Bob Keebler interviews David Kirk and Adrienne Mikolshek, part of the team who wrote the Net Investment Income Tax regulations, to help members understand the new IRS Form 8960, Net Investment Income Tax for Individuals, Estates and Trusts and the draft instructions.

1. AICPA Podcast:
Interview with David H. Kirk, CFP, CPA,
JD, LLM and Adrienne M. Mikolashek, JD,
LLM
Presented by:
Robert S. Keebler, CPA, MST, AEP
Keebler & Associates LLP
© 2013 Prepared by Keebler & Associates, LLP
All Rights Reserved

2. Introduction
About the PFP Section & PFS Credential
• The AICPA PFP Section provides information,
resources, advocacy and guidance for CPAs who
specialize in providing estate, tax, retirement, risk
management and investment planning advice to
individuals and their closely held entities (learn more
at aicpa.org/PFP)
• The CPA/Personal Financial Specialist (PFS)
credential distinguishes CPAs as subject-matter
experts who have demonstrated their financial
planning knowledge through experience, education
and testing (learn more at aicpa.org/PFS)
American Institute of CPAs®
Personal Financial Planning Section
2

3. Introduction
Presented by: Robert S. Keebler, CPA, MST, AEP
Robert.Keebler@KeeblerandAssociates.com
920-593-1700
Disclaimer: The views and opinions expressed in this recording are solely
those of the presenters and other contributors. These views and opinions do
not necessarily represent those of the Internal Revenue Service or the U.S.
Department of the Treasury.
American Institute of CPAs®
Personal Financial Planning Section
3

4. Introductory Questions
1) Who do you believe needs to know the
rules under Section 1411 and the regulations
thereunder – CPAs, lawyers, financial
planners, only tax preparers, etc.?
2) What are some of the highlights from the
Form 8960 instructions?
American Institute of CPAs®
Personal Financial Planning Section
4

5. Self-Rental Question
Is it safe to say that self-rentals are not
subject to the NIIT, provided the rental is to a
trade or business in which the taxpayer
materially participates?
How do you report self-rentals on Form
8960?
American Institute of CPAs®
Personal Financial Planning Section
5

6. Regrouping Question
The election to regroup your activities under the
“fresh start” must be made in the first year you are
subject to the NIIT.
The instructions state that the determination of
whether you met the NIIT applicable income
threshold and have net investment income is made
without regard to the effect of the regrouping.
Therefore, if after the regrouping you are no longer
subject to the NIIT – i.e., before the regrouping you
had NII but because of the regrouping you no longer
have NII – the regrouping will still stand, correct? It
will not be voided, correct?
American Institute of CPAs®
Personal Financial Planning Section
6

7. Regrouping Question (continued)
Example: Prior to regrouping you have only $1M in
passive income from 10 different passive activities
and therefore would be subject to the NIIT. If,
however, you regroup under the “fresh start”
provision (assuming the grouping is allowed under
the regulations) and now have $1M from non-passive
activities and therefore would no longer be subject
to the NIIT, will the regrouping stand and not be
voided because you are no longer subject to the NIIT
(i.e., you no longer have NII)?
How do you make a regrouping election on Form
8960?
American Institute of CPAs®
Personal Financial Planning Section
7

8. Real Estate Professional Safe Harbor
Question
Could you please explain how the real estate
professional safe harbor works under the
NIIT?
How do you report income or loss from real
estate activities that fall under the real estate
professional safe harbor?
American Institute of CPAs®
Personal Financial Planning Section
8

9. Deduction Recoveries Question
What is a deduction recovery?
Could you please explain on deduction
recoveries work under the NIIT?
How do you report deduction recoveries on
Form 8960?
American Institute of CPAs®
Personal Financial Planning Section
9

10. Sections 67 & 68 Limitation on Deductions
Question
Could you please explain how the section 67
& 68 limitations work on properly allocable
deductions for NIIT?
- First the deductions subject to section 67 (2%
Floor)
- Second the deductions subject to section 68 (3%
Pease)
How do you account for the section 67 & 68
limitations on Form 8960?
American Institute of CPAs®
Personal Financial Planning Section
10

11. Loss Deductions Question
Could you please explain how loss
deductions work under the NIIT?
How do you report loss deductions on Form
8960?
American Institute of CPAs®
Personal Financial Planning Section
11

12. Question on Workpapers and File Retention
Some of the lines on Form 8960 require
multiple calculations and “netting” of many
different unrelated amounts; i.e., the
instructions for line 4b and line 7 describe
the possibility of many different unrelated
amounts that could be netted together and
summarily put on line 4b and line 7 of Form
8960. Any suggested methods to keep track
of these amounts in case of an IRS audit?
What will the IRS possibly be looking for in
case of an audit?
American Institute of CPAs®
Personal Financial Planning Section
12

13. Conclusion
When do you anticipate the release of the
Final 8960 Form?
Do you anticipate that it will be substantially
similar to the draft 8960 Form?
American Institute of CPAs®
Personal Financial Planning Section
13

14. Required Disclosure Under Circular 230
Pursuant to the rules of professional conduct set forth in Circular 230, as promulgated
by the United States Department of the Treasury, nothing contained in this
communication was intended or written to be used by any taxpayer for the purpose of
avoiding penalties that may be imposed on the taxpayer by the Internal Revenue
Service, and it cannot be used by any taxpayer for such purpose. No one, without
our express prior written permission, may use or refer to any tax advice in this
communication in promoting, marketing, or recommending a partnership or other
entity, investment plan or arrangement to any other party.
For discussion purposes only. This work is intended to provide general information
about the tax and other laws applicable to retirement benefits. The author, his firm or
anyone forwarding or reproducing this work shall have neither liability nor
responsibility to any person or entity with respect to any loss or damage caused, or
alleged to be caused, directly or indirectly by the information contained in this work.
This work does not represent tax, accounting, or legal advice. The individual
taxpayer is advised to and should rely on their own advisors.
American Institute of CPAs®
Personal Financial Planning Section
14

15. Resources for Post-ATRA & NIIT Planning
Planning After ATRA and the Net Investment Income Tax Toolkit
•
•
•
aicpa.org/pfp/proactiveplanning
Complimentary PFP Section member/PFS credential holder benefit
Includes Bronze Edition of Tax Evaluator, infographic on tax brackets, planning
ideas to use in client meetings, client communication templates,
webcast/podcast archives, and more!
Other Resources for Purchase from Bob Keebler (www.cpa2biz.com)
•
•
Tax Planning After the Healthcare Surtax: Tools, Tips, and Tactics*
The Rebirth of Roth: A CPA's Ultimate Guide for Client Care*
Now Available! More Resources for Purchase from Bob Keebler*
(www.cpa2biz.com)
•
•
Planning Opportunities After ATRA: Tools, Tips, and Tactics (PTX1307M)
Tax Rate Evaluator: A Graphical Calculator for Tax Planning After ATRA
(PTX1306M)
Visit aicpa.org/pfp/join to become a member
*discounts available for PFP/PFS members
American Institute of CPAs®
Personal Financial Planning Section
15