3.8% Net Investment Income Tax for Real Estate Investors and Partnership Members: Maximizing Planning Opportunities

Navigating Material Participation Rules, Real Estate Safe Harbor, Regrouping, Sale of Partnership Interests and More

Recording of a 90-minute premium CLE/CPE webinar with Q&A

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Conducted on Thursday, December 10, 2015

Recorded event now available

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Course Materials

This CLE/CPE course will examine the implications of the Net Income Investment Tax (NIIT) for real estate investors, developers, and members of real estate joint ventures and partnerships. The panel will discuss the definition and calculation of the tax on net investment income, the real estate safe harbor, tax planning strategies for owners and members of pass-through entities, and how to avoid unique tax traps.


The NIIT impacts tax planning for real estate investors and members of real estate joint venture partnerships and S Corps. It also impacts the economics of buying, selling, and exchanging interests in partnerships and other closely held companies.

Final regulations, issued in late 2013, provided clarification and made substantial changes to a number of issues, including estimated taxes, real estate rental activities and regrouping. Despite these clarifications, questions and grey areas remain.

The NIIT safe harbor for real estate investments establishes thresholds for when rental real estate activities rise to the level of active participation in a trade or business, which exempts rental income from NIIT. The regs also confirm that NIIT does not apply if the gain from a disposition of property is not recognized under IRC § 1031.

Listen as our authoritative panel of real estate finance and tax practitioners discusses the implications of the NIIT for real estate investors, developers and members of real estate partnerships, particularly the real estate safe harbor and self-rental property rules. The panel will discuss tax planning strategies as well as tips for avoiding tax traps.



  1. Overview of structure of NIIT
  2. NIIT final regulations
    1. Real estate safe harbor and self-rental property
    2. Regrouping activities
    3. Self-charged interest
    4. Net operating losses
    5. Net gains from the sale of property
  3. Proposed regulations
    1. Sale of S Corporation or partnership interests
    2. Capital loss carryforwards
  4. Capital gains tax planning
  5. Planning for pass-through entities and S corporation issues
  6. Impact of tax regime on entity selection and transfers and sales of interests


The panel will review these and other key issues:

  • How do the safe harbor rules benefit real estate professionals through the definition of “trade or business?”
  • What opportunities are there now to engage in regrouping activities?
  • What structures may minimize the applicability of surtaxes to real estate investors and developers?


Mark A. Bellows
Mark A. Bellows


Mr. Bellows has been a tax professional for over twenty years and has worked in numerous industries. He completed...  |  Read More

Elliot Kung
Elliot Kung
Tax Director

Mr. Kung focuses on foreign and domestic tax planning using pass-through and corporate structures, including...  |  Read More

Robin A. Word, CPA
Robin A. Word, CPA

Senior Manager
Averett Warmus Durkee

Mr. Word practices in the Corporate Business Services Department of his firm. He provides tax and consulting...  |  Read More

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