Instructions For Form 8621 - 2016 (Page 9 of 14) in pdf

The basis of the shareholder’s stock

the shareholder filed a Form 5471 for

Line 6c. This amount is treated as

is increased by the amount of the

the former PFIC for the election year,

ordinary income on your tax return.

deemed dividend. The manner in which

attach Schedule J (Form 5471).

For a noncorporate taxpayer, include

the basis adjustment is made depends

The name, address, and identifying

this amount as “other income” on line 21

on whether the shareholder is a direct or

number of the U.S. person and the

of Form 1040, or on the comparable line

indirect shareholder (as defined below).

amount that was included in income.

of other noncorporate tax returns. For a

See Regulations section 1.1298-3(c)(6).

The tax year in which the amount was

corporate taxpayer, include this amount

Solely for purposes of applying the

previously included in income.

as “other income” on line 10 of Form

PFIC rules, the shareholder’s new

The provision of law under which the

1120, or on the comparable line of other

holding period begins on the day

amount was previously included in

corporate tax returns.

following the termination date.

income.

A description of the transaction in

Line 7c. See the instructions for the

which the shareholder acquired the

Schedule D used for your tax return.

When To Make the Election

stock of the former PFIC from the other

Portions of the net capital gain may

This election must be made by the due

U.S. person.

have to be reported on different lines of

date of the shareholder’s original return

The provision of law under which the

Schedule D, depending upon the

(or by filing an amended return within 3

shareholder’s holding period includes

information provided by the QEF

years of the due date, as extended

the holding period of the other U.S.

concerning the section 1(h) categories

under section 6081, of the original

person.

of net capital gains and amounts

return) for the tax year that includes the

thereof, derived by the QEF. See

first day on which the qualified portion of

For more information on making

Regulations section 1.1293-1(a)(2) for

the shareholder’s holding period in the

Election H, see Regulations section

three options a QEF may use to report

PFIC begins, as determined under

1.1298-3(c).

and calculate capital gain.

section 1297(d). However see Form

Line 8

8621-A (and Regulations section

Part III. Income From a

1.1298-3(e)) if the 3-year period has

If you receive a distribution from the

QEF

expired.

QEF during the current tax year, the

distribution is first treated as a

For any tax year in which the foreign

How To Make the Election

distribution out of the earnings and

corporation is not treated as a QEF

profits of the QEF accumulated during

because it is not a PFIC under section

To make this election, check box H in

the year. If the total amount distributed

1297(a), the shareholder is not required

Part II and complete Part V, line 16. Also

(line 8b) exceeds the amount included

to complete Part III. However, the

attach to Form 8621 the information

in income (line 8a), the excess is treated

section 1295 election is not terminated.

specified below.

as distributed out of the most recently

If the foreign corporation is treated as a

accumulated earnings and profits. This

PFIC in any subsequent tax year, the

Attachments

amount is not taxable to you if you can

original election continues to apply and

The shareholder must attach a

satisfactorily demonstrate that the

the shareholder must include in Part III

statement to Form 8621 that shows the

excess was previously included in your

its pro rata share of ordinary earnings

calculation of its pro rata share of the

income or the income of another U.S.

and net capital gain and also must

post-1986 earnings and profits of the

person. This is demonstrated by

comply with the section 1295 annual

former PFIC that is treated as

attaching a statement to Form 8621 that

reporting requirements.

distributed to the shareholder on the

includes the information listed under

All QEF shareholders complete lines

termination date. The post-1986

Attachments for Election C, earlier. If the

6a through 7c. If you are making

earnings and profits may be reduced

excess has not been previously

Election B, also complete lines 8a

(but not below zero) by the amount that

included in your income or the income

through 9c.

the shareholder satisfactorily shows

of another U.S. person, then the excess

was previously included in its income or

is subject to tax according to the rules of

Lines 6 and 7

in the income of another U.S. person.

section 301(c).

Lines 6a and 7a. Enter on lines 6a and

The shareholder shows this by including

Line 9

7a, respectively, your pro rata share of

in the statement mentioned above the

the ordinary earnings and net capital

following information:

Line 9a. Enter the total tax on your total

gain of the QEF. The PFIC should

taxable income (including your share of

provide these amounts or information

The termination date, as defined in

undistributed earnings of the QEF) for

that will help you determine your pro

Regulations section 1.1298-3(d), for the

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

rata share. See Annual Election

former PFIC.

Schedule J, line 11, or Form 1040,

Requirements of the PFIC or

The beginning and ending dates of

line 63).

Intermediary earlier.

the taxable year of the shareholder in

For this purpose, “undistributed

which the termination date falls (i.e., the

Lines 6b and 7b. Your share of the

earnings” is the excess, if any, of the

election year).

ordinary earnings and net capital gain of

amount included in gross income under

The shareholder’s pro rata share of

the QEF is reduced by the amounts you

section 1293(a) over the sum of the

the post-1986 earning and profits of the

include in income under section 951 for

amount of any distribution and the

former PFIC that is treated as

the tax year with respect to the QEF.

portion of the amount attributable to

distributed to the shareholder on the

Your share of these amounts may also

stock in the QEF that you transferred or

termination date, including a schedule

be reduced as provided in section

otherwise disposed of before the end of

that shows the calculation of this

1293(g).

the QEF's tax year.

amount as required under Regulations

section 1.1298-3(c)(5)(ii). In addition, if

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Instructions For Form 8621 - 2016 Page 9

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