How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask USTaxAdvising Your Own Question

USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1084
Experience:  US Taxation specialist.
58296935
Type Your Tax Question Here...
USTaxAdvising is online now
A new question is answered every 9 seconds

Question about Sec 1291 gain/loss on a PFIC (Form 8621). Im

Resolved Question:

Question about Sec 1291 gain/loss on a PFIC (Form 8621). I'm a US citizen, currently residing abroad. I purchased a foreign mutual fund (out of ignorance of the whole PFIC quagmire) in two lots - one in 2007 and one in 2008. I redeemed all shares (both lots) in 2011 for a net gain. I made a gain on the 2007 lot and a loss on the 2008 lot. My question pertains to reporting this on Form 8621.

From my reading of Form 8621 instructions, the sale is to be reported on a single Form 8621 (since it is a single mutual fund/PFIC) but because it involves two holding periods, Part IV of the form has to be filled out twice - once for each lot. Line 10f of each part IV will show the gain and loss of each lot respectively. The question is, when computing the tax and interest, should I use the net gain or do I have to compute the tax purely on the gain of the first lot for the first part IV instance, and separately for the second part IV (which will be 0 since the second lot was a loss)? If the former, does that mean I cannot use the loss on the second lot to offset a PFIC gain even if both lots were the same mutual fund?
Submitted: 2 years ago.
Category: Tax
Expert:  USTaxAdvising replied 2 years ago.

USTaxAdvising :

When computing the tax and interest you would only compute that for the shares/lot sold at a gain. Not for the shares sold at a loss.

USTaxAdvising :

So you will only have one part IV for the 8621

USTaxAdvising :

does that mean I cannot use the loss on the second lot to offset a PFIC gain even if both lots were the same mutual fund? - yes this is correct. Capital losses derived from the disposition of PFIC shares cannot be recognized per Treasury Regulation 1.1291-6(b)(3).

USTaxAdvising :

Basically the shares sold at a gain are what is known as a 1291 fund. The shares sold at a loss are gone. If you had not purchased the shares on different days/lots then you would not have this issue.

USTaxAdvising :

If the shares were publicly traded then you could have made the "mark to market election" thus eliminating the punitive interest charge. (just a note for future purchases of PFIC stock)(Generally you will want this stock to be publicly traded. If it is not publicly traded then you could inquire if you can get a "PFIC Statement" which will enable you to make a "QEF" Qualified Electing Fund election, which will also get you out of 1291 land.)

Customer:

Sigh, that was my reading as well and was hoping someone would tell me otherwise :-) In any case, the amounts are small enough not to really matter except for the pain in computing the interest

USTaxAdvising :

I hope this helps. Please let me know if you have any further questions.

USTaxAdvising :

Ahh yes, if the amounts are small it is quite an exercise working through the interest charge....

Customer:

I did make a Mark-to-Market for some other investments but was somehow under the impression that pure stock ETFs did not fall in the PFIC category

USTaxAdvising :

Yes these would be PFICs as well if they are foreign.

Customer:

And going back to refile amendments (don't think that's even possible for mark-to-market) is not worth the trouble

Customer:

Thanks for your answer

USTaxAdvising :

That's right, you can't make MTM election on an amended return. It must be made on a timely filed return.

Customer:

Does life insurance also fall under PFIC ?

Customer:

Or should I make that a separate question

Customer:

(feel free to tell me so!)

USTaxAdvising :

hang on one minute

USTaxAdvising :

sorry about that.

USTaxAdvising :

This is a seperate question but I don't mind at all.

USTaxAdvising :

Generally life insurance would not be a PFIC unless you were buying shares of the company.

USTaxAdvising :

If it was like a co-operative where you own shares then it would be a PFIC.

USTaxAdvising :

If only owning a beneficial interest it might be a foreign trust or partnership (perhaps)

Customer:

So surrendering / cashing a policy would be ordinary income?

Customer:

By the way, to be fair, I will adjust the payment to make it a separate question

USTaxAdvising :

I hope this helps, please let me know if you have any further questions.

Customer:

Did you have a response for my question about cashing in a life insurance policy?

Customer:

as ord income?

USTaxAdvising :

Yes this would be ordinary income to the extent the receipt exceeded your initial investment.


Customer:

OK, thanks, XXXXX XXXXX now...

USTaxAdvising :

Thanks!. If you ever have any further questions please feel free to ask me directly here - http://www.justanswer.com/finance/expert-ustaxadvising/

USTaxAdvising :

If I am not online I will have a response to you within 24 hours.

USTaxAdvising :

Best,

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1084
Experience: US Taxation specialist.
USTaxAdvising and 4 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.