first year choise and 8621

[sparkling]

I became a US tax resident in Sep.1.2023. Before Sep1,2023, i sold all my mutual fund. For 2023, I used first year choise and made the electon to be treated as a US resident for the entire year. When I report my income from mutual fund ,do I still need to file 8621?

[nelsona]

Just to be clear, the "first-year choice" is NOT the one that allows you to file full-year 1040. You seem to be wishing to use the election to file a full-year tax return, which is available by treaty. The fist-year choice only allows you to file a part-year 1040 even if not quite eligible. That doesn't seem to be what you want.

If you file a full year 1040 tax return, you are subject to all the rules for anyone else filing a full-year 1040, including PFIC rules, since you are reporting all world income.

[nelsona]

You may simply prefer to file a 1040NR (since you do not meet SPT), and report only US-sourced income for 2023.

[sparkling]

Thank you, nelsona. I received Green card on Sep1, 2023. So i need to file US return as dual status or can choose to be treated as resident for entire year. Is that right?

[sparkling]

If i choose to treated as tax resident for entire year, i will report gain and loss from mutual funds. But do i still need to file 8621? Since I have sold all mutual funds before I got green card and have no any mutual funds after I became US tax resident.

[nelsona]

So, as I said, if you file full year 1040, you need to follow PFIC rules, like any other US resident, for the entire year. Wheter that means filing 8621 or not (which is not necessarily the same as adhering to PFIC regs), or need to account for the type of funds you sold, you will need to determine.

Since, the 1040NR-only option is not available to you (you hadn't mentioned GC in your original post), you are left with full-year 1040 of dual-status. Only if you file dual-status can you ignore what happened prior to getting GC.