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                                                                                               Department of the Treasury
                                                                                               Internal Revenue Service
2023

Instructions for Form 8960

Net Investment Income Tax—Individuals, Estates, and Trusts

Section references are to the Internal Revenue Code unless        • Gross income and net gain specifically excluded by section 
otherwise noted.                                                  1411, related regulations, or other guidance published in the 
                                                                  Internal Revenue Bulletin.
Future Developments                                                 Examples of excluded items are:
                                                                  • Wages,
For the latest information about developments related to Form     • Unemployment compensation,
8960 and its instructions, such as legislation enacted after they • Alaska Permanent Fund Dividends,
were published, go to IRS.gov/Form8960.                           • Alimony,
                                                                  • Social security benefits,
                                                                  • Tax-exempt interest income,
General Instructions                                              • Income from certain qualified retirement plan distributions, 
                                                                  and
Reminders                                                         • Income subject to self-employment taxes.
Charitable contribution deduction for electing small busi-        Net investment income.     Generally, net investment income 
ness trusts (ESBTs).  Line 18b of Form 8960 was updated to        includes gross income from interest, dividends, annuities, 
reflect changes outlined in P. L. 115-97, section 13542, that     royalties, and rents, unless they’re derived from the ordinary 
amended the way the S portion of an ESBT accounts for             course of a trade or business that isn’t (a) a passive activity, or 
charitable contribution deductions under section 170(b) instead   (b) a trade or business of trading in financial instruments or 
of section 641(c), effective January 1, 2018. See Line 18b        commodities. In addition, net investment income includes other 
Deductions for Distributions of Net Investment Income and         gross income derived from a trade or business that’s (a) a 
Charitable Deductions.                                            passive activity, or (b) a trade or business of trading in financial 
Trade or business income subject to net investment in-            instruments or commodities. Additionally, net investment income 
come tax (NIIT). Line 4a of Form 8960 was amended to bring        includes net gain (to the extent taken into account in computing 
attention to certain income reported on Schedule C (Form 1040)    taxable income) attributable to the disposition of property other 
and Schedule E (Form 1040) that is subject to NIIT. This change   than property held in a trade or business that’s not (a) a passive 
was made to the instructions for Form 8960 in tax year 2022 to    activity, or (b) a trade or business of trading in financial 
better reflect section 1411(c)(2).                                instruments or commodities. To arrive at net investment income, 
  These instructions are based mostly on Regulations sections     the above items are reduced by deductions allowed against the 
1.1411-1 through 1.1411-10.                                       income tax that are properly allocable to those items of gross 
                                                                  income or net gain. See section 1411(c) and Regulations 
Who Must File                                                     sections 1.1411-4 and 1.1411-10(c).
Attach Form 8960 to your return if your modified adjusted gross   Passive foreign investment company (PFIC). Generally, a 
income (MAGI) is greater than the applicable threshold amount.    PFIC is any foreign corporation if at least 75% of its gross 
                                                                  income is passive income or an average of at least 50% of its 
Purpose of Form                                                   assets produce passive income or are held for the production of 
Use Form 8960 to figure the amount of your Net Investment         passive income. See section 1297(a).
Income Tax (NIIT).                                                Qualified electing fund (QEF). Generally, a QEF is a PFIC for 
                                                                  which the taxpayer has made an election under section 1295(b) 
Definitions                                                       and the PFIC complies with IRS requirements for determining 
Controlled foreign corporation (CFC). Generally, a CFC is         ordinary earnings and net capital gain. See section 1295(a).
any foreign corporation if more than 50% of its voting power or   Section 1.1411-10(g) election. An election made under 
stock value is owned or considered owned by U.S. shareholders     Regulations section 1.1411-10(g) (section 1.1411-10(g) 
(as defined in section 951(b)) on any day during the tax year.    election). See Regulations Section 1.1411-10(g) Election, later.
Certain foreign insurance companies are considered CFCs if 
more than 25% of their voting power or stock value is owned or    Section 1411 trade or business.  Generally, a trade or 
considered owned by U.S. shareholders (as defined in section      business that’s either a passive activity for the taxpayer or is a 
951(b)) on any day during the tax year. See section 957(a) and    trade or business of trading in financial instruments or 
(b). Additionally, certain foreign insurance companies with       commodities. See section 1411(c)(2) and Regulations section 
related person insurance income may be CFCs. See section          1.1411-5(a).
953(c). A specified foreign corporation described in section 
965(e)(1)(B) and Regulations section 1.965-1(f)(45)(i)(B) that is Recordkeeping
not otherwise a CFC is treated as a CFC for purposes of           For the NIIT, certain items of investment income and investment 
Regulations section 1.1411-10. See Regulations section            expense receive different treatment than for the regular income 
1.965-1(d).                                                       tax. Therefore, you need to keep all records and worksheets for 
                                                                  the items you need to include on Form 8960. Keep all records for 
Excluded income.   Excluded income means:                         the entire life of the investment to show how you calculated 
• Income excluded from gross income in chapter 1 of the           basis. You’ll need to know what you did in prior years if the 
Internal Revenue Code;                                            investment was part of a carryback or carryforward.
• Income not included in net investment income; and

Dec 8, 2023                                                   Cat. No. 53783S

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                                                                         check the appropriate checkbox near the top of Form 8960, Part 
Application to Individuals                                               I.
U.S. citizens and residents.    Individuals who have for the tax 
year (a) MAGI that’s over an applicable threshold amount, and              Once you make either election, its duration and termination 
(b) net investment income, must pay 3.8% of the smaller of (a) or        are governed by sections 6013(g) and 6013(h), respectively, and 
(b) as their NIIT.                                                       related regulations.
  The applicable threshold amount is based on your filing                  You can make either election on an amended return only if the 
status.                                                                  tax year for which you’re making the election, and all tax years 
• Married Filing Jointly or Qualifying Surviving Spouse is               affected by the election, aren’t closed by the period of limitations 
$250,000.                                                                on assessment under section 6501.
• Married Filing Separately is $125,000.
• Single or Head of Household is $200,000.                                 If you elect to apply a section 6013(g) election for NIIT 
Nonresidents. The NIIT doesn’t apply to nonresident alien                purposes and later determine that you didn’t meet the criteria for 
(NRA) individuals. If you’re a U.S. citizen or resident married to       doing so in that tax year, your election for NIIT purposes will have 
an NRA, your filing status will be married filing separately for         no effect that year and for all future years. However, if, in a later 
purposes of determining your MAGI, net investment income, and            year, you meet the criteria to elect to apply your section 6013(g) 
whether you’re subject to the NIIT. However, see information,            election for NIIT purposes, you’ll be treated as though you did 
later, about certain elections to file jointly with NRA spouses.         elect to apply your section 6013(g) election in that later year 
                                                                         unless you file (or amend) your return for that later year to report 
Dual-resident individual. If you’re a dual-resident individual,          your NIIT without the election for NIIT purposes.
within the meaning of Regulations section 301.7701(b)-7(a)(1), 
you’ll generally be treated as a U.S. resident for purposes of the       Application to Estates and Trusts
NIIT. However, you’ll be treated as an NRA for purposes of the 
NIIT if:                                                                 Domestic estates and trusts.   The NIIT applies to estates and 
• You determine you would be treated as a resident of a foreign          trusts that have undistributed net investment income and 
country for purposes of an income tax treaty between the United          adjusted gross income (AGI) in excess of the threshold amount. 
States and that foreign country;                                         The NIIT is 3.8% of the lesser of:
• You elect to be treated as a resident of the foreign country for       • The undistributed net investment income for the tax year; or
purposes of computing your U.S. income tax liability; and                • The excess, if any, of AGI (as defined in section 67(e)) over 
• You file Form 1040-NR, U.S. Nonresident Alien Income Tax               the applicable threshold amount.
Return, and Form 8833, Treaty-Based Return Position                        The applicable threshold amount is the dollar amount at 
Disclosure Under Section 6114 or 7701(b), as provided in                 which the highest tax bracket in section 1(e) begins for the tax 
Regulations section 301.7701(b)-7(b).                                    year. See the instructions for Form 1041, Schedule G, line 1a, 
Dual-status individual. If you were a dual-status                        and the instructions for Form 1041-QFT, line 12, for the dollar 
individual—that is, an individual who was a resident of the United       amount at which the highest tax bracket begins for the tax year.
States for part of the year and an NRA for the other part of the         Exception for certain domestic trusts. The following trusts 
year—you’re subject to the NIIT only for the portion of the year         aren’t subject to the NIIT.
you were a U.S. resident. The relevant threshold amount isn’t            • Trusts that are exempt from income taxes imposed by subtitle 
reduced or prorated for a dual-status individual.                        A of the Internal Revenue Code.
  If you were a U.S. resident on the last day of the tax year, file        1. Charitable trusts and qualified retirement plan trusts 
Form 1040 or 1040-SR and attach a statement showing your                 exempt from tax under section 501.
income for the part of the year you were a nonresident. You can            2. Charitable Remainder Trusts exempt from tax under 
use Form 1040-NR as the statement.                                       section 664.
  If you were a nonresident on the last day of the tax year, file        • A trust or decedent's estate in which all of the unexpired 
Form 1040-NR and attach a statement showing your income for              interests are devoted to one or more of the purposes described 
the part of the year you were a U.S. resident. You can use Form          in section 170(c)(2)(B).
1040 or 1040-SR as the statement.                                        • Trusts that are classified as “grantor trusts” under sections 
  For more information, see the Instructions for Form 1040-NR            671–679.
and Pub. 519, U.S. Tax Guide for Aliens.                                 • Electing Alaska Native Settlement Funds (described in 
                                                                         section 646).
Election To File Jointly With Nonresident                                • Perpetual Care (Cemetery) Trusts (described in section 
                                                                         642(i)).
Spouse—Section 6013(g) or 6013(h)                                          Trusts that aren’t classified as “trusts” for federal income tax 
                                                                         •
If you and your spouse elect to file a joint return under section:       purposes. For example:
• 6013(g) (where an NRA is married to a U.S. citizen or resident 
at the end of the tax year); or                                            1. Real estate investment trusts, and
• 6013(h) (where at least one spouse was an NRA at the                     2. Common trust funds.
beginning of the tax year, but is a U.S. citizen or resident married     Special computational rules for qualified funeral trusts 
to a U.S. citizen or resident at the end of the tax year),               (QFTs). The NIIT applies to the QFT (as defined in section 685) 
you can also elect to apply the joint return election for NIIT           by treating each beneficiary's interest in that beneficiary's 
purposes. If you made a section 6013(g) or 6013(h) election, but         contract as a separate trust. Complete one consolidated Form 
don’t elect to apply the joint return election for NIIT purposes,        8960 for all beneficiary contracts subject to NIIT.
then, for NIIT purposes, you’ll file as married filing separately.
                                                                           If a QFT has one or more beneficiary contracts that have net 
  To make either election for NIIT purposes, use your combined           investment income in excess of the threshold amount:
items of income, gain, loss, and deduction from your joint return        • Complete Form 8960, lines 1–12, using only the sum of the 
to figure your net investment income and MAGI; use the married           net investment income of the beneficiary contracts that have net 
filing jointly return applicable threshold amount ($250,000); and        investment income in excess of the threshold amount; and
                                                                         • On line 19b:

                                                                     -2-                            Instructions for Form 8960 (2023)

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1. Insert the number of beneficiary contracts that have net            Note. The NIIT doesn’t apply directly to foreign estates or 
investment income in excess of the threshold amount next to the        foreign trusts.
entry on the line, and
2. Multiply the number of beneficiary contracts that have net          Passive Activity
investment income in excess of the threshold amount by the 
threshold amount for the year and enter that amount on line 19b.       General Rules
Example.       For 2023, a QFT has a beneficiary contract with         Net investment income generally includes income and gain from 
$16,000 of interest income and another beneficiary contract with       passive activities. A passive activity for purposes of net 
$21,000 of dividend income. Neither contract has any properly          investment income has the same meaning as under section 469. 
allocable deductions. The threshold amount for the 2023 tax            A passive activity includes any trade or business in which you 
year is $14,450. Therefore, the QFT has two beneficiary                don’t materially participate. A passive activity also includes any 
contracts with net investment income in excess of the threshold        rental activity, regardless of whether you materially participate. 
amount for the year.                                                   There are limited exceptions for rentals. See the discussion on 
                                                                       rentals, later. For more details on passive activities, see the 
The QFT will report $16,000 on line 1 (interest) and $21,000           Instructions for Form 8582, Passive Activity Loss Limitations, and 
on line 2 (dividends). Lines 12, 18a, and 19 would each be             Pub. 925, Passive Activity and At-Risk Rules.
$37,000 ($16,000 plus $21,000). Enter “2” on the dotted line at 
the end of line 19b and enter $28,900 ($14,450 × 2) on the entry       Trade or Business Activities
line for 19b. Lines 19c and 20 will be $8,100 ($37,000 less 
$28,900). On line 21, enter the NIIT liability of $307.80 ($8,100 ×    The definition of trade or business for NIIT purposes is limited to 
3.8% (0.038)).                                                         a trade or business within the meaning of section 162. This is 
                                                                       more restrictive than the definition of a trade or business activity 
Special computational rules for electing small business                for purposes of the passive activity loss rules. For example, 
trusts (ESBTs). The NIIT has special computational rules for           under the passive activity loss rules, a trade or business includes 
ESBTs. In general, ESBTs compute their NIIT in 3 steps.                any activity conducted in anticipation of the commencement of a 
1. The ESBT separately calculates the undistributed net                trade or business and any activity involving research or 
investment income of the S portion and non-S portion according         experimentation. In some cases, income from activities that 
to the general rules for trusts under chapter 1 of the Code, and       aren’t passive activities under section 469 will be included in net 
then combines the undistributed net investment income of the S         investment income because the activity doesn’t rise to the level 
portion and the non-S portion. In the case of an ESBT that has         of a trade or business within the meaning of section 162. The 
an S portion and a non-S portion, complete lines 1–11 of Form          activity must be a trade or business within the meaning of 
8960 using the items from the non-S portion, and add                   section 162 and be nonpassive for purposes of section 469 
undistributed net investment income of the S portion to net            before the income is excluded from the NIIT. If you own an 
investment income on line 7.                                           interest in a pass-through entity, the determination of whether 
                                                                       that’s a trade or business is made at that entity's level.
2. The ESBT determines its AGI, solely for purposes of NIIT, 
by adding the net income or net loss from the S portion to the 
AGI of the non-S portion as a single item of income or loss. See       Real Estate Professionals
the instructions for line 19a for more information.                    If you’re a real estate professional for purposes of section 469(c)
                                                                       (7), your rental income or loss won’t be passive if you materially 
3. To determine whether the ESBT is subject to NIIT, the               participated in the rental real estate activity with certain 
ESBT compares the combined undistributed net investment                restrictions. See Safe Harbor for Real Estate Professionals.
income with the excess of its AGI over the section 1(e) threshold.
    For an ESBT with only S corporation income (no non-S                 However, your rental income is included in net investment 
TIP portion), complete Form 8960 using the items from the S            income if the income isn’t derived in the ordinary course of a 
    portion. For ESBTs with an S portion and a non-S                   trade or business. Qualifying as a real estate professional 
portion, use Form 8960 as a worksheet for calculating the              doesn’t necessarily mean you’re engaged in a trade or business 
amounts to enter on line 7 and line 19a. On the S portion's Form       with respect to the rental real estate activities. If your rental real 
8960 worksheet, enter the S portion's net investment income on         estate activity isn’t a section 162 trade or business or you don’t 
line 7 of the trust's Form 8960 and combine line 19a of the Form       materially participate in the rental real estate activities, the rental 
8960 worksheet with the non-S portion's AGI to arrive at the           income will be included in NIIT.
amount on line 19a.                                                      For additional information on real estate professionals, see 
                                                                       section 469(c)(7) and Pub. 925.
See Regulations section 1.1411-3(c) for more details and 
examples.
                                                                       Safe Harbor for Real Estate Professionals
Special computational rules for bankruptcy estates of an               You qualify for the safe harbor if you’re a real estate professional 
individual. A bankruptcy estate of an individual debtor is             for purposes of section 469 and you:
treated as an individual for purposes of the NIIT. Regardless of       • Participate in each rental real estate activity for more than 500 
the actual marital status of the debtor, the applicable threshold      hours during the tax year, or
for purposes of determining the NIIT is the amount applicable for      • Participated in a rental real estate activity for more than 500 
a married person filing separately.                                    hours in any 5 tax years (whether or not consecutive) during the 
Distributions from foreign estates and foreign trusts.      If         10 tax years immediately prior to this tax year.
you’re a U.S. person who receives a distribution of income from a        If you qualify, your gross rental income from your rental real 
foreign estate or foreign trust, you must generally include the        estate activity is treated as though derived in the ordinary course 
distribution in your net investment income calculation to the          of a trade or business and isn’t included in your net investment 
extent that the income is included in your AGI for regular income      income. If you qualify in the year you dispose of the property 
tax purposes. However, you don’t need to include any                   used in the rental real estate activity, the amount of gain or loss 
distributions of accumulated income that you receive from a            from the disposition is also deemed to be derived from property 
foreign trust.                                                         used in the ordinary course of a trade or business and isn’t 
                                                                       included in your net investment income.
Instructions for Form 8960 (2023)                                   -3-

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Note. For real estate professionals with a Regulations section              income (before taking into account any suspended losses). Any 
1.469-9(g) election in effect, all of your rental real estate               suspended passive losses that are allowed by reason of section 
activities constitute a single activity for purposes of applying the        469(g) are allowed as additional properly allocable deductions.
500-hour test described in Safe Harbor for Real Estate 
Professionals above.                                                        Economic Grouping
                                                                            You can treat one or more trade or business activities, or rental 
Note. If you're a real estate professional under section 469(c)             activities, as a single activity if those activities form an 
(7), but you’re unable to satisfy the qualifications for the safe           appropriate economic unit for measuring gain or loss under the 
harbor, you’re not precluded from establishing that the gross               passive activity loss rules. For additional information on passive 
income and gain or loss from the disposition of property                    activity grouping rules, see Pub. 925.
associated with your rental real estate activity isn’t included in 
net investment income.                                                      Regrouping rules. The passive activity grouping rules 
                                                                            determine the scope of your trade or business and whether that 
Special Rules for Certain Rental Income                                     trade or business is a passive activity for purposes of the NIIT. 
For income tax purposes, Regulations section 1.469-2(f)(6)                  The proper grouping of a rental activity with a trade or business 
generally recharacterizes what would otherwise be passive                   activity won’t generally convert any gross income from rents into 
rental income from a taxpayer's property as nonpassive where                gross income derived from a trade or business.
the taxpayer rents the property for use in a trade or business in           Generally, you may not regroup activities unless your 
which the taxpayer materially participates. Similarly, for income           grouping was clearly inappropriate when originally made, or has 
tax purposes, a rental activity that’s properly grouped with a              become clearly inappropriate because of changed facts and 
trade or business activity in which the taxpayer materially                 circumstances.
participates under Regulations section 1.469-4(d)(1) is a                   However, under the NIIT “fresh start” election, you may 
nonpassive activity. For purposes of calculating your net                   regroup for the first tax year you’re subject to the NIIT (without 
investment income, the gross rental income in both of these                 the effect of the regrouping). You may regroup only once under 
situations is treated as though it’s derived in the ordinary course         this election and that regrouping will apply to the tax year for 
of a trade or business. Further, upon the disposition of the assets         which you regroup and all future tax years. If you’re subject to the 
associated with the rental activity, any gain or loss is also treated       NIIT for 2013 and you don’t regroup, you may make the election 
as gain or loss attributable to the disposition of property held in a       for the first tax year beginning after 2013 that you’re subject to 
nonpassive trade or business and not included in your net                   the NIIT.
investment income. For these purposes, the nonpassive trade or 
                                                                            You may regroup on an amended return, but only if you 
business can’t be a business trading in financial instruments or 
                                                                            weren’t subject to the NIIT on your original return (or previously 
commodities.
                                                                            amended return), and if, because of a change to the original 
                                                                            return, you owe NIIT for the year. For additional rules regarding 
Treatment of Former Passive Activities                                      regrouping on amended returns, see Regulations section 
A former passive activity is any activity that was a passive activity       1.469-11(b)(3)(iv)(C).
in a prior tax year but isn’t a passive activity in the current year. A 
prior tax year's unallowed loss from a former passive activity is           Disclosure requirements. Regroupings under the NIIT “fresh 
allowed to the extent of current year income from the activity              start” are subject to the disclosure requirements of Rev. Proc. 
under section 469(f)(1)(A). For purposes of determining your net            2010-13.
investment income, suspended losses from former passive 
activities are allowed as a properly allocable deduction, but only          Disposition of Partnership Interest or 
to the extent the net income or net gain from the former passive            S Corporation Stock
activity is included in your net investment income. Any remaining 
suspended losses from the former passive activity are allowed               In general, an interest in a partnership or S corporation isn’t 
as a properly allocable deduction, but only to the extent the net           property held for use in a trade or business and, therefore, gain 
income or net gain from other passive activities is included in             or loss from the sale of a partnership interest or S corporation 
your net investment income. For more information, see                       stock is included in your net investment income.
Regulations section 1.1411-4(g)(8) and examples.
                                                                            Adjustment
Disposition of Entire Interest                                              The amount of the gain or loss from the disposition for regular 
If you disposed of your entire interest in a passive activity or a          income tax purposes is included on Form 8960, line 5a, as a 
former passive activity to an unrelated person in a fully taxable           gain or loss. If you materially participated (as defined under the 
transaction, your losses allocable to the activity for that year            passive activity loss rules) in a trade or business activity of the 
aren’t limited by the passive activity loss rules for income tax            partnership or S corporation (or one of its subsidiaries) and that 
purposes. A fully taxable transaction is a transaction in which             trade or business activity isn’t the trade or business of trading in 
you recognize all realized gain or loss. For purposes of                    financial instruments or securities, then you must calculate the 
calculating your net investment income, these losses may be                 adjustment to report on line 5c. The adjustment described below 
properly allocable deductions, depending on the underlying                  only applies to dispositions of equity interests in partnerships 
character and origin of the losses.                                         and stock in S corporations and doesn’t apply to gain or loss 
                                                                            recognized on, for example, indebtedness owed to the taxpayer 
Note. If you dispose of an activity that’s always been a passive            by a partnership or S corporation.
activity, the suspended passive losses from that activity are 
allowed in full as a properly allocable deduction.                          For more information on how to calculate the adjustment to 
                                                                            report on line 5c, see Proposed Regulations section 1.1411-7.
Note. If you dispose of an activity that’s a former passive 
activity, any suspended passive losses allowed in the year of               Note. If the tax basis of the interest in the partnership or S 
disposition by reason of section 469(f)(1)(A) are included as               corporation for NIIT purposes is different than for regular income 
properly allocable deductions, but only to the extent the gain on           tax purposes due to certain adjustments associated with income 
the disposition of the activity is included in net investment               from CFCs or QEFs, the amount of gain or loss may exceed the 
                                                                            amount reported for regular income tax purposes.

                                                                        -4-                          Instructions for Form 8960 (2023)

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Required statements. Attach a statement to your return for the            Example.   If, in 2023, a single individual acquires stock in a 
year of disposition. Your statement must include:                       QEF, has a QEF inclusion of $5,000, and has MAGI of $150,000, 
• The name and taxpayer identification number of the                    the individual wouldn’t have to make a section 1.1411-10(g) 
partnership or S corporation of which the interest was                  election for 2023 because section 1411 isn’t applicable. If, in 
transferred,                                                            2024, the individual has MAGI in excess of $200,000, and the 
• The amount of the transferor's gain or loss on the disposition        individual would like to take QEF inclusions into account for 
of the interest for regular income tax purposes included on             purposes of section 1411 in the same manner and in the same 
line 5a,                                                                tax year as those amounts are taken into account for Code 
• The information provided by the partnership or S corporation          chapter 1 purposes, the individual must make the section 
to the transferor relating to the disposition (if any), and             1.1411-10(g) election for 2024 in the time and manner described 
• The amount of adjustment to gain or loss due to basis                 in Regulations section 1.1411-10(g).
adjustments attributable to ownership in certain CFCs and               Content requirements of election.   If you’re making or made 
QEFs.                                                                   the election in a prior year, you must check the checkbox for 
Deferred recognition sales (installment sales and private               “Regulations section 1.1411-10(g) election” on the Form 8960 
annuities).  If you disposed of a partnership interest or S             filed with your original or amended return. In addition, you must 
corporation stock in an installment sale transaction to which           attach a statement to your return, which includes the following.
section 453 applies, you need to calculate your adjustment to net       • Your name and social security number (individuals) or 
gain in the year of the disposition, even if the disposition            employer identification number (EIN) (estates and trusts).
occurred prior to 2013. The difference between the amount               • The following information for each CFC or QEF for which an 
reported for regular income tax and NIIT will be taken into             election is made.
account when each payment is received. You must attach the                1. The name of the CFC or QEF.
statement described above to your return in the first year you’re         2. Either the EIN of the CFC or QEF, or, if the CFC or QEF 
subject to NIIT. In subsequent years, attach a statement to your        doesn’t have an EIN, the reference ID number of the CFC or 
return that provides “Adjustment relates to a deferred recognition      QEF.
sale first reported on line 5c of the (enter year) return.”             In addition, list separately each CFC or QEF for which an 
                                                                        election is being made for the first time with this return and 
Regulations Section 1.1411-10(g)                                        include on the statement a declaration that you elect under 
Election                                                                Regulations section 1.1411-10(g) to apply the rules in section 
                                                                        1.1411-10(g).
In general, you may make the election provided in Regulations 
section 1.1411-10(g) if you own stock of a CFC or QEF. If a             Special Rule for Traders in Financial 
section 1.1411-10(g) election is in effect for stock of a CFC or 
QEF, generally, the amounts you include in income for regular           Instruments or Commodities
income tax purposes under sections 951, 951A, and 1293 from             Gains and losses from your trade or business of trading in 
the stock of the CFC or QEF are included in net investment              financial instruments or commodities aren’t subject to 
income, and distributions from the stock of the CFC or QEF,             self-employment taxes. However, interest expense and other 
described in section 959(d) or 1293(c), are excluded from net           investment expenses are deducted by a trader on Schedule C 
investment income.                                                      (Form 1040), Profit or Loss From Business, if the expenses are 
                                                                        from the trading business. A special rule may apply to a trader in 
  Your election applies only to the specific stock of the CFC or        financial instruments or commodities to reduce net investment 
QEF for which it’s made and stock of the CFC or QEF that you            income. The trader's interest and other investment expenses, to 
subsequently acquire. If you own a CFC or QEF through certain           the extent the expenses aren’t used to reduce the trader's 
domestic pass-through entities, such as a domestic partnership,         self-employment income, may be deductible for NIIT.
the entity may make the election for the stock of the CFC or QEF 
and you’ll be considered as having made the election with 
respect to the stock of the CFC or QEF owned or subsequently            Specific Instructions
acquired by the pass-through entity. The election by the 
pass-through entity applies only to stock of the CFC or QEF held        Part I—Investment Income
or subsequently acquired directly or indirectly by the 
pass-through entity. The pass-through entity's election doesn’t 
apply to any stock of the CFC or QEF that you personally hold or        Elections for Investment Income
subsequently acquire. If the entity doesn’t make the election, you      If you’re making the section 6013(g) or 6013(h) election (see 
may make the election for the stock of the CFC or QEF owned             Election To File Jointly With Nonresident Spouse—Section 
through the entity.                                                     6013(g) or 6013(h), earlier), check the corresponding checkbox.
Timing of election. Your election applies to the tax year for             If you’re making or have made a section 1.1411-10(g) election 
which it’s made and later tax years, and applies to all interests in    (see Regulations Section 1.1411-10(g) Election, earlier), check 
the CFC or QEF that you later acquire. You can’t revoke the             the corresponding checkbox and attach a statement to your 
election. In general, the election must be made no later than the       return, as described earlier under Content requirements of 
first tax year beginning after 2013, in which you include an            election.
amount in income for regular income tax purposes under section 
951(a), 951A, or 1293(a) for the stock of the CFC or QEF, and           Line 1—Taxable Interest
are subject to NIIT or would be subject to NIIT if you made the 
election for the stock of the CFC or QEF. The election may be           Enter the amount of taxable interest received. Include the 
made for a tax year beginning before 2014. The election can be          following amount from your return.
made on an original or an amended return, provided that the tax         • Form 1040 or 1040-SR, line 2b.
year for which the election is made, and all tax years affected by      • Form 1041, line 1.
the election, aren’t closed by the period of limitations on             • Form 1041-QFT, line 1a.
assessment under section 6501. For more information, see                • Form 1040-NR, taxable interest received for period of U.S. 
Regulations section 1.1411-10(g).                                       residency shown on attached statement.
Instructions for Form 8960 (2023)                                    -5-

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  See Special computational rules for qualified funeral trusts        Line 4a—Income From Trades/Businesses, Rental 
(QFTs) and Dual-status individual, earlier.                           Real Estate, Royalties, Partnerships, S 
Adjustments to interest.  Interest income earned in the               Corporations, and Trusts
ordinary course of your non-section 1411 trade or business is 
excluded from net investment income. If this type of interest 
                                                                      Enter the following amount from your properly completed return.
income is included on line 1, use line 7 to adjust your net 
investment income.                                                    • Schedule 1 (Form 1040), line 3.
                                                                      • Schedule 1 (Form 1040), line 5.
  If line 1 includes self-charged interest income received from a     • Form 1041, line 3.
partnership or S corporation that’s a nonpassive activity (other      • Form 1041, line 5.
than a trade or business of trading in financial instruments or       • Form 1041-QFT, the portion of line 4 that’s income and loss 
commodities), see Line 7—Other Modifications to Investment            that properly would be reported by a trust filing Form 1041 on 
Income, later, for a possible adjustment to net investment            Form 1041, line 5.
income.                                                               • Form 1040-NR, the amount properly reported on the 
                                                                      attachment to your Form 1040-NR representing the amount that 
Line 2—Ordinary Dividends                                             you would properly include on Schedule 1 (Form 1040), line 5, if 
                                                                      you were filing Form 1040 or 1040-SR and including income and 
Enter the amount of ordinary dividends received. Include the          loss only for your period of U.S. residency.
following amount from your return.
• Form 1040 or 1040-SR, line 3b.                                        See Special computational rules for qualified funeral trusts 
• Form 1041, line 2a.                                                 (QFTs) and Dual-status individual, earlier.
• Form 1041-QFT, line 2a.
• Form 1040-NR, ordinary dividends received for period of U.S.        Note. Income reported on Schedule 1 (Form 1040), line 3, and 
residency shown on attached statement.                                Schedule 1 (Form 1040), line 5, include both passive and 
                                                                      nonpassive income, and are added to line 4a of Form 8960. 
  See Special computational rules for qualified funeral trusts        Nonpassive income included on Schedule C (Form 1040) and 
(QFTs) and Dual-status individual, earlier.                           Schedule E (Form 1040), Supplemental Income and Loss, is 
Adjustments to dividends.    If line 2 includes dividends from        removed (as a negative) on line 4b, so that only passive income 
employer securities held in an employee stock ownership plan          from Schedule C (Form 1040), and Schedule E (Form 1040) 
(ESOP) that are deductible under section 404(k) or Alaska             remain on line 4c.
Permanent Fund Dividends, include those amounts as negative 
modifications on line 7. See Line 7—Other Modifications to            Line 4b—Adjustment for Net Income or Loss 
Investment Income, later.                                             Derived in the Ordinary Course of a Non-Section 
                                                                      1411 Trade or Business
Line 3—Annuities
                                                                      Use line 4b to adjust the amounts included on line 4a, for gains 
Enter the gross income from all annuities, except annuities paid      and losses that are excluded from the calculation of net 
from the following.                                                   investment income. Enter the amount of gains (as a negative 
• Section 401—Qualified pension, profit-sharing, and stock            number) and losses (as a positive number). Enter the net 
bonus plans.                                                          positive or net negative amount for the following items included 
• Section 403(a)—Qualified annuity plans purchased by an              on line 4a that aren’t included in determining net investment 
employer for an employee.                                             income.
• Section 403(b)—Annuities purchased by public schools or               Net income or loss from a section 162 trade or business that’s 
                                                                      •
section 501(c)(3) tax-exempt organizations.                           not a passive activity and isn’t engaged in a trade or business of 
• Section 408—Individual retirement accounts (IRAs) or                trading financial instruments or commodities.
annuities.                                                              Net income or loss from a section 1411 trade or business 
                                                                      •
• Section 408A—Roth IRAs.                                             that’s taken into account in determining self-employment 
• Section 457(b)—Deferred compensation plans of a state and           income.
local government and tax-exempt organization.                           Royalties derived in the ordinary course of a section 162 trade 
                                                                      •
• Amounts paid in consideration for services (for example,            or business that’s not a passive activity.
distributions from a foreign retirement plan that are paid in the       Passive losses of a former passive activity that are allowed as 
                                                                      •
form of an annuity and include investment income that was             a deduction in the current year under section 469(f)(1)(A).
earned by the retirement plan).
How your annuities are reported to you.     Net investment              In addition, use line 4b to adjust for certain types of 
income from annuities is reported to a recipient on Form 1099-R,      nonpassive rental income or loss derived in the ordinary course 
Distributions From Pensions, Annuities, Retirement or                 of a section 162 trade or business. For example, line 4b includes 
Profit-Sharing Plans, IRAs, Insurance Contracts, etc. However,        the following items.
the amount reported on Form 1099-R may also include annuity           • Nonpassive net rental income or loss of a real estate 
payments from retirement plans that are exempt from NIIT.             professional where the rental activity rises to a section 162 trade 
Amounts subject to NIIT should be identified with code “D” in         or business.
box 7. If code “D” is shown in box 7 of Form 1099-R, include on       • Net rental income or loss that’s a nonpassive activity because 
Form 8960, line 3, the taxable amount reported in box 2a of Form      it was grouped with a trade or business under Regulations 
1099-R. However, if the payor checks box 2b indicating the            section 1.469-4(d)(1). See Special Rules for Certain Rental 
taxable amount can’t be determined, you may need to calculate         Income, earlier.
the taxable portion of your distribution. See Pub. 939, General       • Other rental income or loss from a section 162 trade or 
Rule for Pensions and Annuities, and Pub. 575, Pension and            business reported on Schedule K-1 (Form 1065), Partner's 
Annuity Income, for details.                                          Share of Income, Deductions, Credits, etc., line 3, from a 
                                                                      partnership, or Schedule K-1 (Form 1120-S), Shareholder's 

                                                                  -6-                            Instructions for Form 8960 (2023)

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Share of Income, Deductions, Credits, etc., line 3, from an S          Line 5b—Net Gain or Loss From Disposition of 
corporation, where the activity isn’t a passive activity.              Property That Isn’t Subject to Net Investment 
• Net income that’s been recharacterized as not from a passive 
activity under the section 469 passive loss rules and is derived in    Income Tax
the ordinary course of a section 162 trade or business. For 
example:                                                               Use line 5b to adjust the amounts included on line 5a for gains 
                                                                       and losses that are excluded from the calculation of net 
  1. Net rental income or loss from a rental that meets an             investment income. Enter the amount of gains (as a negative 
exception under Regulations section 1.469-1T(e)(3)(ii), the            number) and losses (as a positive number) included on line 5a 
activity rises to a section 162 trade or business, and you             that are excluded from net investment income. For example, 
materially participated in the activity; or                            line 5b will include amounts such as the following.
  2. Net income from property rented to a nonpassive activity.         • Gain or loss from the sale of property held in a non-section 
See Special Rules for Certain Rental Income, earlier.                  1411 trade or business.
Note.   Any income from an estate or trust reported on Part III of       1. However, if the losses are attributable to formerly 
Schedule E (Form 1040) that excluded net investment income is          suspended passive losses of the non-section 1411 trade or 
taken into account on line 7. Don’t report those adjustments on        business, such gains and losses are excluded from net 
line 4b.                                                               investment income to the extent the nonpassive income from the 
                                                                       non-section 1411 trade or business is excluded from net 
         For line 4b adjustments, enter net positive amounts as a      investment income. See Regulations section 1.1411-4(g)(8) for 
  !      negative adjustment and enter net negative amounts as         more information and examples.
CAUTION  a positive adjustment.
                                                                         2. Gain or loss from the sale of property held in a 
                                                                       non-section 1411 trade or business doesn’t include substantially 
Lines 5a–5d—Gains and Losses on the                                    appreciated property that’s recharacterized as portfolio income. 
Dispositions of Property                                               See Substantially appreciated property, later.
                                                                       • Gain attributable to net unrealized appreciation (NUA) in 
Generally, net gain from the disposition of property not used in a     employer securities held by a qualified plan. See Net gain 
trade or business and net gain or loss from the disposition of         attributable to Net Unrealized Appreciation (NUA) in employer 
property held in a section 1411 trade or business is included in       securities held by a qualified plan, later.
net investment income if included in taxable income.                   • Adjustments to your capital loss carryforwards for items of 
                                                                       excluded loss. See Adjustments to your capital loss 
  Gains and losses that aren’t taken into account in computing         carryforwards, later.
taxable income aren’t taken into account in computing net 
investment income. For example, gain that isn’t taxable by             Substantially appreciated property.        If an interest in property 
reason of section 121 (sale of a principal residence) or section       is substantially appreciated at the time of disposition (fair market 
1031 (like-kind exchanges) isn’t included in net investment            value exceeds 120% of the adjusted basis), any gain from the 
income.                                                                disposition is treated as nonpassive, unless the interest in 
                                                                       property was used in a passive activity for either:
  See Lines 5a–5d—Net Gains and Losses Worksheet, in                     1. 20% of the total period during which you held the interest 
these instructions, for assistance in calculating net gain or loss     in property; or
includible in net investment income.
                                                                         2. The entire 2-year period ending on the date of the 
                                                                       disposition.
                                                                         See Regulations section 1.469-2(c)(2). The recharacterized 
Line 5a—Net Gain or Loss From Disposition of                           gain may be taken into account under section 1411(c)(1)(A)(iii) if 
Property                                                               the gain is attributable to the disposition of property and 
                                                                       recharacterized as portfolio income.
Calculate and enter the amount of net gain or loss from the            Net gain attributable to Net Unrealized Appreciation (NUA) 
disposition of property by combining the following amounts from        in employer securities held by a qualified plan.    Any gain 
your properly completed return.                                        attributable to NUA (within the meaning of section 402(e)(4)) that 
• Form 1040 or 1040-SR, line 7, and Schedule 1 (Form 1040),            you realize on a disposition of employer securities held by a 
line 4.                                                                qualified plan is a distribution within the meaning of section 
• Form 1041, lines 4 and 7.                                            1411(c)(5) and isn’t included in net investment income. However, 
• Form 1041-QFT, line 3, and the portion of line 4 attributed to       any gain realized on a disposition of employer securities 
ordinary gain/(loss).                                                  attributable to appreciation in the value of your employer 
• Form 1040-NR, the amounts properly reported on the                   securities after the distribution from a qualified plan isn’t a 
attachment to your Form 1040-NR representing the amounts that          distribution within the meaning of section 1411(c)(5) and is 
you would enter on Form 1040 or 1040-SR, line 7, and Schedule          included in net investment income.
1 (Form 1040), line 4, if you were filing Form 1040 or 1040-SR 
and including net gain or loss only for your period of U.S.            Shareholders of CFCs and QEFs without a section 
residency.                                                             1.1411-10(g) election. In the case of a QEF (other than a QEF 
                                                                       held in a section 1411 trade or business) for which a section 
                                                                       1.1411-10(g) election isn’t in effect, enter the amount treated as 
  See Special computational rules for qualified funeral trusts         long-term capital gain for regular income tax purposes under 
(QFTs) and Dual-status individual, earlier.                            section 1293(a)(1)(B).
Note.   If you incur gain or loss from a disposition that isn’t          Also, in the case of a disposition of a CFC or QEF (other than 
reported as described in the previous paragraph, report it on          a CFC or QEF held in a section 1411 trade or business) for 
line 7. See Line 7—Other Modifications to Investment Income,           which a section 1.1411-10(g) election isn’t in effect, enter the 
later.                                                                 increase or decrease in the amount of gain or loss for NIIT 
                                                                       purposes over the amount of gain or loss for regular income tax 

Instructions for Form 8960 (2023)                                   -7-

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Lines 5a–5d—Net Gains and Losses Worksheet                                                                             Keep for Your Records
                                                                                          (A)                      (B)                   Total of columns (A)+(B)
                                                                                      Capital gains/(losses):      Ordinary gains/
                                                                                     Form 1040 or 1040-SR,     (losses): Schedule 1 
                                                                                      line 7; Form 1041,           (Form 1040), line 4; 
                                                                                     line 4; Form 1041-QFT,        Form 1041, line 7; 
                                                                                      line 3; Form 1040-NR,        Form 1041-QFT, 
                                                                                      statement reflecting         portion of line 4 
                                                                                      U.S. residency portion   attributed to ordinary 
                                                                                      of Form 1040 or              gain/(loss); Form 
                                                                                      1040-SR, line 7          1040-NR, statement 
                                                                                                                   reflecting U.S. 
                                                                                                                   residency portion of 
                                                                                                                   Schedule 1 (Form 
                                                                                                                   1040), line 4
                                                                                                                                         Enter 
1.     Beginning net gains and losses                                                                                                    this       
                                                                                                                                         amount 
                                                                                                                                         on line 5a
2.     Gains and losses excluded from net investment income. Use current year amounts for lines 2a–2g and 2i.
   (a) Enter net gains from the disposition of property used in a 
       non-section 1411 trade or business (enter as negative 
       amounts): 
       Name of Trade or Business                            Amount                (                           ) (                       )
                                                         (                       )
                                                         (                       )
   (b) Enter net losses from the disposition of property used in 
       a non-section 1411 trade or business (enter as positive 
       amounts):
       Name of Trade or Business                            Amount                                              
                                                           
   (c) Enter net losses from a former passive activity allowed 
       by reason of section 469(f)(1)(A) . . . . . . . . . . . . . . . .                                       
   (d) Gains recognized in the current year for payments 
       received on an installment sale obligation or private 
       annuity for the disposition of property used in a 
       non-section 1411 trade or business . . . . . . . . . . . . . .             (                        )
   (e) Enter the net gain attributable to the net unrealized 
       appreciation (NUA) in employer securities . . . . . . . . . .              (                        )
   (f) In the case of a QEF (other than a QEF held in a section 
       1411 trade or business) for which a section 1.1411-10(g) 
       election isn’t in effect, enter the amount treated as 
       long-term capital gain for regular income tax purposes 
       under section 1293(a)(1)(B) . . . . . . . . . . . . . . . . . . . .        (                        )
   (g) Enter any other gains and losses included in net 
       investment income that aren’t otherwise reported on 
       Form 8960 and any other gains and losses excluded 
       from net investment income reported on line 5a. (Enter 
       excluded gains as a negative number and excluded 
       losses as a positive number.) . . . . . . . . . . . . . . . . . . .                                     
   (h) Enter the amount reported on line 2(i) of this worksheet 
       from your prior tax year return calculations. Enter as a 
       positive number . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
   (i) If you don’t have a capital loss carryover to next year, 
       then skip this line and go to line 2(j). Otherwise, enter the 
       lesser of (i)(1) or (i)(2) as a negative amount . . . . . . . .            (                        )
       (i)(1) If the sum of the amounts 
       entered on lines 2(a)–2(h) and 
       line 3(d), column (A), is greater than 
       zero, enter that amount here. 
       Otherwise, enter -0- on line 2(i) and 
       go to line 2(j) . . . . . . . . . . . . . . . . .  
                 OR
       (i)(2) The amount of capital loss 
       carried over to next year (Schedule D 
       (Form 1040), line 16, less the amount 
       allowed as a current deduction on 
       Schedule D (Form 1040), line 21) 
       entered as a positive 
       number    . . . . . . . . . . . . . . . . . . . .  
                                                                                                                                         Enter 
   (j) Sum of lines 2(a) through 2(i)                                                                                                    this       
                                                                                                                                         amount 
                                                                                                                                         on line 5b

                                                                                      -8-                          Instructions for Form 8960 (2023)

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Lines 5a–5d—Net Gains and Losses Worksheet—continued                                                                        Keep for Your Records
                                                                                               (A)                      (B)                    Total of columns (A)+(B)
                                                                                            Capital gains/(losses):     Ordinary gains/
                                                                                            Form 1040 or 1040-SR,       (losses): Schedule 1 
                                                                                            line 7; Form 1041, line 4;  (Form 1040), line 4; 
                                                                                            Form 1041-QFT, line 3;      Form 1041, line 7; 
                                                                                            Form 1040-NR, statement     Form 1041-QFT, 
                                                                                            reflecting U.S. residency   portion of line 4 
                                                                                            portion of Form 1040 or     attributed to ordinary 
                                                                                               1040-SR, line 7          gain/(loss); Form 
                                                                                                                        1040-NR, statement 
                                                                                                                        reflecting U.S. 
                                                                                                                        residency portion of 
                                                                                                                        Schedule 1 (Form 
                                                                                                                        1040), line 4
3.       Adjustment for gains and losses attributable to the disposition of interests in partnerships and S corporations
   (a)    (i) Enter the amount of net gain from the disposition of a 
   Net          partnership or S corporation included on line 5a to which                                               
Gains           section 1411(c)(4)(A) applies .          . . . . . . . . . . . . . . . .
          (ii) Enter the amount of net gain included in net investment 
                income after the application of Regulations section 
                1.1411-7. (The sum of columns A and B of line 3(a)(ii) 
                must be less than, or equal to, the sum of columns A and                                                
                B of line 3(a)(i).) .  . . . . . . . . . . . . . . . . . . . . . . . . .
          (iii) Enter the difference between line 3(a)(i) and line 3(a)                                                 
                (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
   (b)    (i) Enter the amount of net loss from the disposition of an 
   Net          interest in a partnership or S corporation included on                                                  
Losses          line 5a to which section 1411(c)(4)(B) applies               . . . . . .
          (ii) Enter the amount of net loss included in net investment 
                income after the application of Regulations section 
                1.1411-7. (The sum of columns A and B of line 3(b)(ii) 
                must be less than, or equal to, the sum of columns A and                                                
                B of line 3(b)(i).) .  . . . . . . . . . . . . . . . . . . . . . . . . .
          (iii) Enter the difference between line 3(b)(i) and line 3(b)                                                 
                (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
   (c)    (i) Enter the amount of gain recognized in the current year 
Deferred        attributable to payments received on an installment sale 
Sales           obligation or private annuity that was attributable to the 
                disposition of an interest in a partnership or an S 
                corporation in a year preceding the current year. Also 
                report any gain or loss associated with section 736(b)                                                  
                payments on this line        . . . . . . . . . . . . . . . . . . . . . .
          (ii) Enter the amount of adjustment attributable to such                                                      
                gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
          (iii) Subtract line 3(c)(ii) from line 3(c)(i) .       . . . . . . . . . . . .                                
   (d)   Combine the amounts on lines 3(a)(iii), 3(b)(iii), and 3(c)                                                                           Enter this 
         (iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                     amount   
                                                                                                                                               on line 5c
4.       Sum of items reported on lines 5a–5c
                                                                                                                                               Enter this 
Add lines 1, 2(j), and 3(d)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                       amount   
                                                                                                                                               on line 5d
          
         If the amount of gain for NIIT purposes is less than the amount of gain for regular income tax purposes, the entry on line 3(a)(iii), 3(b)(iii), 
TIP      or 3(c)(iii) should be a negative number. 
          
         If the amount of loss for NIIT purposes is less than the amount of loss for regular income tax purposes, the entry on line 3(a)(iii), 3(b)(iii), or 
         3(c)(iii) should be a positive number. 

Instructions for Form 8960 (2023)                                                           -9-

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purposes. However, if the gain is higher (or the loss larger) for   (1) and deduct from net investment income any amounts 
NIIT purposes compared to regular income tax purposes, in           deducted from income for regular income tax purposes under 
which case there’s no impact to the adjustment for capital loss     section 1296(a)(2). Use line 6 to make increases or decreases to 
carryforwards for NIIT purposes, enter the difference on line 6.    net investment income as a result of this rule (for items that 
                                                                    aren’t otherwise reflected on Form 8960).
Adjustments to your capital loss carryforwards.        Starting in 
2014, capital loss carryforwards must be adjusted if any sum of     Section 1291 funds. If you’re subject to the section 1291 rules 
all capital gain or loss amounts excluded from net investment       for a PFIC, you’ll include in net investment income any “excess 
income on lines 5b and 5c was a net loss (the sum of all            distributions that are dividends for NIIT purposes as well as any 
excluded capital losses was greater than the sum of all excluded    gains that are treated as excess distributions for regular income 
capital gains). Generally, the annual adjustment to your capital    tax purposes.” Use line 6 to make the increases to net 
losses carryforward is the lesser of:                               investment income as a result of the application of this rule (for 
• The amount of your capital loss carryforward from the             items that aren’t otherwise reflected on Form 8960).
previous year (the sum of carryforward amounts reflected on 
                                                                    CFCs and QEFs with a section 1.1411-10(g) election in ef-
Schedule D (Form 1040), Capital Gains and Losses, lines 6 and 
                                                                    fect. If you have a section 1.1411-10(g) election in effect for a 
14); or
                                                                    CFC or QEF, you’ll include in net investment income any 
• The amount of excluded capital losses in excess of excluded 
                                                                    inclusions under section 951(a), 951A, or 1293(a) derived from 
capital gain in the previous year.
                                                                    the CFC or QEF. Inclusions under section 1293(a)(1)(B) may be 
  See Lines 5a–5d—Net Gains and Losses Worksheet, in                reported elsewhere on Form 8960, such as on line 5a. Use line 6 
these instructions, for assistance with the calculation of capital  to make the increases to net investment income as a result of the 
loss carryforwards. In addition, see Proposed Regulations           application of this rule (for items that aren’t otherwise reflected 
section 1.1411-4(d)(4)(iii) for more information and a              on Form 8960).
comprehensive example of the application of this rule.
Pass-through entities. If you hold an interest in a pass-through    Note. If you included in income an amount under section 951(a) 
entity, the determination of whether a trade or business exists is  or section 1293(a) for a CFC or QEF in 2013 and made an 
made at that entity's level.                                        election under Regulations section 1.1411-10(g) after 2013 for 
                                                                    that CFC or QEF, special rules may apply to certain distributions 
                                                                    of previously taxed income from the CFC or QEF that aren’t 
Line 5c—Adjustment From Disposition of                              subject to regular income tax. For more information, see 
Partnership Interest or S Corporation Stock                         Regulations section 1.1411-10.
                                                                    CFCs and QEFs without a section 1.1411-10(g) election in 
Enter the amount from the worksheet for lines 5a–5d, line 3d.       effect. If you don’t have a section 1.1411-10(g) election in effect 
Attach a statement as described in Required statements, earlier,    for a CFC or QEF, you’ll generally include in net investment 
to your return for the year of the disposition.                     income certain distributions of previously taxed income from the 
                                                                    CFC or QEF that aren’t subject to regular income tax. In addition, 
Line 6—Adjustments to Investment Income for                         other special rules may apply, including rules that provide, as 
Certain CFCs and PFICs                                              applicable, alternative basis calculations for your basis in the 
                                                                    CFC or QEF, or your basis in a domestic partnership or S 
If you own stock, directly or indirectly, in a CFC or a PFIC (other corporation that owns the interest in the CFC or QEF. Also, the 
than certain CFCs and PFICs held in a section 1411 trade or         amount of investment interest expense you take into account for 
business or PFICs marked to market under a provision of Code        NIIT purposes may be increased or decreased from the amount 
chapter 1 other than section 1296), use line 6 for adjustments      taken into account for regular income tax purposes. (For 
necessary to calculate your net investment income.                  additional information on all of these rules, see Regulations 
                                                                    section 1.1411-10.) As a result of these rules, you may need to 
  Income from investments in CFCs and PFICs is generally            include amounts in net investment income that aren't otherwise 
included in the calculation of net investment income and, in        reported on Form 8960 or make adjustments to amounts 
many cases, will be included (in whole or in part) on other lines   reported elsewhere on Form 8960. For example, you may need 
of Form 8960. Generally, dividends from a CFC or a PFIC that        to include distributions from a CFC or a QEF in net investment 
are included in your regular income tax base are included on        income. Use line 6 to make increases or decreases to net 
Form 8960, line 2, and gains and losses derived from the stock      investment income as a result of the application of this rule (for 
of a CFC or a PFIC that are included in your regular income tax     items that aren’t otherwise reflected on Form 8960).
base are generally included on Form 8960, line 5. Also, income 
derived from CFCs and certain PFICs you hold in a section 1411      Note. Use line 5b to deduct inclusions under section 1293(a)(1)
trade or business is generally reported on Form 8960, line 4a.      (B) that are allowed on line 5a, or to adjust the amount of gain or 
                                                                    loss derived from the disposition of shares of a CFC or QEF. 
  Line 6 is used for adjustments that are the result of additional  However, if the gain included in net investment income is higher 
rules. These additional rules may apply when you own an             than the amount reported for regular income tax (or the loss is 
interest in a CFC or PFIC and may require you to subtract or add    greater), report the adjustment on line 6.
amounts not otherwise included on Form 8960. These additional 
                                                                    Note. Even if you don’t have a section 1.1411-10(g) election in 
rules vary depending on the set of anti-deferral rules that apply 
                                                                    place for a CFC or QEF, there are certain instances in which 
to you for regular income tax purposes, and for CFCs and QEFs, 
                                                                    distributions to you from the CFC or QEF may not be subject to 
and depending on whether you have a Regulations section 
                                                                    NIIT. For example, if a prior holder of the CFC or QEF had made 
1.1411-10(g) election in effect for the CFC or QEF. For more 
                                                                    a section 1.1411-10(g) election for that CFC or QEF and you 
information about determining the amount to report on line 6, see 
                                                                    receive a distribution of earnings and profits that were previously 
Regulations section 1.1411-10.
                                                                    included in the net investment income of the prior holder, you 
Section 1296 mark-to-market PFICs.    Generally, if you’re          may not be subject to NIIT on that distribution. For more 
subject to the section 1296 mark-to-market rules for a PFIC,        information, see Regulations section 1.1411-10.
you’ll include in net investment income any amounts included in 
income for regular income tax purposes under section 1296(a)

                                                                    -10-                Instructions for Form 8960 (2023)

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Line 7—Other Modifications to Investment Income                       Form 8814 election. Parents electing to include their child's 
                                                                      dividends and capital gain distributions in their income by filing 
Use line 7 to report additional net investment income                 Form 8814 include on Form 8960, line 7, the amount on Form 
modifications to net investment income that aren’t otherwise          8814, line 12, excluding Alaska Permanent Fund Dividends.
specified on lines 1–6. For example, use line 7 to report additions   Distributions from estates and trusts. Enter the amount from 
and modifications to net investment income, such as the               box 14, code H, of Schedule K-1 (Form 1041), Beneficiary's 
following.                                                            Share of Income, Deductions, Credits, etc.
• Section 1411 net operating loss (NOL) (enter as a negative 
amount). See Section 1411 NOL, later.                                 Note. If the amount reported in box 14, code H, of Schedule K-1 
• Any deductions described in section 62(a)(1) that are properly      (Form 1041) is a positive number, enter it on Form 8960, line 7, 
allocable to a passive activity or trading business, but aren’t       and increase your MAGI on Form 8960, line 13 (or Form 8960, 
taken into account on line 4a or 5a (enter as a negative amount).     line 19a) by the same amount.
See Other section 62(a)(1) deductions, later.
• Adjustments for distributions from estates and trusts. See            If the amount reported in box 14, code H, of Schedule K-1 
Distributions from estates and trusts, later.                         (Form 1041) is a negative number, and the trust has indicated 
• Section 404(k) dividends reported on line 2 (enter as a             some (or all) of the adjustment also requires a MAGI adjustment, 
negative amount). See Line 2—Ordinary Dividends, earlier.             enter it on Form 8960, line 7, and make the applicable increase 
• Interest income reported on line 1 received from certain            or decrease to your MAGI on Form 8960, line 13 (or Form 8960, 
nonpassive activities (entered as a negative amount). See             line 19a) as necessary.
Self-charged interest, later.                                         Section 1411 NOL. If you are allowed an NOL deduction under 
• Recoveries of deductions taken on a prior year's Form 8960.         section 172 for purposes of determining your regular income tax, 
See Deduction recoveries, later.                                      you may also be allowed some, or all, of the NOL deduction in 
• Other items of net investment income (or properly allocable         computing net investment income. Because NOLs are computed 
deductions) not otherwise included on Form 8960 reported on           and carried over year by year, you must determine for each NOL 
Schedule 1 (Form 1040), line 8z; Form 1041, line 8; Form              year what portion of the NOL is attributable to net investment 
1041-QFT, lines 4 and 9; Form 1040-NR, amount on statement            income. To determine how much of the accumulated NOL you 
reporting tax items for your period of U.S. residency                 can use in the current tax year as a deduction against your net 
corresponding to Schedule 1 (Form 1040), line 8z. For example,        investment income, you must first calculate your applicable 
these items could include the following.                              portion of the NOL for each loss year. For more information and 
  1. Amounts reported on Form 8814, Parents' Election To              examples on the calculation of a section 1411 NOL and its use, 
Report Child's Interest and Dividends, line 12. See Form 8814         see Regulations section 1.1411-4(h).
election, later.
                                                                      Note. No portion of an NOL incurred in a tax year beginning 
  2. Substitute interest and dividend payments (generally             before 2013 is permitted to reduce net investment income.
reported on Form 1099-MISC, Miscellaneous Information).                 Calculating your section 1411 NOL.   In any tax year in 
  3. Net positive periodic payments received from a notional          which a taxpayer incurs an NOL, the section 1411 NOL is the 
principal contract (NPC) that’s referenced to property (including     lesser of:
an index) that produces (or would produce, if the property were       • The amount of the NOL for the loss year the taxpayer would 
to produce income) interest, dividends, royalties, or rents. For      incur if only items of gross income that are used to determine net 
example, an interest rate swap, cap, or floor and an equity swap      investment income and only properly allocable deductions (other 
would be treated as an NPC that produces net investment               than a section 1411 NOL) are taken into account in determining 
income.                                                               the NOL under section 172, or
• Gains and losses from the disposition of property not included      • The amount of the taxpayer's NOL for the loss year.
on line 5a that are taken into account in computing taxable 
income. For example:                                                        For purposes of calculating the section 1411 NOL, 
                                                                      TIP   compute your NOL using Form 1045, Application for 
  1. Gain or loss from the disposition of an annuity or life                Tentative Refund, Schedule A—NOL, with only items of 
insurance contract (see Line 3—Annuities, earlier); and               income, gain, loss, and deduction on Form 8960 for that year. If 
  2. Casualty and theft losses reported on Schedule A (Form           this amount is less than your NOL computed for regular income 
1040), Itemized Deductions, line 15 (enter as a negative              tax purposes, then this amount is the applicable portion of your 
amount).                                                              NOL. If this amount is equal to, or greater than, your NOL 
However, gains and losses attributable to assets held in a            computed for regular income tax purposes, then your applicable 
non-section 1411 trade or business aren’t included in net             portion is 100% of the regular income tax NOL (which means the 
investment income. For more information, see Line 5b—Net              entire NOL will be deductible in computing net investment 
Gain or Loss From Disposition of Property That Isn’t Subject to       income when the NOL is used for regular income tax purposes).
Net Investment Income Tax, earlier.
                                                                        Using your section 1411 NOL. When you deduct an NOL 
Other section 62(a)(1) deductions.   Use line 7 to report             that originated in a previous year against the current year 
additional deductions attributable to a section 1411 trade or         income, a portion of the NOL may be deductible in computing 
business that aren’t included on lines 4–6. Generally, these          net investment income for the current year, regardless of whether 
deductions are above-the-line deductions reported on Schedule         you’re subject to the NIIT in the current year without the NOL 
1 (Form 1040), lines 11–25.                                           deduction. The amount of the regular income tax NOL used in 
                                                                      calculating net investment income is called the “applicable 
Note. Expenses associated with the trade or business of trading       portion.” The applicable portion is the percentage of the regular 
in financial instruments or commodities that are reported on your     income tax NOL that’s a section 1411 NOL. Because NOLs are 
Schedule C (Form 1040) are reported on Form 8960, line 10.            calculated on a year-by-year basis, the applicable portion of 
See Special rule for traders in financial instruments or              each NOL that’s used in the current year may be different.
commodities, later.
                                                                      Note. If you incurred an NOL after 2012 and carried back that 
Note. Early withdrawal penalty (Schedule 1 (Form 1040),               NOL to offset income in years preceding the imposition of the 
line 18) is reported on Form 8960, line 10.
Instructions for Form 8960 (2023)                                 -11-

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Example: Calculation of Section 1411 NOL for NIIT
Assume an unmarried individual incurs the following NOLs and has waived any potential carryback for each passing year under 
section 172(b)(3), and assume that carryforwards are not limited:

    NOL Origination Year                  (A) Regular Income Tax NOL       (B) Section 1411 NOL          (C) Applicable Portion of NOL 
                                                                                                         [column B divided by column A]
    2018 Calendar Year                    $150,000                               None                                 0.00%
    2019 Calendar Year                    $100,000                               $30,000                              30.0%
    2020 Calendar Year                    $40,000                                $40,000                              100%
    2021 Calendar Year                    $120,000                               $60,000                              50.0%

Beginning in 2022, the unmarried individual begins to use the NOLs to offset income:

    Tax Year             NOL Origination Year                  Regular Income    Applicable Portion          Section 1411 NOL
2022 Tax Year                                                         $300,000
                                          2018 NOL                    ($150,000)         0.00%                        None
                                          2019 NOL                    ($100,000)         30.0%                        ($30,000)
                                          2020 NOL                    ($40,000)          100.0%                       ($40,000)
                                          2021 NOL                    ($10,000)          50.0%                        ($5,000)
Total section 1411 NOL allowed as deduction against 2022 net investment income   . . . . . . . . . . . . . .          ($75,000)
In 2022, the regular income tax NOLs from 2018–2021 have caused the taxpayer’s AGI ($0) to fall below the statutory threshold; therefore, 
the individual isn’t subject to the NIIT. 

    Tax Year             NOL Origination Year                  Regular Income    Applicable Portion          Section 1411 NOL
2023 Tax Year                                                         $600,000
                                          2021 NOL                    ($110,000)         50.0%                        ($55,000)
Total section 1411 NOL allowed as deduction against 2023 net investment income   . . . . . . . . . . . . . .          ($55,000)
In 2023, the regular income tax NOL remaining from 2021 has reduced the taxpayer’s income for regular income tax to $490,000. The 
individual is entitled to reduce net investment income by $55,000 (entered as a negative amount on Form 8960, line 7).

NIIT (for example, a carryback to calendar year 2011 and/or                There are two exceptions to including recovered amounts in 
2012), the amount of section 1411 NOL that was included in the        net investment income. The two exceptions apply the tax benefit 
NOL carryback would’ve been used (as an applicable portion)           rule of section 111 within the NIIT system, and therefore operate 
even though the NIIT wasn’t in effect.                                independently of the application of section 111 for Code 
                                                                      chapter 1 purposes. First, properly allocable deductions aren’t 
See Example: Calculation of Section 1411 NOL for NIIT, in             reduced in the year of the recovery if the amount deducted in the 
these instructions, for an illustration of the calculation and use of prior year didn’t reduce the amount of section 1411 liability. 
a section 1411 NOL for NIIT purposes.                                 Second, properly allocable deductions aren’t reduced in the year 
Deduction recoveries. A recovery or refund of a previously            of the recovery if the amount deducted in the prior year is 
deducted item increases net investment income in the year of          included in net investment income.
the recovery. There are two exceptions to this general rule.
Generally, for purposes of determining the gross amount of            Note.     The total amount of recovery reported on Form 8960, 
the recovery, include the recovery of any amount that was             line 7, can’t exceed the total amount of properly allocable 
deducted in a prior year, regardless of the application of the tax    deductions for the year.
benefit rule (see section 111). For example, if a taxpayer 
receives a refund of state income taxes from a prior year, such a 
refund would be included in the taxpayer's gross income. 
However, if the taxpayer was subject to the alternative minimum 
tax in the year of the payment, the taxpayer may not have 
received any tax benefit under chapter 1 of the Code, and 
therefore section 111 may exclude some or all of the refund from 
gross income. However, the deductibility of state income taxes 
for NIIT is independent of the taxes for alternative minimum tax 
purposes. Therefore, the applicability of the recovery rule is 
determined without regard to whether the recovered amount was 
excluded from gross income by reason of section 111.

                                                                      -12-                       Instructions for Form 8960 (2023)

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    If the recovered amount relates to a deduction taken in a              If the recovered amount is included in net investment 
TIP tax year beginning before 2013, none of the recovery is            TIP income on lines 1–6, none of the recovery is included in 
    included in net investment income in the year of                       net investment income on line 7.
recovery.
                                                                       See Regulations section 1.1411-4(g)(2) for more information 
    If the recovered amount relates to a deduction taken in a          and examples. See Line 7—Deduction Recoveries Worksheet, in 
TIP tax year beginning after 2012 and you weren’t subject to           these instructions, to determine the amount of any recovery to 
    the NIIT because your MAGI (see Line 13—Modified                   include on line 7.
Adjusted Gross Income (MAGI), later, was below the applicable              In the case of multiple recoveries in a single year, 
threshold on line 14, then none of the recovery is included in net     TIP complete this worksheet for each recovery. If multiple 
investment income in the year of recovery. However, this rule              recoveries relate to a single deduction year, the amount 
doesn’t apply if you incurred an NOL in the year of the deduction,     reported on lines 8 and 9 of the first recovery worksheet will 
and a portion of your NOL is a section 1411 NOL.                       become lines 7 and 10, respectively, on the second recovery 
                                                                       worksheet.

Line 7—Deduction Recoveries Worksheet                                                                                              Keep for Your Records
    1.   Enter total amount of recovery included in gross income . . . . . . . . . . . . . . .                               1.    
         • Don’t include recoveries of items that are included in net investment 
         income in the year of recovery (included on lines 1–6).
         • Don’t include recoveries of items if the amount relates to a deduction 
         taken in a tax year beginning before 2013.
         • Don’t include recoveries of items if the amount relates to a deduction 
         taken in a tax year beginning after 2012, and you weren’t subject to the 
         NIIT solely because your MAGI was below the applicable threshold.
                This rule doesn’t apply if you incurred an NOL in such year, and a portion 
           !    of such NOL constitutes a section 1411 NOL.
         CAUTION
    2.   Amount of the recovery that would’ve been included in gross income, 
         except for the application of the tax benefit rule under section 111 . . . . . .                                    2.    
    3.   Total amount of recovery (add lines 1 and 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      3.    
    4.   Enter the percentage of the deduction allocated to net investment income 
         in the prior year. (If the deduction wasn’t allocated between investment 
         income and noninvestment income, enter 100%.) . . . . . . . . . . . . . . . . . . . . .                             4.    
    5.   Enter the lesser of (a) line 3 multiplied by line 4, or (b) the total amount deducted 
         on the prior year Form 8960 attributable to items recovered (after any deduction 
         limitations imposed by section 67 or 68) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  5.    
Calculation of recoveries when the deduction isn’t taken into account in computing your section 1411 NOL
    6.   Multiply line 5 by 3.8% (0.038) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         6.    
    7.   Enter the amount of net investment income in the year of the deduction 
         (previous year’s Form 8960, line 12, unless line 12 is zero, then previous 
         year's Form 8960, line 8 minus line 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               7.    
    8.   Add the amount on line 5 to line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          8.    
    9.   Using the previous year's Form 8960, recalculate the NIIT for the year of 
         the deduction by replacing the amount reported on line 12 with the 
         amount reported on line 8 of this worksheet (don’t use the net investment 
         income reported on that year's Form 8960, line 12). Enter your 
         recalculated NIIT here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9.    
10.      Enter the NIIT reported for the year of the deduction . . . . . . . . . . . . . . . . . . .                         10.  
11.      Subtract line 10 from line 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      11.  
12.      Enter the smaller of line 6 or line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          12.  
13.      Divide line 12 by 3.8% (0.038). Enter the result here and include on 
         Form 8960, line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.  
Calculation of recoveries when the deduction is taken into account in computing your section 1411 NOL
14.      Enter the amount of the section 1411 NOL in the year of the deduction 
         (entered as a positive number) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          14.  
15.      Enter the amount of the section 1411 NOL in the year of the deduction 
         recomputed without the amount on line 5 (entered as a positive number, 
         but not less than zero) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.  
16.      Subtract line 15 from line 14. Enter the result here and include on 
         Form 8960, line 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.  

Instructions for Form 8960 (2023)                                  -13-

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Self-charged interest. The self-charged interest rules under               If you have more than one of the deductions described above, 
section 469 (passive activity loss limitation) apply to lending       you may use a different method of allocation for each one. The 
transactions between a taxpayer and a pass-through entity in          reasonable method of allocation may differ from year to year.
which the taxpayer owns a direct or indirect interest, or between          Examples of reasonable methods of allocation include, but 
certain pass-through entities. The section 469 self-charged           aren’t limited to, an allocation of the deduction based on the ratio 
interest rules apply only to items of interest income and interest    of the amount of a taxpayer's gross investment income (Form 
expense that are recognized in the same tax year. The                 8960, line 8) to the amount of the taxpayer's AGI. In the case of 
self-charged interest rules:                                          an estate or trust, an allocation of a deduction under Regulations 
• Treat certain interest income resulting from these lending          section 1.652(b)-3(b), and in the case of an ESBT, Regulations 
transactions as passive activity income,                              section 1.641(c)-1(h), is also a reasonable method.
• Treat certain deductions for interest expense that are properly 
allocable to the interest income as passive activity deductions,      Note.  If an estate or trust allocates expenses for regular income 
and                                                                   tax purposes under Regulations section 1.652(b)-3(b) or 
• Allocate the passive activity gross income and passive activity     1.641(c)-1(h), any deviation from that allocation may not be a 
deductions resulting from this treatment among the taxpayer's         reasonable allocation method for NIIT purposes.
activities.                                                           Items not deductible in calculating net investment income. 
  The rules for computing net investment income adopt a               Unless a deduction is specifically identified as properly allocable 
similar rule for self-charged interest. See Regulations section       to net investment income in the section 1411 regulations, or in 
1.1411-4(g)(5). Include on line 7 (as a negative amount) the          supplemental guidance issued by the IRS in the Internal 
amount of interest income you received that’s equal to the            Revenue Bulletin, the deduction isn’t permitted.
amount of interest income that would’ve been considered 
passive income under the self-charged interest rules                  Line 9a—Investment Interest Expense
(Regulations section 1.469-7) had the nonpassive activity been 
considered a passive activity.
                                                                      Enter on Form 8960, line 9a, interest expense you paid or 
Note. This rule doesn’t apply to interest received on loans made      accrued during the tax year deducted on Schedule A (Form 
to a trade or business engaged in the trading of financial            1040), line 9. Estates and trusts enter the amount from Form 
instruments or commodities.                                           4952, line 8 (if not required to file Form 4952, use the form as a 
                                                                      worksheet). For individuals filing a Form 1040-NR, include only 
Note. Don’t include any adjustment for interest income on line 7      the amount of investment interest expense deduction for your 
(as a negative amount) if the corresponding interest deduction is     U.S. residency period.
also taken into account in determining your self-employment 
income that’s subject to tax under section 1401(b).                   Note.  If Form 4952 includes investment interest expense that’s 
                                                                      deducted on Schedule E (Form 1040) and already taken into 
Part II—Investment Expenses                                           account on line 4a, don’t include the same amount on line 9a.
Allocable to Investment Income and                                    Note.  If you own a CFC or QEF for which a section 1.1411-10(g) 
                                                                      election isn’t in effect, you may calculate your section 163(d) 
Modifications                                                         investment expense deduction for NIIT purposes differently than 
                                                                      for regular income tax purposes. See Regulations section 
Investment Expenses                                                   1.1411-10(c)(5) for additional guidance. Any modification to your 
Part II of Form 8960 includes deductions and modifications to         section 163(d) investment expense deduction for NIIT purposes 
net investment income that aren’t otherwise included in Part I.       is taken into account on line 6.
Generally, expenses associated with a passive activity trade or 
business, or the trade or business of trading in financial            Line 9b—State, Local, and Foreign Income Tax
instruments or commodities conducted through a pass-through 
entity are already included on line 4a or on line 5a. Part II is used Include state, local, and foreign income taxes you paid for the tax 
to report deductions that are, predominately, itemized                year that are attributable to net investment income. Form 
deductions. For more information on what constitutes properly         1040-NR filers include only taxes paid for the U.S. residency 
allocable deductions, see Regulations sections 1.1411-4(f)–(g).       period of the tax year. Sales taxes aren’t deductible in computing 
Reasonable method allocations.     To the extent that you have        net investment income. You may not take a deduction for any 
a properly allocable deduction that’s allocable to both net           foreign income taxes paid for the tax year if you took a credit for 
investment income and excluded income, you may use any                any portion of them. See section 275(a)(4).
reasonable method to determine that portion of the deduction 
that’s properly allocable to net investment income. The three              You can determine the portion of your state, local, and foreign 
items that may be allocated between net investment income and         income taxes allocable to net investment income using any 
excluded income are the following.                                    reasonable method. See Reasonable method allocations, 
• State, local, and foreign income taxes if properly deducted on      earlier, and Deductions subject to AGI limitations under section 
your return when calculating your U.S. regular income tax.            67 or section 68, later.
• All ordinary and necessary expenses paid or incurred during                 Miscellaneous itemized deductions are suspended for 
the tax year to determine, collect, or obtain a refund of any tax          !  tax years 2018 through 2025. Miscellaneous itemized 
owed if properly deducted on your return when calculating your        CAUTION deductions under section 67 aren’t allowed for tax years 
U.S. regular income tax.                                              beginning after 2017 and before 2026. See section 67(g).
• Amounts paid or incurred by the fiduciary of an estate or trust 
on account of administration expenses, including fiduciaries' 
fees and expenses of litigation, which are ordinary and                    The overall limitation on itemized deductions is also 
necessary in connection with the performance of the duties of         suspended for tax years 2018 through 2025. The overall 
administration if properly deducted on your return when               limitation on itemized deductions under section 68 doesn’t apply 
calculating your U.S. regular income tax.                             for tax years beginning after 2017 and before 2026. See section 
                                                                      68(f).

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We continue to discuss miscellaneous itemized deductions              instruments or commodities, you may use the net loss amount 
under section 67 (and the 2%-of-AGI limitation) and the overall       on your Schedule C (Form 1040) as a deduction on line 10, and 
limitation on itemized deductions under section 68; however,          you don’t need to complete Schedule SE (Form 1040), 
they are suspended for tax years 2018 through 2025.                   Self-Employment Tax.
                                                                      If you have more than one trade or business, you must 
Note.   Enter the amount of state, local, or foreign income taxes     complete Schedule SE (Form 1040) to determine whether you 
on Form 8960, line 9b, net of any deduction limitations imposed       can include some or all of the trading business Schedule C 
by section 68. See Lines 9 and 10—Application of Itemized             (Form 1040) expenses as a deduction on line 10. Complete the 
Deduction Limitations on Deductions Properly Allocable to             Line 10 Worksheet for Traders in Financial Instruments That 
Investment Income Worksheet in these instructions for                 Maintain More Than One Trade or Business.
assistance in figuring the amount to report on line 9b.
                                                                      Note. See the Instructions for Schedule SE (Form 1040) for who 
Line 9c—Miscellaneous Investment Expenses                             must file a Schedule SE (Form 1040). Retain a copy of the 
                                                                      Schedule SE (Form 1040) and the worksheet used to determine 
Investment expenses you incur that are directly connected to the      the expenses included as a modification on line 10 with your 
production of investment income are deductible expenses in            records. Don’t file the worksheet with Form 1040 or 1040-SR.
determining your net investment income. Generally, these 
amounts are reported on Form 4952, line 5. See Form 4952 for 
the instructions for line 5 for more information. The amounts 
reported on line 9c are the amounts allowable after the 
application of the deduction limitations imposed by sections 67 
and 68.

See Deductions subject to AGI limitations under section 67 or 
section 68, later.
Note.   Enter the amount of miscellaneous investment expenses 
on Form 8960, line 9c, net of any deduction limitations imposed 
by section 67 or section 68. See Lines 9 and 10—Application of 
Itemized Deduction Limitations on Deductions Properly 
Allocable to Investment Income Worksheet in these instructions 
for assistance in figuring the amount to report on line 9c.
See Caution regarding miscellaneous itemized deductions, 
earlier.
        Don’t include expenses that have been deducted on 
TIP     other lines of the Form 8960, such as depletion or 
        depreciation reported on Schedule E (Form 1040) and 
included on Form 8960, line 4a.
Dual-status individuals include only tax items related to their 
period of U.S. residency. See Dual-status individual, earlier.
        DO NOT use the following worksheet to calculate 
!       limitations for tax years beginning after 2017 and before 
CAUTION 2026.

See Caution regarding miscellaneous itemized deductions, 
earlier.

Line 10—Additional Modifications

Use line 10 to report additional deductions and modifications to 
net investment income that aren’t otherwise reflected on lines 1–
9. Enter amounts on line 10 as positive numbers.
Note.   Enter the amount on line 10 after the application of 
section 67 or 68. See Lines 9 and 10—Application of Itemized 
Deduction Limitations on Deductions Properly Allocable to 
Investment Income Worksheet in these instructions for 
assistance in figuring the amount to report on line 10.

See Caution regarding miscellaneous itemized deductions, 
earlier.

You may use line 10 to report properly allocable deductions. 
See Regulations sections 1.1411-4(f) and 1.1411-4(g) for 
details.
Special rule for traders in financial instruments or com-
modities. If your only business is trading in financial 
Instructions for Form 8960 (2023)                                 -15-

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Lines 9 and 10—Application of Itemized Deduction Limitations 
on Deductions Properly Allocable to Investment Income 
Worksheet                                                                                                                   Keep for Your Records
Part I—Application of Section 67 to Deductions Properly Allocable to Investment Income
1. Enter the amount of Miscellaneous Itemized Deductions properly allocable to 
   investment income before any itemized deduction limitations (description and 
   Form 8960 line number where they’ll be reported):
                         Description                       Line      Amount
   (a)                                                           
   (b)                                                           
2. Enter the total of all items listed in line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.  
3. Enter the amount of Miscellaneous Itemized Deductions shown on your current 
   return after the application of the section 67 2%-of-AGI limitation . . . . . . . . . . . .                 3.  
4. Enter the lesser of the total reported on line 2 or line 3 . . . . . . . . . . . . . . . . . . . .                                     4.  
Part II—Application of Section 67 Limitation to Specific Deductions
                                                                                                                           (B)
                                                                                                                   IF line 3 is less than 
                                                                                                                   line 2, THEN divide 
                                                                                                                   line 3 by line 2 AND 
                                                                                                                   enter the amount in        (C)
                                                                                                                     column (B).              Multiply the 
                                                                                                                  IF amounts reported         individual 
                                                                                                                  on Part I, lines 2 and      amounts in 
                                                                                                                   4, are equal, THEN         column (A) by 
                                                 (A)                                                              enter 1.00 in column        the amount in 
          Re-enter the amounts and descriptions from Part I, line 1.                                                       (B).               column (B).
                         Description                       Line      Amount
   (a)                                                                                                         x                          =    
   (b)                                                                                                         x                          =    
       Individuals—Use the amounts in column (C) on Part III, line 1, to determine the amount of these deductions that are allowable 
       after the application of the section 68 limitation.
TIP     
       Estates or trusts—Enter the amounts in column (C) in the appropriate location on lines 9 and 10. Don’t complete Part III or IV 
       of this worksheet.

                                                                -16-                                                       Instructions for Form 8960 (2023)

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Lines 9 and 10—Application of Itemized Deduction Limitations 
on Deductions Properly Allocable to Investment Income 
Worksheet—continued                                                                                                               Keep for Your Records
Part III—Application of Section 68 to Deductions Properly Allocable to Investment Income (Individuals Only)
1. Enter the amount of Miscellaneous Itemized Deductions properly allocable to 
   investment income from column (C) of Part II: 
                        Description               Line                                      Amount
   (a)                                                                                      
   (b)                                                                                      
2. Enter the amount of state, local, and foreign income taxes that are properly 
   allocable to investment income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             2.     
3. Enter the amounts of other Itemized Deductions subject to the section 68 
   limitation and properly allocable to investment income before any itemized 
   deduction limitations (description and Form 8960 line number where they’ll be 
   reported):
                        Description               Line                                      Amount
   (a)                                                                                      
   (b)                                                                                      
4. Enter the total deductions properly allocable to investment income subject to the section 68 limitation. Enter 
   the sum of lines 1 through 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.  
5. Enter the amount of total itemized deductions reported on Form 1040 or 
   1040-SR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.     
6. Enter all other itemized deductions allowed but not subject to the section 68 
   deduction limitation:
   (a) Investment Interest Expense . . . . . . . . . . . . . . . . . . . . .               
   (b) Casualty Losses (other than losses described in section 
       165(c)(1)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
   (c) Medical Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          
   (d) Gambling Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         
   (e) Total of lines 6(a) through 6(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    6(e).  
7. Subtract line 6(e) from line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.  
8. Enter the lesser of line 7 or line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.  

       This is the amount of itemized deductions that are properly allocable to investment income after the application of the sections 67 
TIP    and 68 deduction limitations. Use Part IV of this worksheet to reconcile this amount to the individual deduction amounts reported 
       on Form 8960, lines 9 and 10. 

Instructions for Form 8960 (2023)                                                         -17-

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Lines 9 and 10—Application of Itemized Deduction Limitations 
on Deductions Properly Allocable to Investment Income 
Worksheet—continued                                                                   Keep for Your Records

Part IV—Reconciliation of Schedule A Deductions to Form 8960, Lines 9 and 10 (Individuals Only)
                                                                                 (B) 
                                                                         IF Part III, line 8, is 
                                                                          less than Part III,        (C) 
                                                                         line 4, THEN divide         Multiply the 
                                                                           line 8 by line 4          individual 
                                                                          AND enter the              amounts in 
                                                                          amount in column          column (A) by the 
                                                                                 (B).               amount in column 
                                                                          IF the amounts             (B). Enter these 
                                                                         reported on Part III,       amounts in the 
                                (A)                                       lines 4 and 8, are         appropriate 
        Re-enter the amounts and descriptions from Part III, lines 1–    equal, THEN enter           locations on lines 
                                3.                                       1.00 in column (B).         9 and 10. 
Miscellaneous Itemized Deductions properly 
allocable to investment income: 
              Description                   Line                Amount
1. (a)                                                                ×                          =   
   (b)                                                                ×                          =   
2. State, local, and foreign income taxes . . . . . . . . . .         ×                          =  
Itemized Deductions Subject to Section 68 
Included on Line 3 of Part III:
3. (a)                                                                ×                          =   
   (b)                                                                ×                          =   

                                                              -18-               Instructions for Form 8960 (2023)

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  The amounts reported on line 10 are the amounts allowable               See Caution regarding miscellaneous itemized deductions, 
after the application of the deduction limitations imposed by           earlier.
sections 67 and 68, as applicable. See Deductions subject to 
AGI limitations under section 67 or section 68 next.                    Part III—Tax Computation
Deductions subject to AGI limitations under section 67 or 
section 68. Any deduction allowed against net investment                Individuals
income that, for purposes of computing your regular income tax,         Individuals complete lines 13–17.
is subject to either the 2% floor on miscellaneous itemized 
deductions (section 67) or the overall limitation on itemized           Line 13—Modified Adjusted Gross Income (MAGI)
deductions (section 68) is allowed in determining net investment 
income, but only to the extent the items are deductible after           If you didn’t exclude any amounts from your gross income under 
application of both limitations.                                        section 911 and you don’t own a CFC or PFIC, your MAGI is your 
  See Caution regarding miscellaneous itemized deductions,              AGI as reported on Form 1040 or 1040-SR. If you exclude 
earlier.                                                                amounts under section 911 or own certain CFCs or PFICs, your 
  Miscellaneous itemized deductions.       The amount of your           MAGI is your AGI as modified by certain rules described in 
miscellaneous itemized deductions, after application of the 2%          Regulations section 1.1411-10(e)(1).
floor but before application of the overall limitation, used in         Section 911. If you exclude amounts from income under 
determining your net investment income is the lesser of:                section 911, to calculate your MAGI, you must increase your AGI 
• That portion of your miscellaneous itemized deductions                by the excess of the amount excluded from income under 
before the application of the 2% floor that’s properly allocable to     section 911(a)(1) over the amount of any deductions (taken into 
net investment income, or                                               account in computing AGI) or exclusions disallowed under 
• Your total miscellaneous itemized deductions allowed after the        section 911(d)(6) for the amount excluded from income under 
application of the 2% floor but before the application of the           section 911(a)(1). Use Line 13—MAGI Worksheet in these 
overall limitation on itemized deductions.                              instructions to compute your MAGI.
  See Caution regarding miscellaneous itemized deductions,              CFCs and PFICs. If you own, directly or indirectly, stock in a 
earlier.                                                                CFC or PFIC other than certain CFCs and PFICs held in a 
  Itemized deductions. The amount of your itemized                      section 1411 trade or business or PFICs marked to market under 
deductions allowed in determining your net investment income            section 1296 or any other provision, to calculate your MAGI, you 
after applying both the 2% floor and the overall limitation is the      may need to make certain adjustments to your AGI, as provided 
lesser of:                                                              in Regulations section 1.1411-10(e)(1). Generally, these 
• The sum of :                                                          adjustments include the following.
  1. The amount of your miscellaneous itemized deductions               • 1291 funds.
allowed as a deduction against your net investment income                 1. Increase AGI by the amount of any excess distributions 
(before application of the overall limitation), and                     derived from a PFIC that are dividends included in MAGI but not 
  2. The total amount of your itemized deductions that aren’t           included in gross income for regular income tax purposes, and
subject to the 2% floor and are properly allocable to items of            2. Increase AGI by the amount of any gain treated as an 
income or net gain for purposes of determining your net                 excess distribution under section 1291 included in MAGI but not 
investment income; or                                                   included in gross income for regular income tax purposes.
• The total amount of your itemized deductions allowed after the        • CFCs and QEFs without a section 1.1411-10(g) election in 
application of both the 2% floor and the overall limitation on          effect.
itemized deductions.
                                                                          1. Decrease AGI by the amount of any section 951(a), 951A, 
  For more information and examples, see Regulations section            or 1293(a) inclusions;
1.1411-4(f)(7).

Line 10—Worksheet for Traders in Financial Instruments That 
Maintain More Than One Trade or Business                                                       Keep for Your Records
Use this worksheet to determine the amount on line 10.

1. Enter the total amount from Schedule SE (Form 1040), line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       1.     
2. (a)   If the amount on Schedule SE (Form 1040), line 3, is zero or greater, you can’t use the 
         expenses from your trade or business to reduce your investment income. Stop here.
   (b)   If the amount on Schedule SE (Form 1040), line 3, is a negative amount, enter your 
         expenses from your trade or business of trading in financial instruments or commodities 
         (entered as a positive amount) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              2(b).  
3. Add line 1 to line 2(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.     
   (a)   If the amount on line 3 of this worksheet is zero or less, include the trade or business 
         expenses (line 2(b) of the worksheet) on Form 8960, line 10.
   (b)   If the amount on line 3 of this worksheet is a positive number, convert the amount from 
         Schedule SE (Form 1040), line 3 (line 1 of this worksheet) into a positive number and 
         include it on Form 8960, line 10.

Instructions for Form 8960 (2023)                                   -19-

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Line 13—MAGI Worksheet                                                                                                                                    Keep for Your Records
1. Enter your Adjusted Gross Income            . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    1.  
2. Foreign Earned Income Exclusion:
  (a) Enter your Foreign Earned Income Exclusion (from 
      line 42 of Form 2555) . . . . . . . . . . . . . . . . . . . . . . . . . . . .             
  (b) Enter the deductions reported on line 44 of Form 
      2555 allocable to your Foreign Earned Income 
      Exclusion  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (                       )
  (c) Combine lines 2(a) and 2(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       2.  
3. Adjustments for certain CFCs and certain PFICs              . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              3.  
4. Enter the sum of line 1, line 2(c), and line 3. (Enter this amount on Form 8960, 
  line 13.)   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.  

  2. Increase AGI by the amount of any distributions described                                 NRA spouse. Note that if you made a section 6013(g) or 6013(h) 
in section 959(d) or 1293(c) included in your net investment                                   election to file jointly with your NRA spouse, but don’t also elect 
income as a dividend;                                                                          to apply the joint return election for NIIT purposes, then, for NIIT 
  3. Increase or decrease AGI (as appropriate) by the amount                                   purposes, you’ll file as married filing separately and need to use 
of any adjustment to gain or loss on the disposition of the CFC or                             the applicable threshold amount.
QEF that results in an adjustment to your MAGI;
  4. Increase or decrease AGI (as appropriate) by the amount                                   Line 17—Net Investment Income Tax for 
of any adjustment to gain or loss on the disposition of an interest                            Individuals
in a domestic partnership or S corporation that holds a CFC or 
QEF that results in an adjustment to your MAGI;                                                 • Form 1040 or 1040-SR filers: Include this amount on 
  5. Increase or decrease AGI (as appropriate) by the amount                                   Schedule 2 (Form 1040), line 12, and see the instructions there.
of any adjustment to investment interest expense under                                          • Form 1040-NR filers: Include this amount on the line of your 
Regulations section 1.1411-10(c)(5) that’s taken into account in                               U.S. residency statement corresponding to Schedule 2 (Form 
computing MAGI; and                                                                            1040), line 12, and see the Instructions for Form 1040-NR for the 
  6. Increase or decrease AGI (as appropriate) by the amount                                   amount to report on your tax return.

reported to you in box 14, code H, of Schedule K-1 (Form 1041)                                    See Dual-status individual, earlier.
that requires a MAGI adjustment.
• CFCs and QEFs held in a section 1411 trade or business or 
                                                                                               Estates and Trusts
with a section 1.1411-10(g) election in effect.
                                                                                               Estates and trusts complete lines 18–21.
  Increase AGI by the amount of any distributions described in 
section 959(d) or 1293(c) included in your net investment 
income as a dividend (not applicable to tax years beginning                                    Line 18b—Deductions for Distributions of Net 
before 2014).                                                                                  Investment Income and Charitable Deductions
    If you don’t own (directly or indirectly) any interests in 
TIP CFCs or PFICs, and don’t exclude any foreign earned                                        The undistributed net investment income of an estate or trust 
    income on Form 2555, Foreign Earned Income, enter                                          (reported on line 18c) equals its net investment income (reported 
your AGI from Form 1040 or 1040-SR on line 13.                                                 on line 18a) reduced by the net investment income included in 
                                                                                               the distributions to beneficiaries deductible by the estate or trust 
                                                                                               under section 651 or 661, and by the net investment income for 
Line 14—Threshold Based on Filing Status                                                       which the estate or trust was entitled to a section 642(c) 
                                                                                               deduction, in each case as calculated under Regulations section 
The threshold amount is based on your filing status.                                           1.642(c)-2 and the allocation and ordering rules under 
                                                                                               Regulations section 1.662(b)-2. In the case of the S portion of an 
Filing Status               Threshold Amount                                                   Electing Small Business Trust, as defined by section 1361(e), 
                                                                                               net investment income is further reduced by the net investment 
Married Filing Jointly             $250,000                                                    income for which the trust was entitled to a section 170 
Qualifying Surviving Spouse        $250,000                                                    deduction. See Section 641(c)(2)(E).
Married Filing Separately          $125,000
                                                                                                  Regulations section 1.1411-3(e) applies the class system of 
Single or Head of Household        $200,000                                                    income categorization, generally embodied in sections 651 
                                                                                               through 663 and related regulations, to arrive at the trust's net 
                                                                                               investment income reduction in the case of distributions that are 
                                                                                               comprised of both net investment income and net excluded 
  A bankruptcy estate of an individual enters $125,000 and                                     income items. See Regulations section 1.1411-3(e) for more 
uses Form 8960, lines 13–17, to compute the tax.                                               information and examples on the calculation of undistributed net 
  If you’re a U.S. citizen or resident married to an NRA, your                                 investment income.
filing status is married filing separately unless you made an                                  Charitable deduction. Report the amount of net investment 
election under section 6013(g) or 6013(h) to file jointly with your                            income distributed to beneficiaries of the estate or trust and the 

                                                                    -20-                                                            Instructions for Form 8960 (2023)

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amount of net investment income allocated to distributions to           which the highest tax bracket begins for the tax year and enter 
charity pursuant to section 642(c). The amount of the deduction         that amount here.
for net investment income distributed to charities under section 
642(c) is the amount of the net investment income allocated to            In the case of a QFT, see Special computational rules for 
the charity in accordance with Regulations section 1.642(c)-2(b)        qualified funeral trusts (QFTs), earlier, to determine the amount 
and the allocation and ordering rules under Regulations section         to report on Form 8960, line 19b.
1.662(b)-2. In the case of the S portion of an Electing Small 
Business Trust, as defined by section 1361(e), report the amount 
of net investment income distributed to beneficiaries of the            Line 21—Net Investment Income Tax for Estates 
estate or trust and the amount of net investment income                 and Trusts
allocated to distributions to charity pursuant to section 170. See 
Section 641(c)(2)(E).                                                   • Form 1041 filers: Include this amount on Form 1041, 
      Form 1041, Schedule A, can be used as a worksheet to              Schedule G, line 5, and see the instructions there.
TIP   calculate the amounts of net investment income                    • Form 1041-QFT filers: Include this amount on Form 
      allocable to charitable distributions by including on line 2      1041-QFT, line 15, and see the instructions there.
both tax-exempt income and the difference between adjusted 
total income and the trust's net investment income (Form 8960,          Paperwork Reduction Act Notice.              We ask for the information 
line 18a).                                                              on this form to carry out the Internal Revenue laws of the United 
                                                                        States. You are required to give us the information. We need it to 
      The amount of the deduction for net investment income             ensure that you are complying with these laws and to allow us to 
TIP   distributed to beneficiaries should equal the sum of net          figure and collect the right amount of tax.
      investment income reported to the beneficiaries on their 
respective Schedules K-1 (Form 1041).                                     You are not required to provide the information requested on 
                                                                        a form that is subject to the Paperwork Reduction Act unless the 
                                                                        form displays a valid OMB control number. Books or records 
Note. In general, the deduction for distributions of net                relating to a form or its instructions must be retained as long as 
investment income may not exceed the taxable income                     their contents may become material in the administration of any 
distributed to the beneficiary for regular income tax purposes.         Internal Revenue law. Generally, tax returns and return 
However, in the case of an estate or trust that owns an interest in     information are confidential, as required by section 6103.
certain CFCs or PFICs, the distribution of net investment income 
can exceed the distribution of taxable income when the amount             The time needed to complete and file this form will vary 
of distributions exceeds distributable net income for regular           depending on individual circumstances. The estimated average 
income tax purposes.                                                    time is:
      Form 1041, Schedule B, can be used as a worksheet to 
TIP   calculate the income distribution deduction for NIIT              Recordkeeping . . . . . . . . . . . . . .          1 hr., 01 min.
      purposes by replacing line 1 with the trust's net                 Learning about 
investment income (Form 8960, line 18a) and including on line 2         the law or the form    . . . . . . . . . . .       6 hr., 04 min.
both adjusted tax-exempt interest and the difference between 
line 1 and the trust's net investment income (Form 8960,                Preparing the form     . . . . . . . . . . .       1 hr., 47 min.
line 18a).                                                              Copying, assembling,
                                                                        and sending the form
                                                                        to the IRS . . . . . . . . . . . . . . . . . .          20 min.
Line 18c—Undistributed Net Investment Income
Don’t enter a negative number. If negative, enter zero.
                                                                          Comments and suggestions. We welcome your comments 
Line 19a—Adjusted Gross Income (AGI)                                    about this publication and your suggestions for future editions.
If the estate or trust doesn’t own a CFC or PFIC, enter its AGI for       You can send us comments through IRS.gov/
regular income tax purposes.                                            FormComments. Or, you can write to: Internal Revenue Service, 
                                                                        Tax Forms and Publications, 1111 Constitution Ave. NW, 
If the estate or trust owns a CFC or PFIC, it may need to make          IR-6526, Washington, DC 20224. DO NOT SEND THE FORM 
adjustments. See Line 13—Modified Adjusted Gross Income                 TO THIS ADDRESS.
(MAGI), earlier.
                                                                          Although we can't respond individually to each comment 
                                                                        received, we do appreciate your feedback and will consider your 
Line 19b—Highest Tax Bracket for Estates and                            comments as we revise our tax forms, instructions, and 
Trusts                                                                  publications. We can't answer tax questions sent to the above 
                                                                        address.
See the instructions for Form 1041, Schedule G, line 1a, and the 
instructions for Form 1041-QFT, line 12, for the dollar amount at 

Instructions for Form 8960 (2023)                                   -21-

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Index
 
D                                      I                                  P
Deduction recoveries 12                Income Threshold, Estates and      Passive Activity 3
Definitions 1                            Trusts 20
Disposition of Interest 4              Income Thresholds, Individuals  20 R
Disposition of Property, gains and     Index 22                           Recordkeeping 1
  losses 7                             Individuals, application of Net 
                                         Investment tax 2
                                                                          S
E                                      Instruments or Commodities   5
                                                                          Section 1291 10
Economic Grouping   4                                                     Section 1411 Net Operating Loss                11
Election for Reg 1.1411–10(g) 5        J
                                                                          Self-charged Interest 14
Election, Form 8814 11                 Joint-filed returns 2
Elections for Investment Income 5                                         T
Estates and Trusts, application of Net M
                                                                          Tax Computation  19
  Investment tax 2                     Mark-to-market, Passive Foreign 
Expenses of Investments   14             Investment Company 10

                                                  -22-