Form 8621 - Foreign PFIC, necessary?

Saurabh

Hi folks, I have a sanity check question, hoping someone can help confirm.

I'm a US Citizen, my wife is a nonresident alien and we're filing jointly as residents.

She has some foreign investment accounts and bank accounts. We didn't take any distributions or make any interest. I see that people with PFICs (Passive Foreign Investment Company) need to file form 8621.

Based on this quote:

Exception if aggregate value of shareholder’s PFIC stock is $25,000 or less.

 

A shareholder is not required to complete Part I with respect to a specific section 1291 fund if the shareholder meets the $25,000 exception on the last day of the shareholder’s tax year and the shareholder does not receive an excess distribution from, or recognize gain on the sale or disposition of the stock of, the section 1291 fund. For purposes of determining whether a shareholder satisfies the $25,000 threshold, the shareholder takes into account all PFIC stock (QEFs, section 1291 funds, and PFIC stock subject to a section 1296 mark-to-market election) owned directly or indirectly other than PFIC stock owned through another U.S. person or PFIC stock owned through another PFIC. Shareholders filing a joint return have a combined threshold of $50,000 instead of $25,000 for purposes of this exception.

I believe we do not need to file an 8621. We are well under the $25k mark, and we should have a $50k limit as a couple.

Here's the supporting regulation.

I see some murmurs online that being under the limit means you just have to file a single 8621 instead of an 8621 per account. Is this true? I don't see any text to suggest this. I'm wondering if those people are confusing the 8621 with the FBAR 114.

Thanks in advance,

Saurabh

kiarab

Hello Saurabh,

We do not support form 8621. It does appear that you can add it separately to your income tax return based on the instructions for form 8621 if needed. I am going to provide a bit of information, but you probably would want to contact someone who is experienced with this form.

The exception to filing you quoted refers to whether or not you need to file Part 1 of form 8621. You can review it as well on page 6 of the instructions.

The instructions say that the following person needs to file form 8621:

"Generally, a U.S. person that is a direct or indirect shareholder of a PFIC must file Form 8621 for each tax
year under the following five circumstances if the U.S. person:

1. Receives certain direct or indirect distributions from a PFIC,
2. Recognizes gain on a direct or indirect disposition of PFIC stock,
3. Is reporting information with respect to a Qualified Electing Fund (QEF) or section 1296 mark-to-market election,
4. Is making an election reportable in Part II of the form, or
5. Is required to file an annual report pursuant to section 1298(f). See the Part I instructions, later, for more
information regarding the person that must file pursuant to section 1298(f)."

If you meet those requirements, then you will need to file form 8621

https://www.irs.gov/instructions/i8621