Net Investment Income Tax / K-1 Dividend Income

[taxlady2008]

I have an S Corp K-1 (NOT passive) with dividend income on it.  The corporation is a service corporation that bought P&G stock which is where the dividend came from.  The corp is not in the banking business.  I have the boxed check to indicate the K-1 is not subject to net investment tax.  Why is the dividend showing up on Form 8960 line 2?  The dividend was generated from an active business. Do I need to override this or is it correct and the dividend is still considered net investment income because it is a dividend?  Thanks!

[itonewbie · Accepted solution]

Dividends from a pass-through still retain the same character of that income.  That's why it's subject to NIIT.

[taxlady2008]

That makes sense.  Thank you!

[itonewbie]

NP, @taxlady2008!