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TaxRobin, Tax Preparer
Category: Capital Gains and Losses
Satisfied Customers: 15716
Experience:  15+ years in Tax preparartion as well as Instructor for tax law, theory, and application
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Dr. XXXXXXXXXXXX Age 51 Married filing jointly Expected

Customer Question

Age 51 Married filing jointly
Expected earned income 2016 of
Husband $425,000(salary and practice S-Corp distributions) Wife $20,000(salary)
Expexted sale of land in 2016(from land S-Corp) to generate net long term capital gain of $ 900,000.00.
(Not interested in 1031 exchange)
Any ideas to reduce long capital gain tax(LTCG)or net investment income tax(NIIT)?
Dr. ***** *****
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  TaxRobin replied 1 year ago.


The long term gains could be offset if any longterm losses could be generated. If the individual has stock or assets that are longterm as well and sold at a loss that would reduce the gains.

Other than using 1031 gains can be reduced by losses in the year but other than that the gain is difficult to change.

Making sure the true gain is calculated would assist. The cost plus improvements should be used for the basis.

Unfortunately without losses to reduce the gain is going to stand.

If my answer addressed your question please rate below or above (let me know if you have difficulty as I believe the system changed), if you need more information reply below.

Customer: replied 1 year ago.
the NIIT(Net Investment Income Tax) of 3.8%? I am a 2.5% shareholder, my wife is 49% shareholder. My wife participated significantly in the past 3yrs. in marketing, meeting with the real estate agents as well as coordinated the ongoing maintainence of the property. I did not. Even though I have to pay the NIIT because is not my primary business, is her portion excluded from the NIIT because she had significant material participation in the original planned development, the subsequent lawsuit with the contractor as well as the final marketing and negotiation as well as the closing?
Expert:  TaxRobin replied 1 year ago.

NIIT is not applied for nonpassive business. If your spouse has been in business for holding real estate then she could be exempt. Passive activities to the taxpayer (within the meaning of section 469) are exempt for NIIT.

Gross Investment Income is reduced by deductions that are properly allocable to items of Gross Investment Income.

Examples of deductions, a portion of which may be properly allocable to Gross Investment Income, include investment interest expense, investment advisory and brokerage fees, expenses related to rental and royalty income, tax preparation fees, fiduciary expenses (in the case of an estate or trust) and state and local income taxes.