Calculation of net investment income

This guide includes instructions for computing Form 8960, which is required for most trusts and estates but not for grantor trusts, perpetual care trusts, or 1041-QFTs. This guide outlines the line-by-line analysis of Form 8960, detailing the sources of investment income, allowable deductions, and modifications. It also explains the allocation of expenses under §652(b)-3(b), emphasizing the importance of following the IRS regulations for expense allocation.

This guide also includes examples to illustrate how different scenarios are handled, such as the treatment of state tax refunds and real estate taxes on non-rental property. Additionally, it covers the impact of various CIF (Compute-Input-Form) options on the computation and reporting of NII and provides instructions for generating and interpreting Schedule K-1 for beneficiaries.