Reporting PFIC income when not required to file Form 8621

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nelsona
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Reporting PFIC income when not required to file Form 8621

Post by nelsona » Tue Jan 29, 2019 4:44 pm

There are a few exceptions to filing Form 8621 for PFICs.
If one meets one of those exceptions, for example, having less than $25K is such investments, are they still required to pay yearly tax on the undistributed income, if, for example, they use the Mark-to- Market reporting method?
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

CdnAmerican
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Re: Reporting PFIC income when not required to file Form 8621

Post by CdnAmerican » Tue Jan 29, 2019 11:27 pm

Good question! I thought that you had to pay these mark-to-market, regardless of the amount kept in the fund. But I'm really not sure.
Not a professional opinion.

nelsona
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Re: Reporting PFIC income when not required to file Form 8621

Post by nelsona » Wed Jan 30, 2019 11:06 am

yeah. All the writing I see on this focuses on getting out of filing the Form, but IMO you still have to go through the trouble of calculating and paying tax on these each year. and if you do QEF, then you lose the de minimis exemption.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

MGeorge
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Re: Reporting PFIC income when not required to file Form 8621

Post by MGeorge » Mon Mar 11, 2019 4:09 pm

I agree with nelsona- one still needs to do the calculation so avoiding the form doesn't save much. If one takes advantage of the exemption from filing form 8621, then the default tax treatment applies. Dividends are reported as ordinary dividends (not qualified). Unrealized gains do not need to be reported because once the fund is sold for a gain, this triggers the requirement to file 8621 and treat the gain as an excess distribution (a la section 1291). Also, if a dividend in a later year is 1.25x bigger than the average dividend in the past 3 years, this also triggers the need to file form 8621 and treat the excess distribution (interest charge, highest tax rate, etc).
The only time mark-to-market applies is when the mark-to-market election is made. Then, since an election has been made, form 8621 has to be filed annually.
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MGeorge is neither an accounting nor taxation professional.

MGeorge
Posts: 299
Joined: Fri Jun 22, 2012 9:23 am
Location: Canada

Re: Reporting PFIC income when not required to file Form 8621

Post by MGeorge » Mon Mar 11, 2019 4:10 pm

By the way, if one doesn't file form 8621, and the annual dividends are consistent enough not to trigger an "excess distribution", then the fund is sold for a loss, then form 8621 never needs to be filed for that specific fund. This happened to me once.
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MGeorge is neither an accounting nor taxation professional.

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