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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 2863
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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US Tax: Investments in Foreign Mutual Funds: What all forms

Customer Question

US Tax: Investments in Foreign Mutual Funds: What all forms I need to attach with my return and how to calculate and report income/interest/dividends etc. from those if I have investments in foreign mutual funds? I invested in these mutual funds when I was in India. I keep getting regular dividends from these mutual funds. Are these PFICs? Do I need to file form 8621 to report these mutual funds?Please note, I moved from India to the US in 2013. My 2013 US tax status was Non-Resident. This is for tax year 2014. My 2014 US tax status is Resident (married filing joint). I figured that I have to fill Form 8938 because my total foreign assets exceeds $100,000 on 31st Dec 2014.
Submitted: 4 months ago.
Category: Tax
Expert:  Barbara replied 4 months ago.

Welcome back to Just Answer.

Foreign Mutual Funds are considered to be PFICs by the IRS, and a separate Form 8621 is required to be filed.

https://www.irs.gov/uac/form-8621-return-by-a-shareholder-of-a-passive-foreign-investment-company-or-qualified-electing-fund

The following links contain excellent, detailed information you will find helpful:

https://thunfinancial.com/why-americans-should-never-ever-own-shares-in-a-non-us-incorporated-mutual-fund/

http://www.tax-power.com/foreign_mutual_funds.htm

Please let me know if you have any other questions or concerns. regarding this topic.

Thank you and best regards,

Barb

Customer: replied 4 months ago.
If I have to file form 8621 then which one applies in my situation, QEF, MTM or default (i.e. Part V). My understanding is that it's default (Part V) where I need to report this. I need to clarify if the indian mutual funds qualify for MTM (for example, http://capitalquery.com/mutualfunds/NavReport/118510_Franklin-India-Flexi-Cap-Fund). If not how do I fill out Part V? Given that 2014 is the first year I'll be reporting these mutual funds. Prior to 2014, 2013 was the first year of my US Tax filing.
Expert:  Barbara replied 4 months ago.

There are detailed explanations in the instructions for Form 8621 regarding QEF, MTM, or default.

https://www.irs.gov/uac/form-8621-return-by-a-shareholder-of-a-passive-foreign-investment-company-or-qualified-electing-fund

Once you review this information, please let me know if I can assist you further.

Best regards,

Barb

Customer: replied 4 months ago.
I have read all those documents earlier and wasn't able to conclude which election qualifies for my case. My hunch is that, QEF definitely doesn't apply. There seems to be a thin chance for MTM but still not 100% sure. However default must definitely work. Assuming I should choose default option, I wanted to know how to fill out Part V, taking an example, of a mutual fund, say, fund ABC, number of units is 100, Investment start date as 4/1/2010, NAV on purchase data is $100. NAV on 31st Dec 2014 is $200 etc.
Expert:  Barbara replied 4 months ago.

I apologize, but the price point offered for this question is too low for instructions/assistance in completing Form 8621. I will opt out and perhaps another tax expert will assist you.

Best regards,

Barb