Instructions For Form 8621 December 2011 (Page 7 of 10) in pdf

including in the statement mentioned

your pro rata share. See Annual

otherwise disposed of before the end of

above the following information:

Election Requirements of the PFIC or

the QEF’s tax year.

Intermediary on page 4.

•

Line 4b. Calculate your total tax as if

The termination date, as defined in

your total taxable income did not

Regulations section 1.1298-3(d), for the

Lines 1b and 2b. Your share of the

include your share of the undistributed

former PFIC.

ordinary earnings and net capital gain

•

earnings of the QEF (line 3e). Enter this

The beginning and ending dates of

of the QEF is reduced by the amounts

amount on line 4b.

the taxable year of the shareholder in

you include in income under section

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

951 for the tax year with respect to the

Line 4c. For corporations, enter this

election year).

QEF. Your share of these amounts may

tax on Form 1120, Schedule J, in

•

The shareholder’s pro rata share of

also be reduced as provided in section

brackets to the left of the entry space

the post-1986 earning and profits of the

1293(g).

for line 10. Subtract that amount from

former PFIC that is treated as

the total of lines 7 through 9 and enter

Line 1c. This amount is treated as

distributed to the shareholder on the

the difference on line 10.

ordinary income on your tax return.

termination date, including a schedule

For individuals, enter this tax on

For a noncorporate taxpayer, include

that shows the calculation of this

Form 1040 in brackets to the left of the

this amount as “other income” on line

amount as required under Regulations

entry space for line 63. Subtract that

21 of Form 1040, or on the comparable

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

amount from the total of lines 57

line of other noncorporate tax returns.

the shareholder filed a Form 5471 for

through 62, and enter the difference on

For a corporate taxpayer, include this

the former PFIC for the election year,

line 63.

amount as “other income” on line 10 of

attach Schedule J (Form 5471).

•

Form 1120, or on the comparable line

The name, address, and identifying

of other corporate tax returns.

number of the U.S. person and the

Part III. Gain or (Loss)

amount that was included in income.

Line 2c. See the instructions for the

•

From Mark-to-Market

The tax year in which the amount

Schedule D used for your tax return.

was previously included in income.

Portions of the net capital gain may

Election

•

The provision of law under which the

have to be reported on different lines of

amount was previously included in

Schedule D, depending upon the

A shareholder that has made a

income.

information provided by the QEF

mark-to-market election with respect to

•

A description of the transaction in

concerning the section 1(h) categories

PFIC stock completes lines 5a through

which the shareholder acquired the

of net capital gains and amounts

7 with respect to PFIC stock that the

stock of the former PFIC from the other

thereof, derived by the QEF. See

shareholder holds at the close of its

U.S. person.

Regulations section 1.1293-1(a)(2) for 3

taxable year, and lines 8a through 9c

•

The provision of law under which the

options a QEF may use to report and

with respect to PFIC stock that it sold or

shareholder’s holding period includes

calculate capital gain.

disposed of during its taxable year.

the holding period of the other U.S.

Lines 5a Through 7

Line 3

person.

If you receive a distribution from the

If the fair market value of the PFIC

For more information on making

stock as of the close of the tax year is

election H, see Regulations section

QEF during the current tax year, the

more than the U.S. person’s adjusted

distribution is first treated as a

1.1298-3(c).

basis in the stock, the excess is treated

distribution out of the earnings and

profits of the QEF accumulated during

as ordinary income.

Part II. Income From a

the year. If the total amount distributed

If the adjusted basis of the stock is

(line 3b) exceeds the amount included

more than the fair market value as of

QEF

in income (line 3a), the excess is

the close of the taxable year, the

treated as distributed out of the most

For any tax year in which the foreign

excess is allowed as a deduction, but

recently accumulated earnings and

corporation is not treated as a QEF

only to the extent of the lesser of:

profits and is taxable to you unless you

because it is not a PFIC under section

1. The amount of the excess (line

satisfactorily demonstrate that the

1297(a), the shareholder is not required

5c) or

excess was previously included in the

to complete Part II. However, the

2. The unreversed inclusions

income of another U.S. person. To

section 1295 election is not terminated.

(defined below) with respect to such

satisfactorily demonstrate this, the QEF

If the foreign corporation is treated as a

stock (line 6).

shareholder must attach a statement to

PFIC in any subsequent tax year, the

Form 8621 that includes the information

original election continues to apply and

This amount is treated as an

listed under Attachments for Election C

the shareholder must include in Part II

ordinary loss, and as a deduction

on page 5.

its pro rata share of ordinary earnings

allowable in computing adjusted gross

and net capital gain and also must

income.

Line 4

comply with the section 1295 annual

Unreversed inclusions. Unreversed

reporting requirements.

Line 4a. Enter the total tax on your

inclusions are the excess of the

total taxable income (including your

All QEF shareholders complete lines

amounts that were included in income

share of undistributed earnings of the

1a through 2c. If you are making

under the mark-to-market rules for prior

QEF) for the tax year (e.g., from Form

Election D, also complete lines 3a

tax years over the amounts allowed as

1120, Schedule J, line 10, or Form

through 4c.

a deduction under the mark-to-market

1040, line 63).

rules for prior tax years. See section

Lines 1 and 2

1296(d) and Regulations section

For this purpose, “undistributed

1.1296-1(a)(3).

Lines 1a and 2a. Enter on lines 1a

earnings” is the excess, if any, of the

Lines 5c and 7. Corporations and

and 2a, respectively, your pro rata

amount included in gross income under

share of the ordinary earnings and net

section 1293(a) over the sum of the

individuals should include the gain or

capital gain of the QEF. The PFIC

amount of any distribution and the

(loss) on the “other income” line of their

should provide these amounts or

portion of the amount attributable to

tax returns. Other entities should

information that will help you determine

stock in the QEF that you transferred or

include this amount on the comparable

-7-

Instructions For Form 8621 December 2011 Page 7

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