Table of Contents
Generally, a U.S. person that is a direct or indirect shareholder of a PFIC must file Form 8621 for each tax year in which that U.S. person:
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Recognizes gain on a direct or indirect disposition of PFIC stock,
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Receives certain direct or indirect distributions from a PFIC, or
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Is making an election reportable in Part I of the form.
A separate Form 8621 must be filed for each PFIC in which stock is held. See Chain of ownership below for specific filing requirements.
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A direct or indirect owner of a pass-through entity that is a direct or indirect shareholder of a PFIC,
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A shareholder of a PFIC that is a shareholder of another PFIC, or
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A 50%-or-more shareholder of a foreign corporation that is not a PFIC and that directly or indirectly owns stock of a PFIC.
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A U.S. person that is an interest holder of a foreign pass-through entity that is a direct or indirect shareholder of a PFIC,
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A U.S. person that is considered (under sections 671 through 679) the shareholder of PFIC stock held in trust, and
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A U.S. partnership, S corporation, trust (other than a trust that is subject to sections 671 through 679 for the PFIC stock), or estate that is a direct or indirect shareholder of a PFIC.
Note.
U.S. persons that are interest holders of pass-through entities described in 3 above must file Form 8621 if the pass-through entity fails to file such form or the U.S. person is required to recognize any income under section 1291.
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File a Form 8621 for each PFIC in the chain or
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Complete Form 8621 for the first PFIC and, in an attachment, provide the information required on Form 8621 for each of the other PFICs in the chain.
Attach Form 8621 to the shareholder's tax return and file both by the due date, including extensions, of the return at the Internal Revenue Service Center where the tax return is required to be filed.
If you are not required to file an income tax return or other return for the tax year, file Form 8621 directly with the Internal Revenue Service Center, Ogden, UT 84201-0201.
A foreign corporation is a PFIC if it meets either the income or asset test described below.
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Income test. 75% or more of the corporation's gross income for its taxable year is passive income (as defined in section 1297(b)).
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Asset test. At least 50% of the average percentage of assets (determined under section 1297(e)) held by the foreign corporation during the taxable year are assets that produce passive income or that are held for the production of passive income.
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The corporation is not publicly traded for the taxable year and
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The corporation is (a) a CFC or (b) makes an election to use adjusted basis.
Note.
The attribution rules of section 1298(a)(2)(B) will continue to apply even if the foreign corporation is not a PFIC under the CFC overlap rule.
A PFIC is a QEF if the U.S. person who is a direct or indirect shareholder of the PFIC elects (under section 1295) to treat the PFIC as a QEF. See the instructions for Election A on page 2 for information on making this election.
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A shareholder of a QEF must annually include in gross income as ordinary income its pro rata share of the ordinary earnings and as long-term capital gain the net capital gain of the QEF.
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The shareholder may elect to extend the time for payment of tax on its share of the undistributed earnings of the QEF (Election D) until the QEF election is terminated.
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The shareholder may make a deemed sale election (Election B) or a deemed dividend election (Election C) to purge the section 1291 fund years from its holding period.
Note.
A shareholder that receives a distribution from an unpedigreed QEF (defined in Regulations section 1.1291-9(j)(2)(iii)) is also subject to the rules applicable to a shareholder of a section 1291 fund (see below).
A PFIC is a section 1291 fund if:
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The shareholder did not elect to treat the PFIC as a QEF or
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It is an unpedigreed QEF (as defined in Regulations section 1.1291-9(j)(2)(iii)).
Shareholders of a section 1291 fund are subject to special rules when they receive an excess distribution (defined below) from, or dispose of the stock of, a section 1291 fund. A distribution may be partly or wholly an excess distribution. The entire amount of gain from the disposition of a section 1291 fund is treated as an excess distribution.
A U.S. shareholder of a PFIC may elect to mark the PFIC stock to market if the stock is “marketable stock.”
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PFIC stock that is regularly traded (as defined in Regulations section 1.1296-2(b)) on:
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A national securities exchange that is registered with the Securities and Exchange Commission (SEC),
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The national market system established under section 11A of the Securities and Exchange Act of 1934, or
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A foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located and has the characteristics described in Regulations section 1.1296-2(c)(1)(ii).
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Stock in certain PFICs described in Regulations section 1.1296-2.
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Any option on marketable stock described above to the extent provided in Regulations section 1.1296-2(e).
If the PFIC shareholder elects to mark the stock to market, the shareholder either:
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Includes in income each year an amount equal to the excess, if any, of the fair market value of the PFIC stock as of the close of the taxable year over the shareholder's adjusted basis in such stock or
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Is allowed a deduction equal to the lesser of:
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The excess, if any, of the adjusted basis of the PFIC stock over its fair market value as of the close of the tax year or
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The excess, if any, of the amount of mark-to-market gain included in the gross income of the PFIC shareholder for prior taxable years over the amount allowed such PFIC shareholder as a deduction for a loss with respect to such stock for prior taxable years.
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See the instructions for Part III on page 6 for more information.
A shareholder of a PFIC must attach certain information to Form 8621. This information includes:
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The number of shares in each class of stock owned by the shareholder at the beginning of its tax year;
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Any changes in the number of shares in each class of stock during its tax year and the dates of such changes; and
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The number of shares in each class of stock at the end of its tax year.
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