Instructions For Form 8621 (Rev.december 2004) (Page 4 of 7) in pdf

How To Make the Election

Attachments. The shareholder must

E. Election To Recognize Gain

attach a statement to Form 8621 that

on Deemed Sale of PFIC Stock

To make this election:

demonstrates the calculation of its pro

1. Check box B in Part I,

rata share of the post-1986 earnings and

Who May Make the Election

2. Enter the gain or loss on line 10f of

profits of the PFIC that are treated as

This election may be made by:

Part IV, and

distributed to the shareholder on the

•

A U.S. person that is a shareholder of a

3. If a gain is entered, complete line

qualification date. The post-1986 earnings

11 to report the tax and interest due on

foreign corporation that no longer

and profits may be reduced (but not

qualifies as a PFIC under either the

the excess distribution.

below zero) by the amount that the

income or asset test of section 1297(a) or

shareholder satisfactorily demonstrates

•

For more information regarding

A U.S. shareholder (as defined in

was previously included in its income or in

making Election B, see Regulations

section 951(b)) that owns stock in a

the income of another U.S. person. The

section 1.1291-10.

foreign corporation that is a CFC and is

shareholder demonstrates this by

not treated as a PFIC with respect to the

C. Deemed Dividend Election

including in the statement mentioned

U.S. shareholder under section 1297(e).

above the following information:

•

Such persons may elect to treat the

Who May Make the Election

The name, address, and identifying

stock of the foreign corporation as sold on

number of the U.S. person and the

This election may be made by a U.S.

the last day of the last tax year of the

amount that was included in income;

person that elects to treat a PFIC that is

•

foreign corporation in which it was treated

The tax year in which the amount was

also a CFC as a QEF for the foreign

as a PFIC (termination date) for its fair

previously included in income;

corporation’s tax year following its first tax

•

market value on that date.

The provision of law under which the

year as a PFIC included in the

amount was previously included in

shareholder’s holding period (an

Special Rules

income;

•

unpedigreed QEF).

•

The gain from the deemed sale is taxed

A description of the transaction in

A shareholder making this election is

as an excess distribution.

which the shareholder acquired the stock

•

treated as receiving a dividend of its pro

Any shareholder who owns stock in a

of the PFIC from the other U.S. person;

rata share of the post-1986 earnings and

CFC during its last taxable year as a

and

profits (defined below) of the PFIC on the

•

PFIC, may, alternatively, apply the

The provision of law under which the

qualification date (defined under the

deemed dividend election rules under

shareholder’s holding period includes the

instructions for Election B on page 3). The

Election C. The deemed dividend is taxed

holding period of the other U.S. person.

deemed dividend is taxed as an excess

as an excess distribution.

•

For more information on making

distribution, allocated only to the days in

The basis in the stock is increased by

Election C, see Regulations section

the shareholder’s holding period during

the amount of the excess distribution

1.1291-9.

which the foreign corporation qualified as

taxed to the shareholder making

a PFIC. For this purpose, the

Election E.

D. Election To Extend Time for

•

shareholder’s holding period ends on the

The new holding period of the stock

Payment of Tax

day before the qualification date.

begins on the date after the deemed sale.

•

Election E may be made for stock on

Special Rules

Who May Make the Election

which there would be a loss, but the loss

For purposes of this election, the

A shareholder of a QEF may make

is not recognized.

following apply.

Election D to extend the time for payment

•

For more information on making this

The term “post-1986 earnings and

of the tax on its share of the undistributed

election, see Temporary Regulations

profits” means the undistributed earnings

earnings of the fund for the current tax

sections 1.1297-3T(a) and (b).

and profits of the PFIC (as of the day

year. If a U.S. partnership is a

before the qualification date) accumulated

When To Make the Election

shareholder of a QEF, the election is

in tax years beginning after 1986 during

made at the partner level.

This election is made either:

which the CFC was a PFIC and while the

1. With the original return for the tax

Special Rules

shareholder held the stock.

•

year of the shareholder that includes the

If this election is made, interest will be

The basis of the shareholder’s stock is

last day of the last year of the foreign

increased by the amount of the deemed

imposed on the amount of the deferred

corporation during which it qualified as a

dividend. The manner in which the basis

tax.

•

PFIC or

The election cannot be made for any

adjustment is made depends on whether

2. By filing an amended return for the

the shareholder is a direct or indirect

earnings on shares disposed of during the

tax year that includes the date of the

tax year or for a tax year that any portion

shareholder. See Regulations section

deemed sale.

1.1291-9(f).

of the shareholder’s pro rata share of the

•

The shareholder’s holding period

fund’s earnings is included in income

How To Make the Election

under section 551 (relating to foreign

(solely for purposes of applying the PFIC

To make this election:

rules after the deemed dividend election)

personal holding companies) or section

951 (relating to CFCs).

begins on the qualification date.

1. Check box E in Part I and

2. Enter the gain or loss on line 10f of

When To Make the Election

Part IV. If a gain, complete the rest of Part

This election must be made by the due

Generally, this election must be made by

IV.

date (including extensions), of the

the due date, including extensions, of the

shareholder’s original tax return (or by

shareholder’s tax return for the tax year

See Part V for annual reporting

filing an amended return within 3 years of

for which the shareholder reports the

requirements for outstanding section

the due date) for the tax year that

income related to the deferred tax.

1294 elections.

includes the qualification date.

How To Make the Election

F. Election To Mark-to-Market

How To Make the Election

PFIC Stock

To make this election:

1. Check box D in Part I and

Who May Make the Election

1. Check box C in Part I,

2. Complete lines 3a through 4c of

2. Enter the dividend on line 10e of

Election F may be made by:

Part II.

•

Part IV as an excess distribution, and

A U.S. person who owns (or is treated

3. Complete line 11 to figure the tax

For more information on making

as owning) “marketable stock” (defined on

and interest due on the excess

Election D, see Temporary Regulations

page 2) in a PFIC at the close of such

distribution.

section 1.1294-1T.

person’s tax year or

-4-

Instructions For Form 8621 (Rev.december 2004) Page 4

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