Passive Foreign Investment Company (PFIC) Analyzer

Understanding PFICs and Elections

A Passive Foreign Investment Company (PFIC) is a foreign corporation that meets certain tests related to passive income or passive assets. U.S. persons who own stock in a PFIC are subject to special, often unfavorable, tax rules unless they make one of several available elections.

This tool helps illustrate the *tax treatment* of your PFIC investment under the three primary U.S. tax regimes, *assuming* you already know you own a PFIC. You must determine if the foreign company is indeed a PFIC and if a particular election (QEF or Mark-to-Market) is available or appropriate for your situation.

The three main tax treatments/elections are:

Default/Excess Distribution (Section 1291): The standard, often punitive, regime. Gains and certain distributions are treated as ordinary income allocated over your holding period and subject to an interest charge.
Qualified Electing Fund (QEF) (Section 1295): Requires the PFIC to provide necessary information. You include your share of the PFIC's ordinary earnings and net capital gains in your gross income annually.
Mark-to-Market (MTM) (Section 1296): Available only for "marketable stock". You treat the stock as if sold at fair market value at year-end, recognizing ordinary gain or loss.

Disclaimer: This tool is for informational purposes only and does not provide tax advice. PFIC rules are highly complex. Consult with a qualified tax professional regarding your specific circumstances, determining PFIC status, election eligibility, and calculating actual tax liabilities and interest charges.

Excess Distribution (Section 1291) Analysis

Use this tab to analyze the tax treatment under the default PFIC rules (Section 1291).

Total Distributions Received This Year ($):

Average Annual Distributions in 3 Prior Years ($):

Enter the average of distributions received in the prior 3 years (or your holding period if shorter). Enter 0 if no prior distributions or holding period is less than 3 years.

Was the PFIC stock sold this year?

Yes No

Sale Proceeds ($): Basis in Stock at Time of Sale ($):

QEF Election (Section 1295) Analysis

Use this tab if you have a valid QEF election in place for the PFIC for all years of your holding period (or since the QEF election was made) and received a PFIC Annual Information Statement.

Share of PFIC Ordinary Earnings ($):

Enter the amount from your PFIC Annual Information Statement (Form 8621, Part I).

Share of PFIC Net Capital Gains ($):

Enter the amount from your PFIC Annual Information Statement (Form 8621, Part I). These are generally treated as long-term capital gains.

Total Distributions Received This Year ($):

Distributions are generally treated as previously taxed income if received in a year after the QEF election was made and the amounts were previously included in income. They typically reduce your basis.

Was the PFIC stock sold this year?

Yes No

Sale Proceeds ($): Adjusted Basis in Stock at Time of Sale ($):

Under QEF, your basis is adjusted annually by amounts included/excluded from income and distributions received. Use your calculated adjusted basis.

Mark-to-Market Election (Section 1296) Analysis

Use this tab if you have a valid Mark-to-Market election in place for marketable PFIC stock.

Fair Market Value at Beginning of Year ($):

Fair Market Value at End of Year ($):

Total Distributions Received This Year ($):

Generally treated as ordinary income under MTM.

Was the PFIC stock sold this year?

Yes No

Sale Proceeds ($): Adjusted Basis in Stock at Time of Sale ($):

Under Mark-to-Market, your basis is adjusted annually. Use your calculated adjusted basis.