion and Inequality Abound
Net Investment Income Tax and US Territories – Confusion and Inequality Abound
Filing season is done for taxpayers without extensions and will soon be approaching for those with extensions. One item on the menu that is new is the NIIT. That item slices a 3.8% cut off the investor’s revenue and forwards it promptly to Uncle Sam.  Amid confusion regarding trusts, S corporations, real estate, netting losses and so on, apparently there is some confusion regarding the application of the NIIT to US territories. We were not aware of that confusion until today when we reviewed one USVI law firm’s plea to Office of International Tax Counsel to clarify the NIIT...
May 14, 2014 read more
Net Investment Income Tax and Tax Distributions
Net Investment Income Tax and Tax Distributions
Now when the New Year celebrations are out of the way, more prosaic duties poke their head around the corner, such as, Tax Time. Depending on the investment fund, K-1s may start rolling out in late February or March, if investors are lucky. This year, funds and their investors will have to deal with yet another tax, the net investment income tax (NIIT). This tax is brand new and the IRS forms and instructions are still being finalized. One thing is clear though, that investment funds will have to provide investors with enough information so that investors can compute their NIIT. Investors...
January 02, 2014 read more
NEWT Act Reintroduced
NEWT Act Reintroduced
For those who keep up with the net investment income tax (NIIT) and the S-corporation planning touted by many practitioners as a solution for minimizing both NIIT and employment tax, here is a fresh news to keep in mind.  The Narrowing Exceptions for Withholding Taxes Act of 2013, or so called NEWT Act (purportedly named after former House Speaker Newt Gingrich) was reintroduced in the House this January 22 by Charles Rangel.  This Bill is not new. It was also introduced in the 112th Congress and even prior to that with the American Jobs and Closing Tax Loopholes Act of 2010 (Sec. 413 of...
February 01, 2013 read more
A Few Additional Thoughts on the Net Investment Income Tax
A Few Additional Thoughts on the Net Investment Income Tax
I spent some more time with the NIIT proposed regulations and I also reviewed quite a few alerts by reputable firms and articles by renowned tax practitioners.  There are two buzz words that popped up in my NIIT adventures: “S-corporation” and “grouping activities.”  It seems like practitioners are focused on these two elements in their tax planning pitches to potential clients looking to minimize NIIT.  I have my doubts about carrying out any tax planning based on proposed regulations, considering that the regulations could change, and in the interim Treasury would have the...
January 25, 2013 read more
Net Investment Tax Proposed Regs are Out!
Net Investment Tax Proposed Regs are Out!
I am a bit late to the party since the regulations actually came out a few days ago, but nonetheless, I wanted to share my first impressions. These have been long awaited by the community and they do not disappoint. One hundred and fifty nine pages, including the preamble, but I am not going to belabor the point of complexity and volume; I have been ruminating complexity enough on this blog. Per my preliminary review, the proposed regulations cover many of the points that the community expected them to cover, e.g. issues related to attribution of manager’s business, CFC/PFIC issues,...
December 11, 2012 read more