Blog   /   PFIC and CFCs

June 15, 2017 - Haoshen Zhong

Is My Retail Super Fund a PFIC?

Is my pension fund a PFIC?

This is a question we get frequently through email:

I have a pension fund. Is that a PFIC?

Unfortunately, there is no easy answer to this question, because every country has a different pension system, and they can be classified wildly differently depending on how the country’s pension works.

For this post, I will pick on the retail Australian super fund again, because I happen to see a lot of them. This post merely illustrates one process I use to determine if there is a PFIC problem.

What is a super fund?

It is a retirement savings schemes.... continue reading

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

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
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

April 20, 2017 - Haoshen Zhong

PFIC Problems when Pooling Stock Reward

Pooling your stock reward

We got a fairly complex question about a US person pooled his stock reward with his coworkers. By doing so, the US person created a potential PFIC problem.

This post is a brainstorming session on how the US person might get out of his PFIC problems.

The scenario

Here is the scenario:

I am a manager of a private foreign business. In advance of an upcoming IPO, the private foreign business offered its managers the chance to buy shares in the top level parent corporation.

For the purpose of pooling our resources, the managers formed a foreign corporation (manager holding company) and bought shares of the parent corporation in the name of the manager holding company.

... continue reading