107k views
3 votes
Alain Mire files a single tax return and has adjusted gross income of $304,000. His net investment income is $53,000. What is the additional tax that Alain will pay on his net investment income for the year?

A) Zero
B) $2,014
C) $3,952
D) $1,938
E) None of the choices are correct.

User Ecruz
by
6.9k points

1 Answer

3 votes

Final answer:

Alain Mire will pay an additional Net Investment Income Tax of $2,014 on his net investment income for the year since it is the lesser of his net investment income or the excess over the income threshold.

Step-by-step explanation:

The question directly relates to the calculation of the Net Investment Income Tax (NIIT), which is an additional tax certain individuals, estates, and trusts must pay on their investment income. For individuals, this tax is set at 3.8% and applies to the lesser of (1) net investment income or (2) the amount by which the individual's modified adjusted gross income exceeds a certain threshold. For a single filer like Alain Mire, the threshold is $200,000. Since Alain's adjusted gross income is $304,000, which is $104,000 over the threshold, and his net investment income is $53,000, we must calculate 3.8% of $53,000 because it is the lesser amount.

To calculate Alain's additional NIIT:

  • Net Investment Income: $53,000
  • NIIT rate: 3.8%
  • Additional NIIT = 3.8% × $53,000 = $2,014

Therefore, the correct answer is B) $2,014, which represents the additional tax Alain will pay on his net investment income for the year.

User Samp
by
8.0k points