Instructions For Form 8621 - 2016 (Page 12 of 14) in pdf

any unused excess distribution taxes is

Temporary Regulations section

A distribution of earnings will

allowed.

1.1294-1T(h).

terminate an election to the extent the

election is attributable to the earnings

When you dispose of PFIC stock, the

Line 17. Enter the last day of each tax

distributed.

above foreign tax credit rules apply only

year for which you made a section 1294

A loan, pledge, or guarantee by the

to the part of the gain that, without

election that is outstanding. Do not

QEF made directly or indirectly to the

regard to section 1291, would be

include an election made in the current

electing shareholder or related person

treated under section 1248 as a

tax year.

will terminate an election to the extent of

dividend.

Line 18. Enter the undistributed

the undistributed earnings equal to the

Line 16e. This amount is the aggregate

earnings of the QEF for which the

amount loaned, secured, or guaranteed.

increase in tax and is included on your

payment of tax was extended by the

A disposition of stock will terminate all

tax return as additional taxes.

section 1294 election entered on

elections with respect to the

line 17. If the election was partially

undistributed earnings attributable to

For individuals, include the amount

terminated in a prior year, enter the

that stock.

as part of the total for Form 1040,

remaining undistributed earnings.

A change in status of the QEF will

line 44. Check box c on line 44 and

terminate all elections.

enter “1291TAX” in the entry space for

Line 19. Enter the tax for which

that box.

For more information, see

payment was extended by the section

For corporations, enter this amount

Regulations section 1.1294-1T(e).

1294 election entered on line 17. If the

on Form 1120, Schedule J, to the left of

election was partially terminated in the

Line 23. Enter the deferred tax due

the entry space for line 2. Enter “Sec.

previous tax year, enter the balance of

from the termination of the section 1294

1291” next to the amount and include it

the deferred tax from line 25 of the prior

election. The deferred tax entered on

as part of the total for line 2. Other

year Form 8621.

line 19 is due if the election was

entities should use the comparable line

completely terminated. If the election

Line 20. Enter the accrued interest

on their income tax return.

was only partially terminated, a

(determined under section 6621) on the

proportionate amount of the deferred

Line 16f. Interest is charged on each

deferred tax. This is the interest accrued

tax is due. That amount is determined

net increase in tax for the period

from the due date (not including

by multiplying the amount entered on

beginning on the due date (without

extensions) of the return for the year for

regard to extensions) of your income tax

line 19 by a fraction, of which the

which the section 1294 election was

return for the tax year to which an

numerator is the amount entered on

made until the date the current year's

increase in tax is attributable and ending

line 22 and the denominator is the

return is filed.

with the due date (without regard to

amount entered on line 18. The deferred

Line 21. Enter the event(s) that

extensions) of your income tax return for

tax is due by the due date of the

occurred during the tax year that

the tax year of the excess distribution.

shareholder's income tax return (without

terminated one or more of the section

regard to extensions) for the year of

The amount of interest is determined

1294 elections reported on line 17. A

termination.

by using the rates and methods under

section 1294 election may be

When the election is terminated,

section 6621. See section 1291(c)(3) for

terminated voluntarily. However, an

corporations include the deferred tax as

more information regarding the

election will terminate automatically, in

part of the total for Form 1120,

computation of interest, and also see

whole or in part, when any of the

Schedule J, line 11. Also enter the

Rev. Rul. 2015-23, 2015-52 I.R.B. 866

following events occur:

deferred tax to the left of line 11 and

(or successor Revenue Ruling), for a list

An actual or deemed distribution of

label it as “Sec. 1294 deferred tax.”

of historical interest rates under section

earnings to which the election is

6621.

For individuals, include the deferred

attributable (a loan, pledge, or

tax as part of the total for Form 1040,

For individuals, include the interest

guarantee by the QEF to or for the

line 62. Check box c on line 62 and

as part of the total for Form 1040,

benefit of the taxpayer may cause a

line 62. Check box c on line 62 and

deemed distribution of the earnings);

enter “1294DT” and the amount of the

enter “1291INT” and the amount of the

A disposition of stock in the QEF,

deferred tax in the entry space for that

interest in the entry space for that box.

including a pledge by the taxpayer of

box.

stock as security for a loan; or

For corporations, include the interest

Line 24. Enter the interest accrued on

A change of status of the QEF (that

as part of the total for Form 1120,

the deferred tax. Interest accrues

is, a foreign corporation that is no longer

Schedule J, line 9f. See Instructions for

beginning on the due date (without

a QEF or PFIC).

Form 1120, Schedule J, line 9f.

regard to extensions) of your tax return

for the tax year in which the section

Line 22. Enter the earnings distributed

1294 election is made, and ending with

Part VI. Status of Prior

or deemed distributed as a result of the

the due date (without regard to

events described on line 21. Earnings

Year Section 1294

extensions) of your tax return for the tax

are treated as distributed out of the

Elections and Termination

year of the termination. Interest is

most recently accumulated earnings

computed using the rates and methods

of Section 1294 Elections

and profits. Accordingly, an event will

under section 6621.

first terminate the most recently made

Each person who has made a section

election.

For corporations, enter the amount of

1294 election must (1) complete lines

section 1294 interest at the bottom right

An election may be terminated in

17 through 20 to annually report the

margin of Form 1120, page 1 and label

whole or in part depending on the event

status of that election and (2) complete

it as “Sec. 1294 interest.” Also include

causing the termination. Examples are

lines 21 through 24 to report the

this amount in your check or money

as follows.

termination of any section 1294 election

order payable to the United States

that occurred during the tax year. See

-12-

Instructions For Form 8621 - 2016 Page 12

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