PFICs and Tax Strategies U.S. investors who own shares of a PFIC must file IRS Form 8621. This form is used to report actual distributions and gains, along with income and increases in QEF elections. The tax form 8621 is a lengthy, complicated form that the IRS itself estimates may take more than 40 hours to fill out.
What is a PFIC fund?
A PFIC is a non-U.S. corporation that has at least 75% of its gross income considered passive income or at least 50% of the company’s assets are investments that produce passive income. Passive income generally includes dividends, interest, rent, royalties and capital gains from the disposition of securities.
What is PFIC Annual Information Statement?
The PFIC Annual Information Statement contains the information investors need for PFIC reporting for purposes of the QEF election. For some funds, we are also providing IRS Form 8937 which contains certain information that may be required when filing U.S. tax returns.
Do I need to file 8621?
As the US grantor who invests in any foreign mutual funds (PFICs), you will have to file a Form 8621. You are not required to file Form 8621 when you are : not subject to tax under section 1291. haven’t made a QEF election with respect to the PFIC.
When do you have to report the PFIC form?
There are some exceptions, exclusions, and limitations, but generally unless you are below the threshold value you have to report the form each year. Commencing after tax year 2012, Taxpayers have to report the form even if they have no excess distributions.
How are PFIC gains reported on a tax return?
This method allows the shareholder to report the annual gain in market value (i.e., unrealized gain) of the PFIC shares as ordinary income on the “other income” line of their tax returns. “Unrealized losses” are only reportable to the extent that gains have been previously reported.
When to file Form 8621 for a PFIC?
Passive Foreign Investment Corporation (PFIC) Generally, a U.S. person that is a direct or indirect shareholder of a PFIC must file Form 8621 for each tax year under the following five circumstances if the U.S. person: Receives certain direct or indirect distributions from a PFIC, Recognizes gain on a direct or indirect disposition of PFIC stock,
What do you need to know about the PFIC regime?
The PFIC regime imposes obligations for US persons to report taxable income and comply with certain reporting requirements. The Treasury and IRS recently released final regulations that provide guidance on determining the ownership of a PFIC and on certain reporting obligations of PFIC shareholders.
