If one where to chose the 1291 election, does the retroactive tax go back three years or from the date of when fund was purchased?
So will I divide my gain by the number of years since fund was purchased or three years? Then calculate my interest for the number of years since when?
thanks,
mcaps.
1291 election
Moderator: Mark T Serbinski CA CPA
The retroactive tax goes back to the year when you bought the fund. If you bought the fund 4 years ago, and had a gain of $1,000, you would report 1/4 of the gain on the 2014 return ($250 gain) as ordinary income.
Then on a spreadsheet figure out the retroactive gain:
2011 -> $250 gain x 35% tax + 3 years of interest = roughly $101
2012 -> $250 gain x 35% tax + 2 years of interest = roughly $96
2013 -> $250 gain x 39.6% tax + 1 year of interest = roughly $104.
If your ordinary income tax rate is 25% for year 2014, then you will have paid about $363 of tax on this 1291 income.
Then on a spreadsheet figure out the retroactive gain:
2011 -> $250 gain x 35% tax + 3 years of interest = roughly $101
2012 -> $250 gain x 35% tax + 2 years of interest = roughly $96
2013 -> $250 gain x 39.6% tax + 1 year of interest = roughly $104.
If your ordinary income tax rate is 25% for year 2014, then you will have paid about $363 of tax on this 1291 income.
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MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
Hi maps,
There isn't a specific spreadsheet that I know of, I just recommend making your own if you're comfortable with microsoft excell. You can work it out on paper as well.
Regarding the specific interest rates, you'll have to look them up on the IRS website for each year. I just used 5% for this example.
20 years is a long time, and will likely result in a net tax that exceeds 50% when you factor in the compounding interest.
You might be able to request some relief on this. After all, you would have made a mark-to-market election starting 20 years ago if you knew about the 1291 rules. There was something called the "IRS PFIC alternate resolution program" where they reduce the applicable tax rate to 20% for taxpayers who didn't know about the PFIC rules. I would reserach this and maybe request this relief.
There isn't a specific spreadsheet that I know of, I just recommend making your own if you're comfortable with microsoft excell. You can work it out on paper as well.
Regarding the specific interest rates, you'll have to look them up on the IRS website for each year. I just used 5% for this example.
20 years is a long time, and will likely result in a net tax that exceeds 50% when you factor in the compounding interest.
You might be able to request some relief on this. After all, you would have made a mark-to-market election starting 20 years ago if you knew about the 1291 rules. There was something called the "IRS PFIC alternate resolution program" where they reduce the applicable tax rate to 20% for taxpayers who didn't know about the PFIC rules. I would reserach this and maybe request this relief.
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MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.
I found the link to the article I was talking about:
http://woodllp.com/Publications/Article ... a_PFIC.pdf
http://woodllp.com/Publications/Article ... a_PFIC.pdf
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MGeorge is neither an accounting nor taxation professional.
MGeorge is neither an accounting nor taxation professional.