Instructions For Form 8621 (Rev.december 2004) (Page 5 of 7) in pdf

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A RIC that meets the requirements of

the ordinary earnings and net capital gain

Line 4b. Calculate your total tax as if

section 1296(e)(2).

of the QEF. The PFIC should provide

your total taxable income did not include

these amounts or information that will

your share of the undistributed earnings

For more information, see section

of the QEF (line 3e). Enter this amount on

help you determine your pro rata share.

1296 and Regulations section 1.1296-1.

line 4b.

See Annual Election Requirements of the

See sections 1296(f) and (g) and

PFIC or Intermediary on page 3.

Regulations sections 1.1296-1(e) and

Line 4c. For corporations, enter this tax

(h)(1)(ii) for information regarding stock

Lines 1b and 2b. Your share of the

on Form 1120, Schedule J, in brackets to

owned through certain foreign entities.

ordinary earnings and net capital gain of

the left of the entry space for line 11.

the QEF is reduced by the amounts you

When To Make the Election

Subtract that amount from the total of

include in income under section 551 or

lines 8 through 10 and enter the

This election must be made on or before

951 for the tax year with respect to the

difference on line 11.

the due date (including extensions) of the

QEF. Your share of these amounts may

U.S. person’s income tax return for the

also be reduced as provided in section

tax year in which the stock is marked to

For individuals, enter this tax on Form

1293(g).

market. A section 1296 election by a CFC

1040 in brackets to the left of the entry

is made by its controlling shareholders.

space for line 62. Subtract that amount

Line 1c. This amount is treated as an

For more information, see Regulations

from the total of lines 56 through 61, and

ordinary dividend on your tax return.

section 1.1296-1(h)(1)(ii). Once made, the

enter the difference on line 62.

election applies to all subsequent tax

For individuals, include this amount in

years unless the election is revoked or

the total on Form 1040, line 9a. For

terminated pursuant to Regulations

corporations, include this amount in the

section 1.1296-1(h)(3).

total on Form 1120, Schedule C, line 13.

Part III. Gain or (Loss)

How To Make the Election

Line 2c. See the instructions for the

From Mark-to-Market

To make the election:

Schedule D used for your tax return.

Election

1. Check box F in Part I,

Portions of the net capital gain may have

2. Complete Part III to report the gain

to be reported on different lines of

Lines 7 Through 9

or loss, and

Schedule D, depending upon the

3. Complete Part IV if the tax and

information provided by the QEF

If the fair market value of the PFIC stock

interest rules of section 1291 (explained

concerning the section 1(h) categories of

as of the close of the tax year is more

on page 6) apply.

net capital gains and amounts thereof,

than the U.S. person’s adjusted basis in

derived by the QEF. See Regulations

the stock, the excess is a gain and is

Coordination of Election F with section

section 1.1293-1(a)(2) for 3 options a

treated as ordinary income.

1291. If Election F is made for any tax

QEF may use to report and calculate

year, then, except as provided in

capital gain.

If the adjusted basis of the stock is

Coordination rules for first year of election

more than the fair market value, the

below, do not complete Part IV of Form

Line 3

excess is allowed as a deduction, but only

8621 with respect to any stock for which

If you receive a distribution from the QEF

to the extent of the lesser of:

that election is made.

during the current tax year, the

1. The amount of the excess (line 7)

Coordination rules for first year of

distribution is first treated as a distribution

election. See section 1296(j) and

out of the earnings and profits of the QEF

2. The excess of the amounts that

Regulations section 1.1296-1(i) for

accumulated during the year. If the total

were included in income under the

coordination rules that apply for the first

amount distributed (line 3b) exceeds the

mark-to-market rules for prior tax years

year that election F is made.

amount included in income (line 3a), the

over the amounts allowed as a deduction

excess is treated as distributed out of the

Coordination of other mark-to-market

under the mark-to-market rules for prior

most recently accumulated earnings and

rules under chapter 1 of the Code with

tax years (line 8). See section 1296(d)

profits and is taxable to you unless you

section 1291. See Regulations section

and Regulations sections 1.1296-1(c)(3)

satisfactorily demonstrate that the excess

1.1291-1(c)(4).

and (4).

was previously included in the income of

another U.S. person. To satisfactorily

This amount is treated as an ordinary

demonstrate this, the QEF shareholder

loss.

must attach a statement to Form 8621

that includes the information listed under

Part II. Income From a QEF

Attachments on page 4.

Line 9. Corporations and individuals

For any tax year in which the foreign

should include the gain or (loss) on the

corporation is not treated as a QEF

Line 4

“other income” line of their tax returns.

because it is not a PFIC under section

Other entities should include this amount

1297(a), the shareholder is not required

Line 4a. Enter the total tax on your total

on the comparable line of their tax return.

to complete Part II. However, the section

taxable income (including your share of

1295 election is not terminated. If the

undistributed earnings of the QEF) for the

If a CFC makes a mark-to-market

foreign corporation is treated as a PFIC in

tax year (e.g., from Form 1120, Schedule

election with respect to a PFIC in which it

any subsequent tax year, the original

J, line 11, or Form 1040, line 62).

owns stock, any line 9 gain is treated as

election continues to apply and the

foreign personal holding company income

shareholder must include in Part II its pro

For this purpose, “undistributed

and any line 9 loss is treated as a

rata share of ordinary earnings and net

earnings” is the excess, if any, of the

deduction that is allocable to foreign

capital gain and also must comply with

amount included in gross income under

the section 1295 annual reporting

personal holding company income.

section 1293(a) over the sum of the

requirements.

amount of any distribution and the portion

of the amount attributable to stock in the

For more information relating to

Lines 1 and 2

QEF that you transferred or otherwise

mark-to-market elections under section

disposed of before the end of the QEF’s

1296, see Regulations sections 1.1296-1

Lines 1a and 2a. Enter on lines 1a and

and 1.1296-2.

tax year.

2a, respectively, your pro rata share of

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Instructions For Form 8621 (Rev.december 2004) Page 5

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