Form 8621 filing requirement for RESP account

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rubyruby
Posts: 3
Joined: Sat Oct 04, 2014 10:29 pm
Location: United States

Form 8621 filing requirement for RESP account

Post by rubyruby »

Hello fellow forum members, and thanks for all the useful information that I have been digesting and using so far.

I am resident of US and paying US taxes, and hold an RESP account for my kids that was opened when we lived in Canada.

Filing US taxes and completing 3520 and 3520-A for the RESP.

RESP account is <5K.
My question is do I need to complete the form 8621?

Reading here (http://www.bkd.com/articles/2014/irs-is ... orting.htm).

"Even when a U.S. shareholder does not meet the $25,000 de minimis exception, a separate de minimis exception applies to an indirect investment in any Section 1291 Fund stock held through a chain of one or more PFICs where the value of the indirectly held Section 1291 Fund is $5,000 or less. "

Thanks.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

I don't know anyone around here using this exception.

You are doing well to report the RESP on 3520. Are you also reporting the internal income on your 1040, as you should?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
rubyruby
Posts: 3
Joined: Sat Oct 04, 2014 10:29 pm
Location: United States

Post by rubyruby »

I will be reporting income on the 1040.

Ok, if I complete the 8621 I have so far determined that mark-to-market election is the way to go.
Does anyone have a formula for completing a 8621 for an RESP?
There have been no withdraws or contributions at all. Only interest generated inside the RESP.

Thanks.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

There is an 8621 thread. Its not a formula, you simply act as if you sold your holdings at the end of each year, at fair market value, and repurchased them.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
MGeorge
Posts: 313
Joined: Fri Jun 22, 2012 9:23 am
Location: Canada

Post by MGeorge »

Hi there,

The "deminimus exception" isn't really of much use. It can only be used as an excuse not to fill out the 8621 form. If you are making any election, 8621 must be filed. I once took advantage of it because I had reached the maximum efile limit of 5 8621 forms. I simply chose not to make a mark-to-market election on a bond ETF I had bought that year. Since the interest distribution is reported, and the value of the units isn't likely to climb, just simply omitted the 8621. Other than that, I see no use to take advantage of the exception.

As for completing the 8621, the fact that the investments are held in an RESP doesn't affect the 8621 form. With mark-2-market, you'll have ordinary dividend income - reported on Sch. B. and you'll have your annual mark-to-market gain. When you complete your 3520A, the only income items you'll have are of type "ordinary dividends" and, "Other income" - on your "other income statement, put "8621 income, or section 1296 income".

Cheers!
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