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Practice CPA®CPA TCP Practice Exam 2Question 52

Medium1 markMultiple Choice

Area I: Individual Compliance and PlanningTCPIndividual TaxNIIT

CPA · Question 52 · Area I: Individual Compliance and Planning

A taxpayer is subject to the Net Investment Income Tax (NIIT). Their MAGI is $250,000 (Threshold $200,000). They have Net Investment Income (NII) of $40,000. What is the NIIT liability?

Answer options:

A.

$1,900

B.

$1,520

C.

$0

D.

$9,500

How to approach this question

NIIT Formula: 3.8% * Lesser of (NII) or (MAGI - Threshold). <br/>NII = $40k. <br/>Excess MAGI = $250k - $200k = $50k. <br/>Lesser is $40k.

Full Answer

B.$1,520✓ Correct

IRC §1411. Tax is 3.8% of the lesser of Net Investment Income or the excess of MAGI over the threshold. $40,000 < $50,000. $40,000 * 0.038 = $1,520.

Common mistakes

Applying tax to the excess MAGI when NII is lower.

Question 51 All questions Question 53

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