taxes, and charitable contributions (the exemption phase-out and deduction limitation are colloquially known as “PEP and Pease”). These changes, coupled with the new 3.8% tax on net investment income (see below), may mean an unhappy surprise for many taxpayers on April 15, 2014, when they pay their 2013 income tax liability. On the transfer tax front, ATRA also made permanent the $5 million basic exclusion against the gift and estate tax, along with “portability,” which effectively allows a surviving spouse to “inherit” the deceased spouse’s unused exclusion. (The exclusion has been indexed for inflation since 2012, and in 2014, will increase to $5.34 million, the same amount as the generation-skipping transfer tax exemption). Finally, ATRA raised the top transfer tax rate from 35% to 40%. 3.8% tax on net investment income. What has come to be known as the “Affordable Care Act” (or ACA, sometimes referred to as “Obamacare”) was enacted in two parts in March 2010: the “Patient Protection and Affordable Care Act” (Pub. L. 111-148), and “The Health Care and Education Reconciliation Act of 2010” (Pub. L. 111-152). ACA is a seismic shift in health care insurance and is beginning to be phased in (see below). It has also brought a number of new taxes, including the 3.8% tax on “net investment income,” which took effect in 2013. Such income includes interest, dividends, capital gains, royalties and rents; the 3.8% tax on these items can apply if a taxpayer’s “modified adjusted gross income’ (adjusted gross income plus otherwise excluded foreign income) exceeds certain amounts that are not indexed for inflation: $250,000 (married filing jointly), $200,000 (single taxpayers) and $125,000 (married filing separately). The extensive guidance the IRS has issued on this 3.8% tax is indicative of its complexity. To illustrate, in November 2012, the IRS issued over 150 pages of proposed regulations on the tax (REG-130507-11), and on November 27, 2013, the IRS issued over 300 pages o