The result: The investor owes U.S. tax on net income, not gross income.

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That includes a tortuous calculation of a 2% excise tax on net investment income.

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Moreover, nearly the entire bottom 50% of income earners now pay no federal income tax on net as a group.

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In total for the three years about 2 billion of GAAP income tax expense on net is deferred.

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Before the market futilely tried to correct in 2008, approximately 37.9% of tax filers, on net, paid no income taxes.

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In sharp contrast, in that same year, the middle 20% of income earners, the true middle class, paid 2.7% of total federal individual income taxes on net, while earning 15% of before-tax income.

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This strategy can also reduce tax when paid, because the tax would be owed on net rather than gross income.

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On page 1 you will find an overview of the net investment income tax regulations, complete with key definitions and the mechanical application of the tax.

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Interest earned on state and local bonds that is exempt from income tax under Section 103 is excluded from the definition of net investment income for purposes of Section 1411.

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The New Jersey Gross Income Tax Act does not follow federal law regarding carry-forward and carry-back losses and the loss on the 2008 New Jersey individual income tax return can only be netted against gains or income reported in the category Net gains or income from disposition of property.

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