Witnesses Urge Greater Simplicity in Net Investment Income Rules

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Practitioners, in April 2 testimony before the Internal Revenue Service, called for greater simplicity, more clarity, and fewer restrictions in proposed rules (REG-130507-11) on the net investment income tax imposed on certain individuals, trusts, and estates.
The rules under tax code Section 1411, instituted by the Affordable Care Act, would impose a 3.8 percent tax on unearned income or investments, generally derived from passive activities, IRS said.
The dense set of proposed rules could be better tailored in their final version to be more usable to a broad, middle-range level of tax adviser whose clients may be of only fairly moderate income, said Michael Grace of Whiteford, Taylor & Preston LLP. Because the taxpayers, estates, and trusts affected by the rules are typically represented by small to medium-size accounting or law firms, Grace said he urged IRS to err on the side of explaining its rules “simply, clearly, and completely.”

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