Have a Tax Question? Ask a Tax Expert
I would be surprised if not all the foreign mutual funds are not PFICs. Note that all of the funds/PFICs have to be reported for the year, even if there are no excess distributions to include under IRC 1291. Note that IRC 1298(f) requires disclosure of all PFICs held regardless of the $ value of ownership.
Having said the above, is there any chance that these mutual funds are publicly traded and therefore qualify for the mark to market election of IRC 1296?
Sorry, I should have read your question more thoroughly regarding the reporting of a "1291 fund". I don't generally see people with less than 25K so I have not seen this exception apply very often. But you are absolutely correct.
My main focus here for you is the IRC 1296 Mark to Market election. This election, if available to you, would save you a significant amount of taxes. Note that the election must be made on a timely filed income tax return and you have to make the election in the first year of ownership. You have to file Form 8621 to make this election.
Hello Frank - you would just report the 1291 fund that has the excess distributions. Your other 1291 funds would not be required to be reported if you meet the 25K value exception.
I appreciate your decision not to make the mark to market election, but in all honesty, if the election is available, you will be paying significantly more tax as a 1291 fund. 1296 provides for capital gain or loss on disposal whereas 1291 funds only allow for ordinary gain. No losses are allowed on disposal of 1291 funds.