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Question

How are the expenses allocated to investment income for Form 8960?

Answer

UltraTax/1041 uses the Form 8960 Net Investment Income Distributions Worksheet to allocate the expenses to net investment income based on how the expenses were allocated to the same categories of income on the Allocation of Expenses by Income Type – Tax Basis Worksheet.

Example: If other income of $1000 was allocated $200 in expense on the Allocation of Expenses by Income Type - Tax Basis Worksheet and only $800 was considered investment, then $160 of the expense would be considered allocated to investment income on the Form 8960 Net Investment Income Distributions Worksheet (800 / 1000 x 200).

Related topic: 1041-US: Form 8960 FAQs

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