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Is royalty income from an invention that is treated as a long term capital gain under IRC 1235, subject to the 3.8% Medicare Surtax Pursuant to IRC Section 1411?


The BIDaWIZ Team's Answer:

We don't believe that the royalty income will be subject to the investment income surtax as the source of the royalty relates to his active trade or business and isn't a passive activity. The intent of the surtax wouldn't be to tax someone in this situation. You can reference IRC Sec. 1411(c) here, which states that gross income from interest, dividends, annuities, royalties, and rents, other than such income which is derived in the ordinary course of a trade or business not described in paragraph.

The BIDaWIZ Team



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