Who needs a PFIC statement?
A. The PFIC Annual Information Statement enables U.S. investors who have made a QEF election to compute their taxable income, if any, attributable to their investment in the Fund.
What happens when you sell a PFIC?
All gains realized upon the disposition of PFIC shares are also considered excess distributions (Sec. All capital gains from the sale of PFIC shares are treated as ordinary income for federal income tax purposes and thus are not taxed at preferential long-term capital gain rates (Sec. 1291(a)(1)(B)).
Where do I report QEF income?
The gain is reported on Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, filed with the taxpayer’s federal income tax return.
What is a form 8865?
A US person who is a partner in a foreign partnership (or an entity electing to be taxed as a partnership) is required to file Form 8865 to report the income and financial position of the partnership and to report certain transactions between the partner and the partnership.
What is a Section 1291 Fund?
§ 1291 is the default method of taxation for PFICs. The taxpayer may choose to impose § 1291 tax on phantom income or income that has not been received yet. Any income or gain allocated to years before 1987 is not PFIC income.
What is the QEF election?
The QEF or Qualified Electing Fund election under §1295 is optional method of taxation available for certain PFICs. This election most closely mirrors the US taxation of US mutual funds and allows for capital gains treatment of some of the income as long as any prior §1291 gain has been dealt with.
What is a PFIC statement?
What is a PFIC? The annual PFIC Statements contain reporting information that can enable investors classified as “U.S. Persons” to make the Qualified Electing Fund (“QEF”) election for U.S. tax reporting services. …
What type of income is reported on PFIC Annual Information Statement?
Both the annual ordinary earnings of $188.58 and net capital gain of $113.15 are reported on Form 8621 as QEF income. This calculation and preparation of Form 8621 is repeated for each PFIC (or Canadian mutual fund) held.
What are PFIC distributions?
Passive Investments from Overseas & the IRS A PFIC is a Passive Foreign Investment Company and highly frowned upon by the IRS. As a result, the IRS has seemingly devised a scheme to penalize Foreign Mutual Fund investors while couching it as a “tax.”
What is an Unpedigreed QEF?
If a QEF election is made effective after the first day of the first year of the U.S. shareholder’s holding period, the QEF is an “unpedigreed QEF”. An “unpedigreed QEF” is subject to the PFIC default rules (i.e., tax on “excess distributions”) on a sale or liquidation of the stock.
Are banks PFICs?
The 1986 law exempted foreign banks and securities dealers that were licensed in the United States from being classified as PFICs. The new regulations deal with the status of foreign banks, financial institutions and securities dealers that are licensed to practice in their own countries but not in the United States.
What is the Form 8938?
Use Form 8938 to report your specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest is more than the appropriate reporting threshold.
Is PFIC income passive income?
A passive foreign investment company (PFIC) is a corporation, located abroad, which exhibits either one of two conditions, based on either income or assets: At least 75% of the corporation’s gross income is “passive”—that is, derived investments or other sources not related to regular business operations.
Is a TFSA a PFIC?
These rules suggest that most Canadian mutual funds, income trusts, real estate investment trusts (REITs), and exchange traded funds (ETFs) would be considered PFICs. If you have an RESP or TFSA account, and there are PFICs in them, you are considered to own the PFICs indirectly and must file Form 8621 to report them.
Do I report TFSA on FBAR?
If you have invested in one or more TFSAs, you generally have to report the TFSA on your U.S. taxes – usually on a form 8938 and accompanying FBAR — and you do pay tax on the growth (even if it is non-distributed).