Source: https://www.taxconnections.com/taxblog/tag/medicare-tax/
Timestamp: 2017-10-20 10:44:05
Document Index: 308603388

Matched Legal Cases: ['§1411', '§1411', '§7701', '§1411', '§7701', '§301', '§1411', '§1411']

Medicare Tax | Tax Blog
3.8% Medicare Investment Tax on CFC’s and PFIC’s Income?
The regulations clarify that, in the case of residents of the other three U.S. possessions, all of which have so-called “mirror” Codes; Guam, the U.S. Virgin Islands, and the Northern Marianas, the §1411 tax will not apply because it has not been imposed by Congress on those three possessions, and because residents of those possessions pay income tax on their worldwide income to the government of the possession where they are resident.
Section 1411(e)(1) exempts a “nonresident alien” from the §1411 tax. The proposed regulations confirm that the term “nonresident alien” is determined in accordance with the “resident alien” definitional rules of §7701(b). However, the regulations give no guidance on how to apply §1411 when an individual is a U.S. citizen or resident alien for part of the year, and a nonresident alien for the balance of the year.
The regulations do not discuss the status of so-called “treaty tie-breaker aliens” who are classified as resident aliens under §7701(b), but who are also classified as income tax residents of a country having an income tax treaty with the United States under the “tie-breaker” rules of the treaty. Regs. §301.7701(b)-7(a)(1) provides that a tie-breaker alien will be classified as a nonresident “for purposes of computing that individual’s United States income tax liability under the provisions of the Internal Revenue Code and the regulations thereunder … .” Thus, whether a treaty tie-breaker alien is exempt from the §1411 tax probably depends on whether the §1411 tax is an “income tax” within the meaning of U.S. income tax treaties.
The Application of the New 3.8% Medicare Tax on CFC’s & PFIC’s Got You Confused?
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