Instructions For Form 8621 (2008) - Internal Revenue Service (Page 6 of 8) in pdf

profits and is taxable to you unless you

section 1296(d) and Regulations

Enter on line 10a the total distributions

satisfactorily demonstrate that the

sections 1.1296-1(c)(3) and (4).

you received from the section 1291

excess was previously included in the

fund with respect to that stock during

This amount is treated as an

income of another U.S. person. To

the current tax year. If you did not

ordinary loss.

satisfactorily demonstrate this, the QEF

dispose of that stock during the tax

shareholder must attach a statement to

year, do not complete the rest of Part

Line 9. Corporations and individuals

Form 8621 that includes the information

IV. If you did dispose of that stock

should include the gain or (loss) on the

listed under Attachments on page 4.

during the tax year, skip lines 10b

“other income” line of their tax returns.

through 10e and complete lines 10f and

Other entities should include this

Line 4

11.

amount on the comparable line of their

tax return.

If the holding period of the applicable

Line 4a. Enter the total tax on your

stock began in the current tax year, the

If a CFC makes a mark-to-market

total taxable income (including your

line 10a amount is taxed according to

election with respect to a PFIC in which

share of undistributed earnings of the

the rules of section 301. To the extent

QEF) for the tax year (e.g., from Form

it owns stock, any line 9 gain is treated

that section 301(c)(1) is applicable,

1120, Schedule J, line 10, or Form

as foreign personal holding company

include the amount as a dividend on

1040, line 63).

income and any line 9 loss is treated as

your income tax return. For

a deduction that is allocable to foreign

For this purpose, “undistributed

corporations, include this amount on

personal holding company income.

earnings” is the excess, if any, of the

Form 1120, Schedule C, line 13. For

For more information relating to

amount included in gross income under

individuals, include this line 10a amount

mark-to-market elections under section

section 1293(a) over the sum of the

on Form 1040, line 9a (and, if

1296, see Regulations sections

amount of any distribution and the

applicable, on Schedule B (Form 1040),

1.1296-1 and 1.1296-2.

portion of the amount attributable to

line 5).

stock in the QEF that you transferred or

Line 10c

otherwise disposed of before the end of

Part IV. Distributions

the QEF’s tax year.

Divide the amount on line 10b by 3. If

the number of tax years in your holding

From and Dispositions

Line 4b. Calculate your total tax as if

period preceding the current tax year is

your total taxable income did not

of Stock of a Section

less than 3, divide the amount on line

include your share of the undistributed

10b by that number.

earnings of the QEF (line 3e). Enter this

1291 Fund

amount on line 4b.

Line 10e

See Section 1291 Fund on page 2 for

Line 4c. For corporations, enter this

the definition of section 1291 fund. See

Nonexcess distribution. The

tax on Form 1120, Schedule J, in

nonexcess distribution is the lesser of

page 2 for a brief summary of the tax

brackets to the left of the entry space

line 10a or line 10d. This amount is

consequences for shareholders of a

for line 10. Subtract that amount from

taxed according to the rules of section

section 1291 fund.

the total of lines 7 through 9 and enter

301. To the extent that section

Complete a separate Part IV for

the difference on line 10.

301(c)(1) is applicable, include the

each excess distribution. That is, if you

amount as a dividend on your income

For individuals, enter this tax on

receive a distribution from a section

tax return. For corporations, include this

Form 1040 in brackets to the left of the

1291 fund with respect to shares for

amount on Form 1120, Schedule C,

entry space for line 63. Subtract that

which you have different holding

line 13. For individuals, include this

amount from the total of lines 57

periods, complete lines 10a through

amount on Form 1040, line 9a (and, if

through 62, and enter the difference on

10e separately for each block of shares

applicable, on Schedule B (Form 1040),

line 63.

that has the same holding period

line 5).

(“applicable stock”). If you dispose of

Excess distributions. If you received

stock in a section 1291 fund for which

more than one distribution during the

Part III. Gain or (Loss)

you have different holding periods,

tax year with respect to the applicable

complete line 10f for each block of

From Mark-to-Market

stock, the excess distribution is

shares that has the same holding

apportioned among all actual

period.

Election

distributions. Each apportioned amount

Line 10

is treated as a separate excess

Lines 7 Through 9

distribution.

Lines 10a and 10b

If the fair market value of the PFIC

Line 10f

stock as of the close of the tax year is

Enter your total distributions from the

Gain recognized on the disposition of

more than the U.S. person’s adjusted

section 1291 fund with respect to the

stock of a section 1291 fund is treated

basis in the stock, the excess is a gain

applicable stock for the periods

as an excess distribution. Losses are

and is treated as ordinary income.

indicated.

not recognized. Stock of a section 1291

Note. A distribution to a corporation

If the adjusted basis of the stock is

fund is considered disposed of if it is

claiming the foreign tax credit for

more than the fair market value, the

sold, transferred, or pledged.

deemed paid foreign taxes includes

excess is allowed as a deduction, but

foreign taxes deemed paid. See Form

Line 11

only to the extent of the lesser of:

1118, Foreign Tax

1. The amount of the excess (line 7)

Credits – Corporations, Schedule C,

Lines 11a and 11b

Part I, column 10, and Parts II and III,

2. The excess of the amounts that

Determine the taxation of the excess

column 8, for the gross-up amount.

were included in income under the

distribution on a separate sheet and

mark-to-market rules for prior tax years

Line 10a. If the holding period of the

attach it to Form 8621. Divide the

over the amounts allowed as a

applicable stock began in the current

amount on line 10e or 10f, whichever

deduction under the mark-to-market

year, there is no excess distribution and

applies, by the number of days in your

rules for prior tax years (line 8). See

Part IV should be completed as follows:

holding period. The holding period of

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Instructions For Form 8621 (2008) - Internal Revenue Service Page 6

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