26 U.S.C. § 1411 — Imposition of tax

(a) In general. Except as provided in subsection (e), the following tax is imposed for each taxable year^*, in addition to any other tax imposed by this subtitle.

(1) Individuals. For an individual, the tax is 3.8 percent of the lesser of:

(A) the individual’s net investment income for the taxable year; or

(B) the excess, if any, of:

(i) the individual’s modified adjusted gross income for the taxable year, over

(ii) the threshold amount.

(2) Estates and trusts. For an estate or trust, the tax is 3.8 percent of the lesser of:

(A) the undistributed net investment income for the taxable year; or

(B) the excess, if any, of:

(i) the adjusted gross income for the taxable year, as “adjusted gross income” is defined in section 67(e), over

(ii) the dollar amount at which the highest tax bracket in section 1(e) begins for the taxable year.

(b) Threshold amount. For this chapter, “threshold amount” means:

(1) For a taxpayer^* filing a joint return^* under section 6013 or a surviving spouse, as defined in section 2(a), $250,000.

(2) For a married taxpayer, as defined in section 7703, who files a separate return, one-half of the dollar amount in paragraph (1).

(3) In every other case, $200,000.

(c) Net investment income. For this chapter:

(1) In general. “Net investment income” means the excess, if any, of the following amount over the deductions allowed by this subtitle that are properly allocable to that gross income or net gain:

(A) The sum of:

(i) gross income from interest, dividends, annuities, royalties, and rents, except for income derived in the ordinary course of a trade or business^* not described in paragraph (2);

(ii) other gross income derived from a trade or business described in paragraph (2); and

(iii) net gain, to the extent taken into account in computing taxable income, that is attributable to disposing of property other than property held in a trade or business not described in paragraph (2).

(2) Trades and businesses to which tax applies. A “trade or business” is described in this paragraph if it is either:

(A) a passive activity, within the meaning of section 469, with respect to the taxpayer; or

(B) a trade or business of trading in financial instruments or commodities, as defined in section 475(e)(2).

(3) Income from investment of working capital subject to tax. A rule similar to the rule in section 469(e)(1)(B) applies for this subsection.

(4) Exception for certain active interests in partnerships and S corporations. For disposing of an interest in a partnership^* or S corporation^*:

(A) gain from the disposition is counted under paragraph (1)(A)(iii) only to the extent of the net gain that would be counted by the transferor if all the partnership’s or S corporation’s property were sold for fair market value immediately before the disposition of the interest; and

(B) a rule similar to subparagraph (A) applies to a loss from the disposition.

(5) Exception for distributions from qualified plans. “Net investment income” does not include a distribution from a plan or arrangement described in section 401(a), 403(a), 403(b), 408, 408A, or 457(b).

(6) Special rule. “Net investment income” does not include an item taken into account in determining self-employment income for the taxable year if section 1401(b) imposes a tax on that income.

(d) Modified adjusted gross income. For this chapter, “modified adjusted gross income” means adjusted gross income increased by the excess of:

(1) the amount excluded from gross income under section 911(a)(1), over

(2) the amount of deductions or exclusions that are disallowed under section 911(d)(6), and that were taken into account in computing adjusted gross income, with respect to the amounts described in paragraph (1).

(e) Nonapplication of section. This section does not apply to:

(1) a nonresident alien; or

(2) a trust in which all unexpired interests are devoted to one or more purposes described in section 170(c)(2)(B).