Instructions For Form 8621 December 2011 (Page 9 of 10) in pdf

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The mark-to-market election

the general rules of the foreign tax

Part V. Status of Prior

(Election F) is made or was made in a

credit.

prior year (see section

Year Section 1294

1291(a)(3)(A)(ii)).

The excess distribution taxes

•

The deemed dividend election with

Elections and

allocated to a PFIC year only reduce

respect to a Section 1297(e) PFIC

the increase in tax figured for that tax

Termination of Section

(Election G) or with respect to a Former

year (but not below zero). No carryover

PFIC (Election H) is made. See the

1294 Elections

of any unused excess distribution taxes

instructions for Election G and Election

is allowed.

H on page 6.

Each person who has made a section

Determine the amount allocable to

1294 election must (1) annually report

When you dispose of PFIC stock,

each tax year in your holding period by

the status of that election and (2) report

the above foreign tax credit rules apply

adding the amounts allocated to the

the termination of any section 1294

only to the part of the gain that, without

days in each such tax year. Add the

election that occurred during the tax

regard to section 1291, would be

amounts allocated to the pre-PFIC and

year. See Temporary Regulations

treated under section 1248 as a

current tax years. Enter the sum on line

section 1.1294-1T(h).

11b.

dividend.

Line 1. Enter the last day of each tax

This amount is treated as ordinary

year for which you made a section

Line 11e

income (e.g., individuals and

1294 election that is outstanding. Do

corporations should enter this amount

not include an election made in the

This amount is the aggregate increase

on the “other income” line of their tax

current tax year.

in tax and is included on your tax return

return).

Line 2. Enter the undistributed

as additional taxes.

earnings of the QEF for which the

Line 11c

payment of tax was extended by the

For individuals, enter this amount on

Determine the increase in tax for each

section 1294 election entered on line 1.

Form 1040 to the left of the line 44

tax year in your holding period (other

If the election was partially terminated

entry space. Enter “Sec. 1291” next to

than the current tax year and pre-PFIC

in a prior year, enter the remaining

the amount and include the amount as

years). An increase in tax is determined

undistributed earnings.

for each PFIC year by multiplying the

part of the total for line 44.

Line 3. Enter the tax for which

part of the excess distribution allocated

payment was extended by the section

to each year (as determined on line

For corporations, enter this amount

1294 election entered on line 1. If the

11a) by the highest rate of tax under

on Form 1120, Schedule J, to the left of

election was partially terminated in a

section 1 or section 11, whichever

the entry space for line 2. Enter “Sec.

previous tax year, enter the balance of

applies, in effect for that tax year. Add

the deferred tax.

1291” next to the amount and include it

the increases in tax computed for all

as part of the total for line 2. Other

Line 4. Enter the accrued interest

years. Enter the aggregate increases in

entities should use the comparable line

(determined under section 6621) on the

tax (before credits) on line 11c.

deferred tax. This is the interest

on their income tax return.

Line 11d

accrued from the due date (not

including extensions) of the return for

To figure the foreign tax credit, the

Line 11f

the year for which the section 1294

shareholder of a section 1291 fund

Interest is charged on each net

election was made until the date the

figures the total creditable foreign taxes

increase in tax for the period beginning

current year’s return is filed.

attributable to the distribution. This

on the due date (without regard to

Line 5. Enter the event(s) that

amount includes the direct foreign taxes

extensions) of your income tax return

occurred during the tax year that

paid by the shareholder on the

for the tax year to which an increase in

terminated one or more of the section

distribution (for example, withholding

1294 elections reported on line 1. A

taxes) and, for 10% or greater

tax is attributable and ending with the

section 1294 election may be

corporate shareholders, any taxes

due date (without regard to extensions)

terminated voluntarily. However, an

deemed paid under section 902. Both

of your income tax return for the tax

election will terminate automatically, in

the direct and indirect foreign taxes

year of the excess distribution.

whole or in part, when any of the

must be creditable under general

following events occur:

foreign tax credit principles and the

For individuals, enter the interest at

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An actual or deemed distribution of

shareholder must choose to claim the

the bottom right margin of Form 1040,

earnings to which the election is

foreign tax credit for the current tax

page 1 and label it as “Sec. 1291

attributable (a loan, pledge, or

year.

interest.” Include this amount in your

guarantee by the QEF to or for the

The excess distribution taxes (the

check or money order payable to the

benefit of the taxpayer may cause a

creditable foreign taxes attributable to

deemed distribution of the earnings);

United States Treasury. If you would

an excess distribution) are determined

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A disposition of stock in the QEF,

otherwise receive a refund, reduce the

by apportioning the total creditable

including a pledge by the taxpayer of

refund by the interest due.

foreign taxes between the part of the

stock as security for a loan; or

distribution that is an excess distribution

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A change of status of the QEF (that

For corporations, enter this interest

and the part that is not.

is, a foreign corporation that is no

at the bottom right margin of Form

longer a QEF or PFIC).

The excess distribution taxes are

1120, page 1, and label it as “Sec.

allocated in the same manner as the

Line 6. Enter the earnings distributed

1291 interest.” Include this amount in

excess distribution is allocated. See

or deemed distributed as a result of the

your check or money order payable to

Excess distributions on page 2. Those

events described on line 5. Earnings

the United States Treasury. If you

taxes allocated to pre-PFIC tax years

are treated as distributed out of the

would otherwise receive a refund,

and the current tax year are taken into

most recently accumulated earnings

reduce the refund by the interest due.

account for the current tax year under

and profits. Accordingly, an event will

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Instructions For Form 8621 December 2011 Page 9

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