Instructions For Form 8621 December 2011 (Page 6 of 10) in pdf

Coordination of other

Also attach to Form 8621 the

provided that the foreign corporation

mark-to-market rules under chapter

information specified below.

was a CFC during its last taxable year

1 of the Code with section 1291.

as a PFIC.

Attachments

See Regulations section 1.1291-1(c)(4).

Special Rules

The shareholder must attach a

statement to Form 8621 that shows the

A shareholder making this election is

G. Deemed Dividend Election

calculation of its pro rata share of the

treated as receiving a dividend of its

With Respect To a “Section

post-1986 earnings and profits of the

pro rata share of the post-1986

section 1297(e) PFIC (as defined in

earnings and profits (defined below) of

1297(e) PFIC”

Regulations section 1.1291-9(j)(2)(v))

the former PFIC on the termination date

that is treated as distributed to the

(defined below). The deemed dividend

Who May Make the Election

shareholder on the CFC qualification

is taxed under section 1291 as an

This is a deemed dividend election

date. The post-1986 earnings and

excess distribution, allocated only to the

under section 1298(b)(1) and

profits may be reduced (but not below

days in the shareholder’s holding period

Regulations section 1.1297-3(c). This

zero) by the amount that the

during which the foreign corporation

election may be made by a shareholder

shareholder satisfactorily shows was

qualified as a PFIC. For this purpose,

that is a U.S. shareholder (as defined in

previously included in its income or in

the shareholder’s holding period ends

section 951(b)) of a foreign corporation

the income of another U.S. person. The

on the termination date. After the

that is a CFC and that is not treated as

shareholder shows this by including in

deemed dividend election, the

a PFIC with respect to the U.S.

the statement mentioned above the

shareholder’s stock is not treated as

shareholder under section 1297(d).

following information:

stock in a PFIC.

Special Rules

•

The CFC qualification date, as

For purposes of this election, the

defined in Regulations section

following rules apply:

A shareholder making this election is

•

1.1297-3(d), for the Section 1297(e)

The basis of the shareholder’s stock

treated as receiving a dividend of its

PFIC.

is increased by the amount of the

pro rata share of the post-1986

•

The beginning and ending dates of

earnings and profits (defined below) of

deemed dividend. The manner in which

the taxable year of the shareholder in

the Section 1297(e) PFIC on the CFC

the basis adjustment is made depends

which the CFC qualification date falls

qualification date (defined below). The

on whether the shareholder is a direct

(i.e., the election year).

deemed dividend is taxed under section

or indirect shareholder (as defined

•

The shareholder’s pro rata share of

1291 as an excess distribution,

below). See Regulations section

the post-1986 earning and profits of the

1.1298-3(c)(6).

allocated only to the days in the

•

Section 1297(e) PFIC that is treated as

For purposes of the PFIC rules only,

shareholder’s holding period during

distributed to the shareholder on the

which the foreign corporation qualified

the shareholder’s new holding period

CFC qualification date, including a

as a PFIC. For this purpose, the

begins on the day following the

schedule that shows the calculation of

shareholder’s holding period ends on

termination date.

this amount as required under

the day before the CFC qualification

When To Make the Election

Regulations section 1.1297-3(c)(5)(ii).

date. After the deemed dividend

In addition, if the shareholder filed a

This election must be made by the due

election, the shareholder’s stock is not

Form 5471 for the Section 1297(e)

date of the shareholder’s original tax

treated as stock in a PFIC.

PFIC for the election year, attach

return (or by filing an amended return

For purposes of this election, the

Schedule J (Form 5471).

within 3 years of the due date, as

following rules apply:

•

The name, address, and identifying

extended under section 6081, of the

•

The basis of the shareholder’s stock

number of the U.S. person and the

original return) for the tax year that

is increased by the amount of the

amount that was included in income.

includes the first day on which the

deemed dividend. The manner in which

•

The tax year in which the amount

qualified portion of the shareholder’s

the basis adjustment is made depends

was previously included in income.

holding period in the PFIC begins, as

on whether the shareholder is a direct

•

A description of the transaction in

determined under section 1297(d).

or indirect shareholder (as defined

which the shareholder acquired the

However see Form 8621-A (and

below). See Regulations section

stock of the Section 1297(e) PFIC from

Regulations section 1.1298-3(e)) if the

1.1297-3(c)(6).

the other U.S. person.

3-year period has expired.

•

For purposes of the PFIC rules only,

•

The provision of law under which the

the shareholder’s new holding period

How To Make the Election

shareholder’s holding period includes

begins on the CFC qualification date.

the holding period of the other U.S.

To make this election, check box H in

When To Make the Election

person.

Part I and complete Part IV, line 11.

Also attach to Form 8621 the

This election must be made by the due

For more information on making

information specified below.

date of the shareholder’s original tax

election G, see Regulations section

return (or by filing an amended return

1.1297-3(c).

Attachments

within 3 years of the due date, as

H. Deemed Dividend Election

The shareholder must attach a

extended under section 6081, of the

statement to Form 8621 that shows the

original return) for the tax year that

With Respect To a Former

calculation of its pro rata share of the

includes the first day on which the

PFIC

post-1986 earnings and profits of the

qualified portion of the shareholder’s

former PFIC that is treated as

holding period in the PFIC begins, as

Who May Make the Election

distributed to the shareholder on the

determined under section 1297(d).

This is a deemed dividend election

termination date. The post-1986

However see Form 8621-A (and

under section 1298(b)(1) and

earnings and profits may be reduced

Regulations section 1.1297-3(e)) if the

Regulations section 1.1298-3(c). This

(but not below zero) by the amount that

3-year period has expired.

election may be made by a shareholder

the shareholder satisfactorily shows

How To Make the Election

of a foreign corporation that no longer

was previously included in its income or

To make this election, check box G in

qualifies as a PFIC under either the

in the income of another U.S. person.

Part I and complete Part IV, line 11.

income or asset test of section 1297(a)

The shareholder shows this by

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Instructions For Form 8621 December 2011 Page 6

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