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August 15, 2011 - Phil Hodgen

PFIC bought and sold in the same year – excess distribution rules

A question from a commenter triggered this blog post. Keep those questions coming!


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 it reported on a tax return? To keep this example simple, let’s pretend that there are no distributions or dividends from this PFIC. It is a simple buy low, sell high transaction.

Three methods of taxing PFIC gain

Dispositions of PFICs are taxed according to the rules in Internal Revenue Code Sections 1291 through 1297. For us, that is the Source of Ultimate Truth.... continue reading

August 4, 2011 - Phil Hodgen

One PFIC per Form 8621

This post is part of the ongoing saga of the mighty PFIC….

Let’s say you have 6 foreign mutual funds in an investment account. Six PFICs, in other words. How do you report them on your income tax return?

Answer: one PFIC per Form 8621. No there is no short cut. You can’t lump the results of all six PFICs into one number and report the results on a single Form 8621. Yes it would be easier. No, you can’t do it.

One Form 8621 per PFIC.

(Our consistent recommendation is to sell all PFICs. Buy stocks and bonds. Hold cash.... continue reading

August 3, 2011 - Phil Hodgen

What is a PFIC?

Yesterday I was talking to an accountant about the intricacies of PFICs, ISAs, and the entirely plausible strategy of giving up a green card to get away from the Borg that is the IRS.

She asked the entirely reasonable question, “Where can I find out more about this stuff?” Sadly, unless you are willing to delve into the Code, Regulations, and a few hard-core tax treatises, the answer is “Nowhere.”

This website is my attempt to get some answers out there into the real world about the arcane international tax stuff I live with every day. And this blog post is one of many I will be doing over the next few weeks on various topics related to PFICs.... continue reading