QEF election with MTM purge

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mrsjack
Posts: 11
Joined: Sat Feb 18, 2017 11:22 am
Location: UK

QEF election with MTM purge

Post by mrsjack »

Hello all you lovely helpful people. (Especially MGeorge, who deserves chocolate.)

I've finally wrapped my brain around the 8621 for my QEF fund, which my accountant reported with an election last year. This year I have to do a purge. I've got a grip on the MTM bit, but the ordinary QEF bit is throwing me. (Part 3)

If I fill it in, it looks like I wll be double reporting all the income for a year. Do any of the part the exclusions apply for the first year as I am also doing MTM? I don't entirely understand them. Or it that just tough nuts for changing over a PFIC?

Thanks.

Mrs Jack
Michele
MGeorge
Posts: 313
Joined: Fri Jun 22, 2012 9:23 am
Location: Canada

Post by MGeorge »

Hi Mrsjack,

Ah thanks!

I don't understand your question though. What do you mean by doing a purge. Are you talking about election D (deemed sale for first year as a QEF?). Or are you going to sell all of your mutual funds so that you don't have to deal with form 8621 anymore...

Either way, you never have to double report your income. Any extra income "other income" which comes from either QEF or MTM should be adjusted elsewhere.

For a QEF, the QEF income is added to your cost basis for the fund, so when you sell, it reduces your capital gain (or increases your capital loss).

For an MTM, the extra MTM specific income is added to the basis so that in the next year, you don't get dinged for the gain again.

What are the exclusions you are talking about?

Best Regards!
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MGeorge is neither an accounting nor taxation professional.
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