PFIC de minimis exception, 8621 reporting & how to proceed?

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AvalonJeff
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Joined: Tue Jul 19, 2022 12:24 pm

PFIC de minimis exception, 8621 reporting & how to proceed?

Post by AvalonJeff »

Scenario...

Dual Canadian/US citizen (USC) with Canadian spouse (CDN), both resident in Canada. USC files MFS (not desirable but non-negotiable). CDN spouse claims NRA and does not file a US return. Through ignorance of the PFIC complications, they jointly made a small investment (50/50) in a Canadian mutual fund that currently has a market value of US$15,000 and a cost base of US$8,000. They receive a Canadian T3 for that investment with amounts in Boxes, 21, 25, 34 and 42. USC has never filed a US form 8621 (because of the de minimis exception) and has not made either a QEF or mark-to-market election. Nor has he received an excess distribution. USC has reported this PFIC investment both on form 8938 and to FBAR. USC has also reported his 50% of the T3 Box 21 amount as capital gains on his US 1040.

Questions…

1. Is it correct that USC does not have to file a form 8621 as long as the market value of the account remains below the de minimis exception limit?

2. Since USC only owns 50% of the joint account, is the de minimis limit based on his 50% ownership hitting US$25,000 or is the de minimis limit based on the total value of the joint account hitting US$25,000?

3. If no form 8621 is required, where on USC’s 1040 does USC report the amounts shown on his Canadian T3 Boxes 21, 25, 34 and 42? Was USC correct to report the amount shown in Box 21 of his Canadian T3 as capital gains on his US return?

4. Would it be wise to sell this investment and close the account in order to eliminate the PFIC complications or would that trigger the need to file an 8621 and create an even more confusing situation?

5. Would transferring sole ownership of this account to the CDN spouse trigger the need for USC to file an 8621 just the same as if the investment was sold?
nelsona
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Re: PFIC de minimis exception, 8621 reporting & how to proceed?

Post by nelsona »

whether or not they meet the 8621 thresshold, they still have to report there PFICs in accord with the PFIC rules.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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