IRC Section 1.1411 regulations spell out what is to be included in Net Investment Income that may be subject to the 3.8% Medicare Tax for years 2013 and beyond.

If you sell a property – SURPRISE – the gain may push you above your status threshold. The gain from Schedule D is shown on Line 13, Form 1040 and it along with your other income may make you subject to the 3.8% Medicare Tax and be reported on new IRS Form 8960.

However, if you do a 1031 exchange on the property the gain is not recognized in determining net investment income (NII) under Section 1411. Both the gain and any depreciation recapture is deferred when you do a 1031 exchange.

For more details look at our website or call Bill Horan, CES® at 1-800-795-0769.