Adjusting line 4a on Form 8960
The entry for line 4b is used to adjust the amount automatically pulled to Form 8960, line 4a. On line 4b, enter the net amount (positive or negative) for the following items included on line 4a that aren’t included in determining net investment income.
- Net income or loss from a section 162 trade or business that’s not a passive activity and isn’t engaged in a trade or business of trading financial instruments or commodities.
- Net income or loss from a section 1411 trade or business that’s taken into account in determining self-employment income.
- Royalties derived in the ordinary course of a section 162 trade or business that’s not a passive activity.
- Passive losses of a former passive activity that are allowed as a deduction in the current year by reason of section 469(f)(1)(A).
Use line 4b to adjust for certain types of nonpassive rental income or loss derived in the ordinary course of a section 162 trade or business.
For example, line 4b includes the following items:
- Nonpassive net rental income or loss of a real estate professional where the rental
activity rises to a section 162 trade or business. - Net rental income or loss that’s a nonpassive activity because it was grouped with a trade or business under Regulations section 1.469-4(d)(1).
- Other rental income or loss from a section 162 trade or business reported on Schedule K-1.
- Net income that’s been recharacterized as not from a passive activity under the section 469 passive loss rules and is derived in the ordinary course of a section162 trade or business.
Where is the entry in the program?
To adjust the amount on line 4a of Form 8960 Net Investment Income Tax, go to:
- Federal Section
- Income
- Less Common Income
- K-1 Earnings
- Schedule K-1 Form 1041
- Adjust the amount listed in box 5
Line 4a is the rental real estate, royalty, partnership, S corporations, trust income subject to Net Investment Income Tax.