8621 PFIC TFSA Dividend Mutual Fund

hello3520 · Post by **hello3520** » Wed Apr 16, 2014 3:57 pm

I am putting together form 8621 for a mutual fund held in my TFSA.

1. Can I make a Mark to Market election if the fund paid out dividends?

2. Where do I declare the Dividends if I make the Mark to Market Election? Do I just fill out part IV of the 8621?

Because there is no place in part IV for dividends makes me think that I can't do a Mark to Market election.

nelsona · Post by **nelsona** » Wed Apr 16, 2014 4:01 pm

Others will chime in, but the dividends would be reported as income on your 1040 in the normal way. mark-to-market involves your holdings, not the dividends they generated. Those are already taken care of on schedule B.

That is how I interpret it, anyways.

rlb · Post by **rlb** » Wed Apr 16, 2014 5:52 pm

That's how I did it, back before I dumped my PFICs. The only issue I would think would be, is if you used the dividends to purchase more shares of the PFIC. Each purchase of the PFIC, even automatic reinvestment, is a separate lot of the stock, and requires a separate 8621 for that lot. If you had automatic quarterly reinvestment, that would be a lot of forms.

nelsona · Post by **nelsona** » Wed Apr 16, 2014 7:33 pm

Are you sure rlb? The reinvested dividends would simply be added to the existing pile, with an adjusted cost basis, no?

rlb · Post by **rlb** » Wed Apr 16, 2014 7:51 pm

nelsona, no I'm not absolutely sure. Fortunately, I avoided that precise situation. I did have multiple lots of a single PFIC (a couple of them in fact), though just as investments, not in a TSFA. I always treated these as separate investments, with separate 8621s. And I only had them for two tax years; after the first, when I realized what a problem PFICs would be, I sold them in the second year.

In the US (we were there 34 years), we always used FIFO for lot identification. I am not sure if the US allows the use of average cost basis, and it would certainly make a mess on their forms where you need to specify purchase dates. However, I think Canada requires it.

nelsona · Post by **nelsona** » Thu Apr 17, 2014 7:59 am

If you are marking to market your entire fund, no need to divide them. Same if you are selling all stock purchased at different times.

hello3520 · Post by **hello3520** » Thu Apr 17, 2014 12:28 pm

I had reinvest dividends on several mutual funds. This is in a TFSA so there is no FIFo tracking or any kind of real statement other then manually tracking the shares in a spreadsheet myself.

I was not going to separate them. I sold all shares at the same time and was going to enter the sale FMV (line 13a) and the adjusted basis (cost) (line 13b).

I wish I had switched funds a month earlier in December 2012 so the old gains wouldn't be taxable when I became a US resident in 2013.

nelsona · Post by **nelsona** » Thu Apr 17, 2014 1:04 pm

... and you wouldn't have had to bother with pfic and 3520, etc for 2013.

I was giving that advice years ago, too bad you came here too late.