Serbinski Accounting Firms

This is about a Canadian bond mutual fund I have that reinvests all distributions and grows in value basically by those distributions only. I'll be reporting in on f8621 for the first time, all calculations as for the current year, 2011. The result of the Part III 5a and 5b calculations, therefore, ...

Forgot to say. I'll go the MTM route.

I'm a Canadian living in the US. I left a couple of income mutual funds behind, bank accounts term deposits and a RRIF. The RRIF no problem, there's 8891 for that. The rest, including the mutual funds, I always listed on the TD F 90-22.1 sent to the Treasury after faithfully declaring all the non-registered income received in Canada. So far so good.

I'm very stressed now over this business about mutual funds but after I comply with f8621, I may even sell them if this yearly obligation becomes a real pain, doing any selling on a January first or second, when the "gain" if any over the new basis (f8621 lines 5a and 5c) will be minimal. That way any sizeable capital gains becoming "excess distributions" (with all the punitive tax and interest to follow) would be kept to a minimum, I believe.

Oh and by the way, 2011 tax year is the first year for mutual funds inclusion in the f8621. Some power decided they were "corporations" instead but this did not get enacted into law until March 18, 2010 so it does not apply to tax years beginning BEFORE the date of enactment.

***The current instructions to Form 8621 limit the filing requirement to years in which the taxpayer (1) receives direct or indirect distributions from the PFIC, (2) recognizes gain on disposition of the taxpayer’s interest in the PFIC, or (3) makes a QEF or mark-to-market election. However, Section 521 of the Hiring Incentives to Restore Employment Act of 2010 amends Code Section 1298 to require any US person who owns an interest in a PFIC to “file an annual report containing such information as the Secretary may require.â€￾ Code Section 1298(f). The instructions to Form 8621 have not been amended to reflect this change in the statute which was effective March 18, 2010. The Internal Revenue Service has released guidance which confirms that PFIC investors who were not required to file Form 8621 before enactment of Code Section 1298(f) will not be required to file the Form for tax years beginning before the date of enactment solely as a result of the change in law. See Notice 2010-34, 2010-17 IRB 612 (April 6, 2010).***

From: http://rewardlaw.com/Publications/Artic ... PFICs.aspx

I was also wondering about this. According to this article,

http://rewardlaw.com/Publications/Artic ... PFICs.aspx

Bottom part: "The current instructions to Form 8621 limit the filing requirement to years in which the taxpayer (1) receives direct or indirect distributions from the PFIC, (2) recognizes gain on disposition of the taxpayer’s interest in the PFIC, or (3) makes a QEF or mark-to-market election. However, Section 521 of the Hiring Incentives to Restore Employment Act of 2010 amends Code Section 1298 to require any US person who owns an interest in a PFIC to “file an annual report containing such information as the Secretary may require.â€￾ Code Section 1298(f). [b]The instructions to Form 8621 have not been amended to reflect this change in the statute which was effective March 18, 2010. The Internal Revenue Service has released guidance which confirms that PFIC investors who were not required to file Form 8621 before enactment of Code Section 1298(f) will not be required to file the Form for tax years beginning before the date of enactment solely as a result of the change in law. See Notice 2010-34, 2010-17 IRB 612 (April 6, 2010). [/b]

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