Instructions For Form 8621 - 2016 (Page 7 of 14) in pdf

qualification date) for its fair market

A shareholder making this election is

the shareholder satisfactorily

value.

treated as receiving a dividend equal to

demonstrates was previously included

its pro rata share of the post-1986

in its income or in the income of another

earnings and profits (defined below) of

U.S. person. The shareholder

Special Rules

the PFIC on the qualification date

demonstrates this by including in the

For purposes of this election, the

(defined under the instructions for

statement mentioned above the

following apply.

Election D earlier). The deemed

following information:

The gain from the deemed sale is

dividend is taxed as an excess

The name, address, and identifying

taxed as an excess distribution received

distribution, allocated only to the days in

number of the U.S. person and the

on the qualification date.

the shareholder's holding period during

amount that was included in income;

The basis of the stock is increased by

which the foreign corporation qualified

The tax year in which the amount was

the gain recognized. The manner in

as a PFIC. For this purpose, the

previously included in income;

which the basis adjustment is made

shareholder's holding period ends on

The provision of law under which the

depends on whether the shareholder is

the day before the qualification date.

amount was previously included in

a direct or indirect shareholder. See

income;

Regulations section 1.1291-10(f).

A description of the transaction in

Special Rules

Solely for purposes of applying the

which the shareholder acquired the

PFIC rules, the shareholder's holding

For purposes of this election, the

stock of the PFIC from the other U.S.

period of the stock begins on the

following apply.

person; and

qualification date.

The term “post-1986 earnings and

The provision of law under which the

The election may be made for stock

profits” means the undistributed

shareholder's holding period includes

on which the shareholder will realize a

earnings and profits of the PFIC (as of

the holding period of the other U.S.

loss, but that loss cannot be recognized.

the day before the qualification date)

person.

In addition, there is no basis adjustment

accumulated in tax years beginning

for a loss.

after 1986 during which the CFC was a

For more information on making

After the deemed sale, the PFIC

PFIC and while the shareholder held the

Election E, see Regulations section

becomes a pedigreed QEF with respect

stock.

1.1291-9.

to the shareholder.

The basis of the shareholder's stock

F. Deemed Sale Election with

is increased by the amount of the

deemed dividend. The manner in which

Respect to a Former PFIC or

When To Make the Election

the basis adjustment is made depends

“Section 1297(e) PFIC”

This election must be made by the due

on whether the shareholder is a direct or

date, including extensions, of the

Who May Make the Election

indirect shareholder. See Regulations

shareholder's original tax return (or by

section 1.1291-9(f).

This is a deemed sale election under

filing an amended return within 3 years

Solely for purposes of applying the

section 1298(b)(1) and Regulations

of the due date of the original return) for

PFIC rules, the shareholder's holding

section 1.1297-3(b) or 1.1298-3(b). This

the tax year that includes the

period begins on the qualification date.

election may be made by:

qualification date.

A U.S. person that is a shareholder of

When To Make the Election

a foreign corporation that no longer

How To Make the Election

qualifies as a PFIC under either the

This election must be made by the due

To make this election:

income or asset test of section 1297(a)

date (including extensions) of the

1. Check box D in Part II,

shareholder's original tax return (or by

A U.S. shareholder (as defined in

filing an amended return within 3 years

2. Enter the gain or loss on line 15f

section 951(b)) that owns stock in a

of the due date of the original return) for

of Part V, and

foreign corporation that is a CFC and a

the tax year that includes the

3. If a gain is entered, complete

PFIC, but that is not treated as a PFIC

qualification date.

line 16 to report the tax and interest due

with respect to the U.S. shareholder

on the excess distribution.

under section 1297(d).

How To Make the Election

For more information regarding

To make this election:

Such persons may elect to treat the

making Election D, see Regulations

stock of the foreign corporation as sold

1. Check box E in Part II,

section 1.1291-10.

for its fair market value on the last day of

2. Enter the dividend on line 15e of

E. Deemed Dividend Election in

the last tax year of the foreign

Part V as an excess distribution, and

corporation in which it was treated as a

Connection with a QEF Election

3. Complete line 16 to figure the tax

PFIC (termination date) or the first day

and interest due on the excess

Who May Make the Election

on which the qualified portion of the

distribution.

shareholder’s holding period in the

This is a deemed dividend election

section 1297(e) PFIC begins

under section 1291(d)(2)(B). This

Attachments. The shareholder must

(qualification date), as applicable.

election may be made by a U.S. person

attach a statement to Form 8621 that

that elects to treat a PFIC that is also a

demonstrates the calculation of its pro

CFC as a QEF for the foreign

Special Rules

rata share of the post-1986 earnings

corporation's tax year following its first

and profits of the PFIC that are treated

The gain from the deemed sale is

tax year as a PFIC included in the

as distributed to the shareholder on the

taxed as an excess distribution.

shareholder's holding period (an

qualification date. The post-1986

The basis in the stock is increased by

unpedigreed QEF).

earnings and profits may be reduced

the amount of the excess distribution

(but not below zero) by the amount that

taxed to the shareholder making

-7-

Instructions For Form 8621 - 2016 Page 7

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