Instructions For Form 8621 December 2011 (Page 3 of 10) in pdf

•

The number of shares in each class

capacity as a shareholder of a PFIC.

shareholder describes the basis for its

of stock at the end of its tax year.

The entity will include the QEF earnings

reasonable belief;

as income for the year in which the

3. Extended, in the Protective

Reportable transaction disclosure

PFIC’s taxable year ends. The interest

Statement, the periods of limitations on

statement. A 10-percent shareholder

holder in the pass-through entity takes

the assessment of taxes under the

(by vote or value) of a QEF also may

the income into account under the rules

PFIC rules for all taxable years to which

be required to file Form 8886 if the QEF

applicable to inclusions of income from

the protective statement applies; and

is considered to have participated in a

the pass-through entity.

4. Complied with the other terms

reportable transaction pursuant to

and conditions of the protective

Regulations section

Affiliated groups. The common

statements.

1.6011-4(c)(3)(i)(G). See Form 8886,

parent of an affiliated group of

Reportable Transaction Disclosure

corporations that joins in filing a

The Protective Statement must be

Statement, and Regulations section

consolidated income tax return makes

attached to the shareholder’s tax return

1.6011-4 for additional information.

the QEF election for all members of the

for the shareholder’s first taxable year

affiliated group that are shareholders in

to which the statement will apply. For

the PFIC. An election by a common

required content of the statement and

Specific Instructions

parent is effective for all members of

other information, see Regulations

the group that own stock in the PFIC at

section 1.1295-3(c).

Important: All line references to Form

the time the election is made or any

Consent regime. Under the

1120 and Form 1040 are to the 2007

time thereafter.

consent regime, a shareholder that has

forms. Other entities should use the

For more information on who may

not satisfied the requirements of the

comparable line on their tax return.

make the election, see Regulations

protective regime may request that the

section 1.1295-1(d).

Address and Identifying

IRS permit a retroactive election. The

consent regime applies only if:

When To Make the Election

Number

1. The shareholder reasonably

Generally, a shareholder must make

relied on tax advice of a competent and

Address. Include the suite, room, or

the election to be treated as a QEF by

qualified tax professional;

other unit number after the street

the due date, including extensions, for

2. The interest of the U.S.

address. If the post office does not

filing the shareholder’s income tax

government will not be prejudiced if the

deliver mail to the street address and

return for the first taxable year to which

consent is granted;

the shareholder has a P.O. box, enter

the election will apply (the “election due

3. The shareholder requests

the box number instead.

date”). See Retroactive election below

consent before the PFIC status issue is

Identifying number. Individuals

for exceptions. The foreign corporation

raised on audit; and

should enter a social security number

will be treated as a QEF with respect to

4. The shareholder satisfies the

or a taxpayer identification number

the shareholder for the taxable year in

procedural requirements under

issued by the IRS. All other entities

which the election is made and for each

Regulations section 1.1295-3(f)(4).

should enter an employer identification

subsequent tax year of the foreign

number.

corporation ending with or within a

Special Rules

taxable year of the shareholder for

For rules relating to the invalidation,

which the election is effective. For more

Part I. Elections

termination, or revocation of a section

information on making a retroactive

1295 election, see Regulations section

election, see Regulations section

1295-1(i). Also see Regulations section

A. Election To Treat the PFIC

1.1295-3.

1.1295-1(c)(2) for rules relating to the

as a QEF (Section 1295

Retroactive election. A shareholder

years to which a section 1295 election

may make a QEF election for a taxable

Election)

applies.

year after the election due date (a

How To Make the Election

retroactive election), only if:

Who May Make the Election

•

The shareholder has preserved its

For the tax year in which the section

Generally, a U.S. person that owns

right to make a retroactive election

1295 election is made, the shareholder

stock in a PFIC, directly or indirectly,

under the protective statement regime

must do the following.

may make Election A to treat the PFIC

(described below) or

1. Check box A in Part I of Form

as a QEF.

•

The shareholder obtains the

8621.

Note. A separate election must be

permission of the IRS to make a

2. Complete the applicable lines of

made for each PFIC that the

retroactive election under the consent

Part II. Include the information provided

shareholder wants to treat as a QEF.

regime (described below).

in the PFIC Annual Information

Exception. A tax-exempt organization

Protective statement regime.

Statement, the Annual Intermediary

that is not taxable under section 1291

Under the protective statement regime,

Statement, or a combined statement

may not make the election. In addition,

a shareholder may preserve the ability

(see below) received from the PFIC.

a tax-exempt organization that is a

to make a retroactive election if the

3. Attach Form 8621 to a timely filed

member of a domestic pass-through

shareholder:

tax return (or, if applicable, partnership

entity is not subject to a QEF election

return).

1. Reasonably believed, as of the

made by the pass-through entity.

due date for making the QEF election,

Chain of ownership. In a chain of

For each subsequent tax year in

that the foreign corporation was not a

ownership, only the first U.S. person

which the election applies and the

PFIC for its taxable year that ended

that is a direct or indirect shareholder of

corporation is treated as a QEF, the

during that year (retroactive election

the PFIC may make the election.

shareholder must:

year);

Pass-through entities. A QEF

2. Filed a Protective Statement (see

1. Complete the applicable lines of

election made by a domestic

below) with respect to the foreign

Part II and

partnership, S corporation, or estate is

corporation, applicable to the

2. Attach Form 8621 to a timely filed

made in the pass-through entity’s

retroactive election year, in which the

tax return.

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Instructions For Form 8621 December 2011 Page 3

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