Section 1291(a)(2) says that if there is a disposition of PFIC stock, then you treat the gain as an “excess distribution” and apply the rules of Section 1291(a)(1). Yes you do have excess distribution.
When you sell your PFIC stock, your gain is an “excess distribution” and taxed as such.
You allocate the gain across the time you hold the PFIC, day-by-day. [Section 1291(a)(1)(A)].
You treat the amount of that excess distribution as ordinary income if it is allocated to the current year. [Section 1291(a)(1)(B)(i)].
All of the gain is treated as an excess distribution, and is ordinary income to you. You cannot just use the Schedule D.
Gain from sale of a Section 1291 fund is reported on Line 10f of Form 8621. The instructions to Line 10f note that the gain is taxed as ordinary income.
You attach a statement showing the holding period and the allocation of the gain across the days you owned the PFIC stock.
Line 11b should be the same as Line 10f. This is because the amount of the gain from sale of your PFIC stock that is allocable to the current tax year.
Line 11b goes on the Form 1040 on page 1, on the “other income” line.
If you do not feel comfortable completing your reporting you may wish to use a tax professional for this year so the pfic is correct.
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