Articles on the Medicare Contribution Tax

Lewis Saret (Federal Tax Attorney, Washington D.C.) recently published a few articles  on the medicare contribution tax entitled,The 3.8 Percent Medicare Contribution Tax and  The 3.8 Percent Medicare Contribution Proposed Regulation Part I and Part II, The Estate Planner, (Jan. 2013),( Mar. 2013), & (May. 2013). Provided below is the introduction to the latest article:

This is the second part of a two-part series1 that addressthe proposed regulations that provide guidance with respect to Code Sec. 1411.Code Sec. 1411 imposes a 3.8-percent tax on net investment income forindividuals, trusts and estates. This column resumes where the first partended.

 Note. As of the date that this column was submitted forpublication, several comments have  been submitted to the Treasury Department concerningthe proposed regulations, some of  which are extensive. Attached as an Appendix tothis column is a list of issues raised in  such comments, along with cites to the comments submitted to theTreasury.

 Application to Estates and Trusts

In addition to placing a 3.8-percent tax on certain individuals,Code Sec. 1411 also applies a 3.8-percent net investment income tax on estatesand trusts. This tax is determined by applying a 3.8 percent tax for a tax yearon the lesser of: the estate’s or trust’s Undistributed Net Investment Income(UNII), or the estate’s or trust’s Adjusted Gross Income (AGI) above athreshold. The threshold amount is the dollar amount that begins the highesttax bracket for a particular year and is currently approximately $11,950.2 CodeSec. 1411 provides that AGI for estates and trusts, as for individuals, is defined in Code Sec. 67(e).