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Section 1291 Excess Distribution Calculations for PFIC Tax and Interest Reporting

Extrapolating PFIC Information From Fund Statements and Reporting on Form 8621

This advanced program assumes basic knowledge of PFIC Rules and Form 8621.

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

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Conducted on Tuesday, June 19, 2018

Recorded event now available

This course will provide tax advisers with a detailed analysis of Section 1291 reporting including how to perform the onerous calculations and determine available elections to ease the burden. The panel will go beyond the basics to provide examples of PFIC disclosures on fund statements and illustrations on how to calculate and report “excess distributions” on Form 8621. The program assumes the attendee is familiar with identifying funds subject to PFIC reporting and will focus on extrapolating information from fund statements to calculate taxable income.

Description

Among the most complex regimes of taxation and reporting under the Code is the classification of certain foreign investments held by U.S. taxpayers as investments in passive foreign investment companies (PFICs). The PFIC regime subjects U.S. investors to a tax and accrued interest regime that is both complicated and expensive, and even experienced advisers face challenges in calculating and reporting taxable distributions.

The PFIC regime is intended to prevent U.S. persons from deferring U.S. taxation on passive investments held through foreign companies. The default rules impose a tax and interest charges on “excess distributions” from PFICs, defined as stock distributions exceeding 125% of the average distribution amount received over the three preceding taxable years. The default rules do not apply for U.S. taxpayers who make a QEF election or choose mark-to-market treatment.

For many tax advisers, determining fund distributions that fall under the PFIC rules can be extremely challenging. Some foreign funds do not delineate PFIC information in their fund statements exacerbating the difficulty. For taxpayers holding interests in multiple funds, even where distributions are small amounts, determining the excess distribution amount can be a costly exercise.

Listen as our experienced panel provides practical guidance on extracting PFIC details from fund statements to calculate “excess distributions” and the resulting tax and interest charges arising from them.

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Outline

  1. “Excess distributions” defined
  2. PFIC information on foreign fund statements
  3. Identifying distributions subject to PFIC tax and interest
  4. Illustration of calculations
  5. Tax treatment of distributions not treated as excess

Benefits

The panel will discuss these and other important topics:

  • Legal background of PFICs and general rules for same
  • Locating and interpreting PFIC information on foreign fund statements
  • Identifying and calculating “excess distributions” under the PFIC rules
  • Calculating tax and interest on eligible distributions
  • Tax treatment of distributions not considered “excess”
  • Alternate options and elections for PFICs

Faculty

Marques, Daniel
Daniel Marques, CPA, MT
Principal
Drucker & Scaccetti
McCormick, Patrick
Patrick J. McCormick, J.D., LL.M.
Principal
Drucker & Scaccetti

Mr. McCormick specializes in the areas of international taxation, tax compliance, and offshore reporting...  |  Read More