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PFIC Identification and Reporting: Look-Through Attribution Rules, QEF and Mark-to-Market Elections, Form 8621

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, November 6, 2019

Recorded event now available

This course will furnish tax advisers with a thorough and practical guide to the reporting of investments in a passive foreign investment company (PFIC) on IRS Form 8621. The panel will identify those investments that require PFIC reporting, focusing specifically on the look-through rules that apply in determining the PFIC status of a foreign corporation. The webinar will outline the various elections available to taxpayers holding interests in PFICs, discuss the tax implications of those elections, and provide an example of a completed Form 8621 to illustrate reporting requirements.

Description

PFIC tax provisions are among the most complicated rules affecting both individual and corporate taxpayers in the U.S. The PFIC provisions adversely impact U.S. taxpayers, particularly affecting those with portfolio investments in non-U.S. corporations (often as a result of living or doing business outside the U.S.). More challenging can be the lack of support for U.S. tax reporting from these entities. Unlike U.S.-based mutual funds, foreign investment entities and funds typically have no obligation to furnish U.S. persons with tax reporting information. As a result, the responsibility falls entirely on the shareholder to determine ownership share and tax obligations arising therefrom.

The thresholds for determining whether an investment qualifies as ownership of a PFIC can be difficult to apply in practice, given the "look-through" rules applicable to foreign corporations. Section 1297(c) sets a 25% ownership threshold in another foreign corporation for purposes of determining whether the PFIC rule applies. Additionally, Section 1298(b)(7) applies the look-through rule to foreign corporations owning 25% or more of the stock of a U.S. domestic corporation in determining whether the foreign corporation is a PFIC.

Listen as our panel of expert advisers provides a thorough guide to reporting PFIC ownership shares, including determination of PFIC reporting requirements, tax calculations required by the PFIC reporting regime, and elections available to opt-out of default tax treatment under the PFIC rules.

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Outline

  1. Overview of the PFIC rules
  2. Identifying PFIC investments subject to filing requirements
  3. Section 1297 look-through rule
  4. Section 1298(b)(7) look-through for foreign corporations owning first-tier domestic corporation shares
  5. Filing thresholds and key exclusions
  6. Elections available to taxpayers
    1. Mark-to-market
    2. QEF election
  7. Completing Form 8621

Benefits

The panel will review these and other vital issues:

  • Identifying assets that constitute PFIC holdings
  • Comparing tax results of the PFIC default rules, mark-to-market, and QEF regimes
  • Identifying tax impact of QEF election in a year after the acquisition of the PFIC asset
  • Where to report QEF and purging elections on Form 8621

Faculty

Drucker, Pamela
Pamela Drucker
Director
Armanino

Ms. Drucker specializes in International Taxation.

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Kelly, Bryan
Bryan H. Kelly
Partner
Withers Bergman

Mr. Kelly has private practice and Big Four accounting firm experience advising clients on a multitude of tax matters,...  |  Read More