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Topic: PFIC form 8621 and MTM elections from year to year  (Read 224 times)

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PFIC form 8621 and MTM elections from year to year
« on: April 29, 2018, 04:02:21 PM »
Hi All,

It must be tax time!

I need some help on a form 8621 I'm filing for my children (grandparent put money into a UK ISA but the fund is a PFIC for U.S. purposes).

Anyway, my question is around the fact that a portion of a share in the fund was sold automatically to pay management fees. My question is, how does this affect my cost basis going forward or does it? I was thinking I would have to calculate average share values and all that, but is it just the dollar value of all the shares on Dec 31 that the IRS cares about, regardless of the fact that this tax year I might have fewer shares than I did in a previous tax year?

It seems to me that I would fill out my 8621 like this (example numbers to keep simple):

10a. $110 (total value, based on holding 9.5 shares @ $12.22 on Dec 31, 2017)
10b. $100 (total value, based on holding 10 shares @ $10.00 on Dec 31, 2016)
10c. MTM Gain of $10, entered as ordinary income. My cost basis for 2018 would be $110.

13a. $6.11 (this is the value of .5 of a share, sold on Dec 31, 2017 to pay for management fees).
13b. $5.00 (this is the value of .5 of a share, based on the price at last MTM filing, on Dec 31, 2016)
13c. Gain of $1.11, entered as ordinary income (although this was paid as management fee, I'm fine just whacking this as ordinary income as I'm nowhere near the threshold where tax would be required to be paid).

I guess ultimately, my question is how does the IRS look at MTM PFIC elections? All the advice I see about cost basis and things is, obviously, geared towards U.S. mutual funds and stocks, which aren't MTM so things like average price or FIFO would apply. On a PFIC with an MTM election, everything is sold every year and tax paid on gains at ordinary income tax rates, so the value of an individual share within the total value doesn't matter (unless there is an actual disposition). Is that correct?

Any help, much appreciated.

EDIT: I should say, that all shares in the fund were bought at the same time, at the same price. As far as I can tell, no new shares have been added automatically, although I suppose that might happen in the future.

« Last Edit: April 29, 2018, 04:24:12 PM by sjb2016 »

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Re: PFIC form 8621 and MTM elections from year to year
« Reply #1 on: November 15, 2018, 01:05:10 PM »
Hi there, could you share what you did in the end, please?


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