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. Don’t buy foreign mutual funds or ETFs.)
Phil Hodgen
Philip D. W. Hodgen is the principal attorney of HodgenLaw PC, an international tax law firm based in Pasadena, California. He earned his undergraduate degree from Claremont McKenna College and his law degree from the School of Law at the University of California, Los Angeles. He then went on to earn a Master of Laws degree with a specialty in taxation from the University of San Diego School of Law. Admitted to the California bar in 1982, Phil spent nine years in law firms and with a large U.S. bank before starting his own firm in 1991.
Phil is a past chair of the International Tax Committee of the State Bar of California's Tax Section and was a member of the Executive Committee of the State Bar of California's Tax Section for 2004-2007. Phil frequently speaks on a variety of international tax, trust and estate topics to attorneys, accountants, and real estate professionals.
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4 Comments
The Form 8621 is attached to your Form 1040 if you own PFIC stock. Foreign mutual funds are PFICs. So you’d have to do Form 8621 if you own foreign mutual funds.
Phil.
I agree… there is nothing in 2011 ovdi talking about submitting 8621 form. Phil or Dave can you comment… if these forms are required submission for the ovdi
For 2011, they’ve said in effect — if you use our method, calculate your gains and losses, just add the gain or loss to your final tax for a year.
Completely agree, but with one caveat. For clients in the 2009 program, the IRS doesn’t seem to care. And that probably goes ditto for 2011. At this point they seem to just want to cash checks (in the right amount) with as little effort on their part as possible.
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Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.
The Form 8621 is attached to your Form 1040 if you own PFIC stock. Foreign mutual funds are PFICs. So you’d have to do Form 8621 if you own foreign mutual funds.
Phil.
I agree… there is nothing in 2011 ovdi talking about submitting 8621 form. Phil or Dave can you comment… if these forms are required submission for the ovdi
For 2011, they’ve said in effect — if you use our method, calculate your gains and losses, just add the gain or loss to your final tax for a year.
Completely agree, but with one caveat. For clients in the 2009 program, the IRS doesn’t seem to care. And that probably goes ditto for 2011. At this point they seem to just want to cash checks (in the right amount) with as little effort on their part as possible.