MacBook Pro + Bank Account = PFIC

The Passive Foreign Investment Corporation and Controlled Foreign Corporation rules are the government’s countermeasures against a logical tax strategy–tax deferral.

If your business operates through a foreign corporation … you probably have a latent Passive Foreign Investment Corporation on your hands, or (“less bad”) you probably have a Controlled Foreign Corporation.

International Tax Lunch – PFICs

What: Passive Foreign Investment Companies (PFICs) — Presentation and discussion When: Friday, January 10, 2014 at Noon (Pacific Time) Where: HodgenLaw PC Conference Room, 80 S. Lake Avenue, Suite 680, Pasadena, CA 91101 Who: Elena N. Redko, CPA at HodgenLaw PC Just in time for tax season, Elena will help you better understand PFICs. At […]

2013 International Tax Conference Speaker Profile: Elena Redko

2013 CalCPA International Tax Conference You should attend the 2013 International Tax Conference on December 6, 2013 in San Francisco. Elena is one of the speakers this year. Speaker Profile: Elena Redko Elena speaks to CPA groups all over the place, mostly about PFICs. She also teaches an accounting course at Glendale Community College, and […]

How gain on disposition of a PFIC is taxed

Let’s say you own PFIC stock.  (Hint:  foreign mutual funds almost certainly are PFICs.  So even normal people can own PFICs, to their absolute horror.) You sell your PFIC stock.  Better yet, you sell at a profit.  “Buy low, sell high!”  How hard can that be?    To make this example extremely simple, I am […]

PFIC distributions by nonqualifying funds mean ordinary income

In blog posts here and here I discussed the treatment of disposition gain by a taxpayer who sells a PFIC.  In those two blog posts I assumed that a taxpayer bought a PFIC and sold it in the same calendar year, and I further assumed there were no distributions by the PFIC.  (I am trying […]

Why the steady stream of PFIC posts?

We do a lot (and I do mean a LOT) of work with PFICs — Passive Foreign Investment Companies. As a result we have a lot of stuff on this topic stored in our collective brains at the firm. We also have fiercesomely complex spreadsheets designed by David, and tweaked by David, Elena, and Debra. […]

Time required to prepare Form 8621

Our consistent advice to U.S. taxpayers is “Sell all of your foreign mutual funds.” Foreign mutual funds are almost always Passive Foreign Investment Companies — PFICs. We tell people to get rid of foreign mutual funds and buy individual stocks and bonds. The advice has nothing to do with investment strategy. It has everything to […]

PFIC disposition and the excess distribution rule

Correspondent C (thanks!) read my prior blog post about how the excess distribution rule would treat recognized gain on a purchase and sale in the same year, and pointed me to Section 1291(b)(2)(B). Wouldn’t that seem to indicate that we should treat the gain as capital gain rather than ordinary income? Fact recap Remember we’re […]

PFIC bought and sold in the same year – QEF election

Continuing the saga of how a PFIC is taxed, we now deal with the QEF election. Recall that we are thinking of an extremely simple fact pattern: Facts A taxpayer buys shares of a PFIC for US$1,000 and sells them in the same calendar year for US$1,500. How is the US$500 gain taxed? How is […]

PFIC bought and sold in the same year – mark-to-market

In Part 1 of this series, I showed you what happens when you buy and sell a PFIC in a year. Part 1 dealt with the default treatment of the PFIC sale under the excess distribution rules. The bottom line? All of the gain is ordinary income, is reported on Form 8621 and then flows […]