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PFIC Testing: Performing the Gross Income and Asset Tests, Avoiding the PFIC Taint, Illustrative Examples

A live 110-minute CPE webinar with interactive Q&A

This program is included with the Strafford CPE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
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Tuesday, May 13, 2025

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

Early Registration Discount Deadline, Friday, April 18, 2025

or call 1-800-926-7926
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This webinar will walk international tax practitioners through the qualifying PFIC tests and provide comprehensive examples of these complex computations. Our astute foreign tax panelists will clarify existing guidelines and offer suggestions to simplify these calculations.

Description

Foreign corporations that satisfy one of two tests are classified as PFICs under IRC Section 1297. The determination is critical since PFIC shareholders may be subject to additional reporting requirements, taxed at ordinary income rates on amounts that would otherwise be qualified dividends and long-term capital gain distributions, and assessed an interest charge on amounts deferred under IRC Section 1291 (unless a qualified electing fund (QEF) or mark-to-market election is made).

Foreign corporations that meet either a gross income or asset test are classified as PFICs. If 75 percent or more of gross income for the tax year is passive, the corporation meets the gross income test. Passive income generally includes dividends, interest, gains on sales of property, currency gains, rents, royalties, and other revenue. The corporation satisfies the asset test if the average percentage of assets producing passive income during the year is 50 percent or more. The gross income and asset tests raise numerous issues. Even if a foreign corporation qualifies as an active trade or business, it could still be classified as a PFIC. Additionally, once a company is classified as a PFIC, it remains a PFIC even when thresholds are not met in subsequent tax years unless an appropriate election is made.

Determining what constitutes passive income for potential PFICs and performing the gross income and asset tests is complicated. International tax advisers must understand the rules and assist MNEs in avoiding the PFIC taint.

Listen as our panel of international tax reporting experts discusses performing the income and asset tests for PFIC classification and offers advice to avoid this status.

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Outline

  1. PFIC testing: introduction
  2. Income test
  3. Asset test
  4. Final and Proposed regulations
  5. Exceptions and look-through rules
  6. Elections
  7. Best practices

Benefits

The panel will cover these and other critical issues:

  • Common scenarios with examples of applying the gross income tests
  • Defining assets that produce passive income for purposes of the asset test
  • Recommendations for avoiding the PFIC taint or adverse PFIC consequences
  • Exceptions and elections available to circumvent PFIC classification or adverse PFIC rules

Faculty

Poms, Doug
Doug Poms
Principal
KPMG

Mr. Poms is Principal, International Tax, WNT at KPMG. 

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Manpreet Sangha
Manpreet Sangha
International Tax Manager
Withum

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Early Discount (through 04/18/25)

CPE credit processing is available for an additional fee of $39.
CPE processing must be ordered prior to the event. See NASBA details.

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Early Discount (through 04/18/25)

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CPE On-Demand

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