Line 7 is for Recoveries of deductions taken on a prior year's Form 8960. A recovery or refund of a previously deducted item increases net investment income in the year of the recovery.
In 2020, I had a value on 8960 line 9b. I believe I now need to include that (or a portion of it) in income in the year of the recovery. For most people, that would be 2021. For me, I have not yet received by tax refund so it will be for 2022 if I am reading the instructions for line 7 correctly.
According to another forum, I need to manually enter the number in Forms Mode. TT does not calculate this.
My question is how to calculate the amount to put on line 7. I am looking at the Deduction Recoveries Worksheet in the instructions and cannot determine what they are asking for for Line 1. It asks for the amount of recovery included in gross income, but not to include it if it is included in net investment income in the year of recovery. What does that all mean?
Line 2 asks for the amount of recovery that would've been included in gross income but for the application of the tax benefit rule under section 111. What does that mean?
Line 4 asks for the % of the deduction allocated to the net investment income in the prior year. If the deduction wasn't allocated between investment income and noninvestment income, enter 100%. How do I determine if it was allocated?
I think I can handle the rest of the worksheet.
I had $3,495on Form 8960 Line 9b in 2020. It reduced my NIIT by $132.
