Proposed Net Investment Income Tax Rules Warn Against Manipulation to Avoid Tax

The Internal Revenue Service Nov. 30 released proposed rules (REG-130507-11) that address the net investment income tax provisions of the health care reform law, warning that IRS will closely review transactions that manipulate a taxpayer’s net investment income to reduce or eliminate the amount of tax imposed by Section 1411.

The Health Care and Education Reconciliation Act of 2010 added tax code Section 1411 to the tax code, beginning in 2013, imposing a 3.8 percent tax on certain individuals, estates, and trusts.

The general purpose of the section is to impose a tax on unearned income or investments, ...