NUA stock sale should not be included in Net Investment Income tax calculation. How do I exclude it?

[cappsokerson]

Sale of NUA stock transferred from 401K should not be included in Net Investment Income tax calculation (that is, Form 8960).  How do I correctly exclude it?  Is there an indicator in Schedule D or Form 8949 to mark a stock sale as excluded?

[TomYoung · Accepted solution]

"How do I correctly exclude it?  Is there an indicator in Schedule D or Form 8949 to mark a stock sale as excluded?"

I think you've hit upon an "unsupported calculation" within TurboTax:

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"Net Investment Income Tax(Form 8960):The program does not automatically support the following scenarios for the calculation of Net Investment Income Tax (NIIT). Make any necessary adjustments on the Form 8960 worksheet:

• Any adjustment to the gain or loss from the disposition of an interest in a partnership or S corporation that should be included on line 5c.
• Activities involving trading in financial instruments or commodities which should be included in NII regardless of material participation.
• Any adjustment to interest or dividend income or to capital gain/loss that is not related to an activity.
• Net operating loss for NIIT purposes.
• Any other adjustments or deductions not accounted for on the Form 8960 worksheet.

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I think you'll need to go into Forms Mode and make those adjustments directly.  Click on the "Forms" icon in the upper right hand corner, click on the "Open Form" icon above the list of forms/schedules/worksheets that comprise your income tax return, type in "8960" and click on the "Form 8960 Worksheet" item.

Tom Young

[clivtx]

This is what I did, but it is a terrible oversight for TT Premier to leave this out. If you edit the form to show the amount not subject to NIIT, then you can no longer file electronically.

Also, if it had a way to indicate the NUA portion of a sale, it would also eliminate having to create two 1099-B forms if sold within a year of distribution (NUA is LTCG, appreciation since distribution is short term).

[Critter-3]

This is not really a program oversight... You have to understand the program is written for the masses not for the exceptions. There are several things the program doesn't handle automatically because it is not cost-effective to do so.

For many situations there are just too few users that are affected by the situation so TurboTax chooses not to deal with it. So the only way to handle this is in the forms mode with an override.  Right now the 2019 filing season has closed so you're only choices to mail in the return. In the file tab choose the mail in option so the proper instructions and forms are populated in the PDF file.

[clivtx]

I thought that was part of the selling point for the Premier edition: "Designed for all levels of investing and investment types, from simple stocks to complex rental income."

Also, it was frustrating for TT to have kept asking if I wanted to file electronically (even though I thought it had said that with that edit to the form, one could not file electronically). After going through those hoops, it then said I had to undo that form edit to file electronically. When TT forces one to directly edit the form for exception cases, at the end, it should say that electronic filing is not possible due to form edits (and offer doing the Review again if that is not wanted).

[clivtx]

I was able to get it to work and still allow electronic filing last year. I don't remember exactly what it was, but I think I found a TT "form" that I could edit. The first time (when it disallowed electronic filing), I edited the IRS form.