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June 1, 2017 - Haoshen Zhong

Mark-to-Market Election for PFICs You Own Through a Fund

PFICs held in a fund

This is a situation we see fairly often:

I have a foreign retirement account. I realized that I am taxed on the income from the account as if it is a normal account. The account owns a single fund offered through the account custodian, which invests in several publicly traded funds. Can I make a mark-to-market election for the underlying publicly traded funds?

For today’s post, we will assume that in fact, the US person is taxed as if the retirement account is just a normal investment account. That is not always the case for foreign retirement accounts.... continue reading

PFIC and CFCs
May 26, 2017 - Phil Hodgen

Nonresident Real Estate Investors, Rental Income, and No Tax Returns Filed

What happens to a nonresident who owns U.S. real estate and — gasp — does not report the rental income on a U.S. tax return? What is the tax risk to that nonresident investor? And how can that investor fix the problem?

In this article I will discuss the following topics:

  • How does the United States tax rental income received by a nonresident owner of U.S. real estate?
  • What are the tax return requirements for that nonresident investor in U.S. real estate?
  • What can a nonresident do if he has not filed U.S. tax returns and reported (and paid tax on) the rental income collected?
... continue reading
Friday Edition
May 18, 2017 - Haoshen Zhong

Attribution of PFICs Through a Family Trust

Today’s topic is based on some war stories we have seen. Here is the general situation we have had to deal with:

I am a US citizen living abroad and married to a foreign national. She and I both owned some PFICs. We transferred them to a family trust whose trustee is a private company we own 50-50. Our children and we are beneficiaries of the family trust. Do I have to report the PFICs held in the family trust as my own?

Today’s post will discuss some of the uncertainties and possible results for PFIC attribution through a trust.

What are PFICs?

... continue reading
PFIC and CFCs
May 12, 2017 - Phil Hodgen

Independent Contractors Who Become U.S. Residents

Inspiration: Swizec

This newsletter is inspired by a geek with a hat. Swizec is someone whose blog I follow from afar. I also watch for him on Hacker News, where he pops up from time to time. Interesting guy, does interesting things.

So when he wrote a blog post about his international tax catastrophe, I read it with interest.

In brief, Swizec came to California from Slovenia, spent too much time here, and became a resident for tax purposes for multiple years. He ended up with a massive tax bill for Federal and State income tax.

As a bonus multiplier, he ended up owing tax in Slovenia, too.... continue reading

Friday Edition
May 4, 2017 - Haoshen Zhong

Are my Exchange Traded Notes PFICs?

Debts instruments that sound somewhat like shares

This is a question that came by way of email:

I own some exchange traded notes. Are those PFICs?

In this post, I will discuss the factors that you can examine to check whether buying a particular debt instrument carries any risk related to passive foreign investment companies. Then, we can check if exchange traded notes are debt or shares.

What are exchange traded notes?

Exchange traded notes (ETN) is a type of debt instrument. They have a fixed maturity date. They pay interest, but the rate of interest depends on an index or market benchmark.... continue reading

PFIC and CFCs