IRS Form 8621 - How to Complete QEF Election for a PFIC

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A U.S. person who directly or indirectly owns stock in a passive foreign investment company (PFIC) needs to complete Form 8621 and include it with their annual tax return.
PFICs have certain default treatments, but a shareholder can make an election to either treat the PFIC as a Qualified Electing Fund (QEF) or a Mark-to-Market (MTM) election.
In this video, I discuss the QEF election for Form 8621.
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DISCLAIMER: The information provided in this video may contain information about tax, financial, and legal topics. Such materials are for informational purposes only and may not reflect the most current developments. These informational materials are not intended and should not be taken as tax, financial, or legal advice. You should contact an advisor to discuss your specific facts and circumstances. Self-help services may not be permitted in all states or jurisdictions. The use of these materials does not create an attorney-client or confidential relationship. This video does not include information about every topic or issue related to these informational materials.
#IRS #PFIC #Form8621

Опубликовано:

11 сен 2024

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Комментарии : 40

@yimenghao3326 5 месяцев назад

Soooooooo helpful!!! First time filing as a US person and this saves my life! I watched the whole ad!

@Andrew-ne3mn 2 года назад

This was awesome! Saved me a ton of work.

@JasonDKnott 2 года назад

Glad it was helpful!

@isitaboutmycube 5 месяцев назад

Thank you so much for this video. This is the my acquisition year on Sprott (like many others, I see) and first time dealing with this form, so the walkthrough was super helpful!

@John800AD 2 года назад

Thanks! Helped with the Sprott I purchased last year. I had no idea about this when I bought it.

@JasonDKnott 2 года назад

Glad it was helpful! Also check out our 8621 video for Market to Market (MTM) on PFICs. Some publicly traded PFICs you can make a MTM election rather than the QEF, which can sometimes be more favorable to the U.S. holder. Can find that video here: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-FLDC3zxHkss.html

@YanningLiu 5 месяцев назад

Very good video with real life example

@bluewker 2 года назад

Hi Jason! Appreciate the video, helped me out. Probably a lot to ask, but could you reconsider doing this with a sale of some of the shares or a deemed sale, just to cover more of the form in this example?

@JasonDKnott 2 года назад

Glad it was helpful! We can add a video that covers those issues

@bluewker 2 года назад

@@JasonDKnott Awesome! I've got a follow up question. For Vanguard's PFIC statement, they give an Ordinary Earnings prorata rate, Net Capital Gains prorata rate and Cash/property distributions per share - so similar to your example EXCEPT adding the cash/property distributions per share. How would that factor into line 5b or the rest of the form?

@TomCGhost 2 года назад

Thank you for the video, I also hold a sprott physical trust. Uranium. Since sprott does not sell any of the physical assets then the pro rata should be zero. And if you did not sell any of the shares, it is my understanding that part 3 and 5.b will be zero.

@JasonDKnott 2 года назад

You should rely on the PFIC statements provided by the company. If the PFIC statements show any ordinary income, or capital gains, then you will have an inclusion if you make the QEF election.

@TomCGhost 2 года назад

@@JasonDKnott Thank you Jason. One last question if you don't mind. The PFIC statement is for Jan 1 to July 18th 2021. Do I need to specify that in the Tax year of the PFIC or can I just say calendar year 2021?

@ciguarayonson 2 года назад

Excellent video. Question, how the dividends paid out in the year are reported for a PFIC? Thanks.

@JasonDKnott 2 года назад

Depends upon how the PFIC is taxed. For a PFIC that made a QEF election from the start, any cash dividend distributions are nontaxable because they are a return of principal, as the taxpayer already included the amounts of ordinary income & capital gains on their tax returns each year.

@markgirard826 8 месяцев назад

Excellent video! Question: If the PFIC also issued a dividend to the shareholders in the tax year, is that amount already included in the QEF ordinary earnings, or does income from those dividends need to be reported separately on a 1099-div?

@airdownthere9525 2 года назад

Hi Jason, in your example, wouldn't it be possible to elect the cayman co to be a disregarded entity and thus avoid PFIC? thanks

@JasonDKnott 2 года назад

Yes, if the foreign corporation is an eligible entity, it can file an entity classification election via Form 8832 to make the entity either a disregarded entity (if it has only one owner), or a flow through partnership entity. In this example the corporation has multiple owners, so an election would make it a partnership for federal tax purposes.

@airdownthere9525 2 года назад

Awesome thanks!

@LindaFox-x3z 7 дней назад

How does a PFIC owner report if there is a loss during the year?

@YukonCornelius435 5 месяцев назад

Great video. The Sprott PHYS fund had a capital gain in 2023, so this video was quite helpful. I read somewhere that the capital gain increases the cost basis. is that correct? Or is it just money down the drain?

@234vannguyen 2 года назад

Thank you!

@JasonDKnott 2 года назад

You're welcome!

@suckmacaq 9 месяцев назад

Hi Jason, how would you complete Form 8621 if you decide to sell some OR all shares of a PFIC investment? In other words, how would you complete Form 8621 once you've had some capital gains?

@sumankothari5291 6 месяцев назад

Hi Jason - This video is very helpful. If I could ask a question. i there a way I can ask you personally instead puting on for consumption of the world.

@YukonCornelius435 5 месяцев назад

And any idea on how to enter the capital gains into TurboTax? Thanks.

@jeremiecarvin1833 Год назад

Hello Jason. Thanks a lot for this great video, very clear. I subscribed right away. I have got a question and I hope you will know the answer. If I sell all the shares I have from my PFIC QEF during a year and get rid of it entirely, do I need to fill any other part in this form 8621 (except for the ones you show on your video) ? Thank you a lot for your help. J.

@glennbornstein5562 11 месяцев назад

Thanks Jason! This is very helpful. Do you need to file form 8621 if the PFIC has no income or capital gains? Also does it matter if this is the first year you are invested in the pfic (and need to make the election) - or had made the qef election in a previous year but the PFIC has no tax implications in this year? Thanks!

@CarlosCabrera-xy6op Год назад

Thanks Jason! Super Helpful. How would dividend distributions be treated/accounted for for tax purposes? Thanks in advance

@subhajitguha3283 Год назад

Hi Jason, First of all thank you very much for making this excellent video. In case shares are purchased/Sold during the year , how to find out the (%) of ownership ??

@JasonDKnott Год назад

Generally, all of this information is provided by the foreign corporation. The corporation prepares a "PFIC Annual Information Statement" which is provided to all of the shareholders.

@davidperry6194 2 года назад

Excellent video. I do have one question. I need to fill out an 8621 for holdings of sprott physical silver trust that I bought in two segments during 2021. My question is what do I report as the purchase date, only the date of the initial purchase or "various, 2021" (or something similar)?

@JasonDKnott 2 года назад

Yes, you can use Various as the purchase date if there were multiple acquisitions during the year.

@davidperry6194 2 года назад

@@JasonDKnott Thanks so much.

@kathyzapp2455 2 года назад

I made a QEF election in the first year that I purchased shares in a PFIC. In subsequent tax years do I still need to select this box or leave it blank?

@JasonDKnott 2 года назад

Once the election is made, it applies to all subsequent years, and you need to continue to report the income on Form 8621 consistent with the QEF election. You should still check the QEF box in Part II, and then complete Part III.

@kathyzapp2455 2 года назад

@@JasonDKnott Thank you, Jason. This is for Sprott Gold Trust shares held in a US brokerage. No income is distributed. Would I also need to complete Form 8938 (assuming the threshold is met) or not?

@mimi2114 2 года назад

Hi Jason. Are foreign bank stocks considered PFICs?

@JasonDKnott 2 года назад

Generally, no. If the foreign corporation is an active business, it won't be a PFIC. However, you don't want to make any assumptions. Contact the corporation and ask whether they have done an analysis to determine their PFIC status. Most PFICs are foreign hedge funds, private equity funds, mutual funds, etc.

@mimi2114 2 года назад

@@JasonDKnott Thank you very much for your response, Jason! So in general, foreign banks are not considered as PFICs although it seems like the definition applies?