Instructions For Form 8621 (2008) - Internal Revenue Service printable pdf download

Department of the Treasury

Instructions for Form 8621

Internal Revenue Service

(Rev. February 2008)

(Use with the December 2004 revision of Form 8621.)

Return by a Shareholder of a Passive Foreign Investment Company or Qualified

Electing Fund

required to recognize any income under

1. The corporation is not publicly

Section references are to the Internal

Revenue Code unless otherwise noted.

section 1291.

traded for the taxable year and

2. The corporation is (a) a CFC or

General Instructions

Chain of ownership. If the

(b) makes an election to use adjusted

shareholder owns one PFIC and

basis.

through that PFIC owns one or more

Who Must File

other PFICs, the shareholder must

Publicly traded corporations must

Generally, a U.S. person that is a direct

either:

use fair market value when determining

or indirect shareholder of a PFIC must

PFIC status using the asset test.

1. File a Form 8621 for each PFIC

file Form 8621 for each tax year in

in the chain or

Look-thru rule. When determining if a

which that U.S. person:

2. Complete Form 8621 for the first

foreign corporation that owns at least

•

Recognizes gain on a direct or

PFIC and, in an attachment, provide

25% (by value) of another corporation

indirect disposition of PFIC stock,

the information required on Form 8621

is a PFIC, the foreign corporation is

•

Receives certain direct or indirect

for each of the other PFICs in the

treated as if it held a proportionate

distributions from a PFIC, or

chain.

share of the assets and received

•

Is making an election reportable in

directly its proportionate share of the

Part I of the form.

income of the 25%-or-more owned

When and Where To File

corporation.

A separate Form 8621 must be filed

Attach Form 8621 to the shareholder’s

for each PFIC in which stock is held.

CFC overlap rule. A 10% U.S.

tax return and file both by the due date,

See Chain of ownership below for

shareholder (defined in section 951(b))

including extensions, of the return at

specific filing requirements.

that includes in income its pro rata

the Internal Revenue Service Center

share of subpart F income for stock of a

Indirect shareholder. Generally, a

where the tax return is required to be

CFC that is also a PFIC, generally will

U.S. person is an indirect shareholder

filed.

not be subject to the PFIC provisions

of a PFIC if it is:

for the same stock during the qualified

If you are not required to file an

1. A direct or indirect owner of a

portion of the shareholder’s holding

income tax return or other return for the

pass-through entity that is a direct or

period of the stock in the PFIC. This

tax year, file Form 8621 directly with

indirect shareholder of a PFIC,

exception does not apply to option

the Internal Revenue Service Center,

2. A shareholder of a PFIC that is a

holders. For more information, see

Ogden, UT 84201-0201.

shareholder of another PFIC, or

section 1297(d).

3. A 50%-or-more shareholder of a

Note. The attribution rules of section

foreign corporation that is not a PFIC

Definitions and Special

1298(a)(2)(B) will continue to apply

and that directly or indirectly owns stock

Rules

even if the foreign corporation is not a

of a PFIC.

PFIC under the CFC overlap rule.

Interest holder of pass-through

Passive Foreign Investment

Qualified Electing Fund

entities. The following interest holders

Company (PFIC)

(QEF)

must file Form 8621 under the

A foreign corporation is a PFIC if it

circumstances described above:

A PFIC is a QEF if the U.S. person who

meets either the income or asset test

1. A U.S. person that is an interest

is a direct or indirect shareholder of the

described below.

holder of a foreign pass-through entity

PFIC elects (under section 1295) to

1. Income test. 75% or more of the

treat the PFIC as a QEF. See the

that is a direct or indirect shareholder of

corporation’s gross income for its

instructions for Election A on page 2 for

a PFIC,

taxable year is passive income (as

information on making this election.

2. A U.S. person that is considered

defined in section 1297(b)).

(under sections 671 through 679) the

Tax Consequences for

2. Asset test. At least 50% of the

shareholder of PFIC stock held in trust,

Shareholders of a QEF

average percentage of assets

and

•

(determined under section 1297(e))

3. A U.S. partnership, S corporation,

A shareholder of a QEF must

held by the foreign corporation during

trust (other than a trust that is subject to

annually include in gross income as

the taxable year are assets that

ordinary income its pro rata share of

sections 671 through 679 for the PFIC

produce passive income or that are

the ordinary earnings and as long-term

stock), or estate that is a direct or

held for the production of passive

capital gain the net capital gain of the

indirect shareholder of a PFIC.

income.

QEF.

•

Note. U.S. persons that are interest

The shareholder may elect to extend

holders of pass-through entities

Basis for measuring assets. When

the time for payment of tax on its share

described in 3 above must file Form

determining PFIC status using the

of the undistributed earnings of the

8621 if the pass-through entity fails to

asset test, a foreign corporation may

QEF (Election D) until the QEF election

file such form or the U.S. person is

use adjusted basis if:

is terminated.

Cat. No. 10784P

Instructions For Form 8621 (2008) - Internal Revenue Service

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