Source: https://www.irs.gov/pub/irs-prior/i8960--2025.pdf#page=13
Pages 13-13, text extracted with pdftotext (poppler), reading order.

Line 7—Other Modifications to Investment Income
Use line 7 to report additional NII modifications to NII that
aren’t otherwise specified on lines 1–6. For example, use
line 7 to report additions and modifications to NII, such as
the following.
• Section 1411 net operating loss (NOL) (enter as a
negative amount). See Section 1411 NOL, later.
• Any deductions described in section 62(a)(1) that are
properly allocable to a passive activity or trading business,
but aren’t taken into account on line 4a or 5a (enter as a
negative amount). See Other section 62(a)(1) deductions,
later.
• Adjustments for distributions from estates and trusts.
See Distributions from estates and trusts, later.
• Section 404(k) dividends reported on line 2 (enter as a
negative amount). See Line 2—Ordinary Dividends,
earlier.
• Interest income reported on line 1 received from certain
nonpassive activities (entered as a negative amount). See
Self-charged interest, later.
• Recoveries of deductions taken on a prior year’s Form
8960. See Deduction recoveries, later.
• Other items of NII (or properly allocable deductions) not
otherwise included on Form 8960 reported on Schedule 1
(Form 1040), line 8z; Form 1041, line 8; Form 1041-QFT,
lines 4 and 9; and Form 1040-NR, amount on statement
reporting tax items for your period of U.S. residency
corresponding to Schedule 1 (Form 1040), line 8z. For
example, these items could include the following.
1. Amounts reported on Form 8814, Parents’ Election
To Report Child’s Interest and Dividends, line 12. See
Form 8814 election, later.
2. Substitute interest and dividend payments
(generally reported on Form 1099-MISC, Miscellaneous
Information).
3. Net positive periodic payments received from a
notional principal contract (NPC) that’s referenced to
property (including an index) that produces (or would
produce, if the property were to produce income) interest,
dividends, royalties, or rents. For example, an interest rate
swap, cap, or floor and an equity swap would be treated
as an NPC that produces NII.
• Gains and losses from the disposition of property not
included on line 5a that are taken into account in
computing taxable income, for example:
1. Gain or loss from the disposition of an annuity or life
insurance contract (see Line 3—Annuities, earlier); and
2. Casualty and theft losses reported on Schedule A
(Form 1040), Itemized Deductions, line 15 (enter as a
negative amount).
However, gains and losses attributable to assets held in a
non-section 1411 trade or business aren’t included in NII.
For more information, see Line 5b—Net Gain or Loss
From Disposition of Property That Isn’t Subject to Net
Investment Income Tax, earlier.
Other section 62(a)(1) deductions. Use line 7 to report
additional deductions attributable to a section 1411 trade
or business that aren’t included on lines 4–6. Generally,
these deductions are above-the-line deductions reported
on Schedule 1 (Form 1040), lines 11–25. Similar section
62(a) deductions more directly related to investment
Instructions for Form 8960 (2025)

income are addressed in Part II, and Line 9c
Miscellaneous Investment Expenses, later.
Note: Expenses associated with the trade or business of
trading in financial instruments or commodities that are
not reflected on line 4a, from your Schedule C (Form
1040), are reported on Form 8960, line 10, as an
adjustment or modification. See Special rule for traders in
financial instruments or commodities, later.
Note: Early withdrawal penalty (Schedule 1 (Form 1040),
line 18) is reported on Form 8960, line 10.
Form 8814 election. Parents electing to include their
child’s dividends and capital gain distributions in their
income by filing Form 8814 must include on Form 8960,
line 7, the amount on Form 8814, line 12, excluding
Alaska Permanent Fund Dividends.
Distributions from estates and trusts. Enter the
amount from box 14, code H, of Schedule K-1 (Form
1041), Beneficiary’s Share of Income, Deductions,
Credits, etc.
Note: If the amount reported in box 14, code H, of
Schedule K-1 (Form 1041) is a positive number, enter it on
Form 8960, line 7, and increase your MAGI on Form 8960,
line 13 (or Form 8960, line 19a), by the same amount.
If the amount reported in box 14, code H, of
Schedule K-1 (Form 1041) is a negative number, and the
trust has indicated some (or all) of the adjustment also
requires a MAGI adjustment, enter it on Form 8960, line 7,
and make the applicable increase or decrease to your
MAGI on Form 8960, line 13 (or Form 8960, line 19a), as
necessary.
Section 1411 NOL. If you are allowed an NOL deduction
under section 172 for purposes of determining your
regular income tax, you may also be allowed some, or all,
of the NOL deduction in computing NII. Because NOLs
are computed and carried over year by year, you must
determine for each NOL year what portion of the NOL is
attributable to NII. To determine how much of the
accumulated NOL you can use in the current tax year as a
deduction against your NII, you must first calculate your
applicable portion of the NOL for each loss year. For more
information and examples on the calculation of a section
1411 NOL and its use, see Regulations section
1.1411-4(h).
Note: No portion of an NOL incurred in a tax year
beginning before 2013 is permitted to reduce NII.
Calculating your section 1411 NOL. In any tax year
in which a taxpayer incurs an NOL, the section 1411 NOL
is the lesser of:
• The amount of the NOL for the loss year the taxpayer
would incur if only items of gross income that are used to
determine NII and only properly allocable deductions
(other than a section 1411 NOL) are taken into account in
determining the NOL under section 172, or
• The amount of the taxpayer’s NOL for the loss year.
For purposes of calculating the section 1411 NOL,

TIP compute your NOL using Form 172, Net

Operating Losses (NOLs), with only items of
income, gain, loss, and deduction on Form 8960 for that
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