Specific Instructions

Address and Identifying Number

Address.   Include the suite, room, or other unit number after the street address. If the Post Office does not deliver mail to the street address and the shareholder has a P.O. box, enter the box number instead.

Identifying number.   Individuals should enter a social security number or a taxpayer identification number issued by the IRS. All other entities must enter an employer identification number.

Shareholder Contact Information.   If the person to contact with respect to Form 8621-A is the taxpayer, enter “Same” in the entry space for the name. If the person to contact with respect to Form 8621-A is a person other than the taxpayer, enter the information requested and attach Form 2848.

Part I. Elections

Election A. Late Deemed Dividend Election With Respect to a Former PFIC

This is a deemed dividend election under section 1298(b)(1) that is made with respect to a former PFIC after the time prescribed in Regulations section 1.1298-3(c)(4) has elapsed.

Who May Make the Election

This election may be made by a U.S. person that is a shareholder of a foreign corporation that is a former PFIC with respect to such shareholder provided the foreign corporation was a CFC during the last taxable year as a PFIC.

Effect of Election

A shareholder making this election is treated as receiving a dividend of its pro rata share of the post-1986 earnings and profits of the former PFIC on the termination date. The deemed dividend is taxed under section 1291 as an excess distribution, allocated only to the days in the shareholder's holding period during which the foreign corporation qualified as a PFIC. For this purpose, the shareholder's holding period ends on the termination date. After the deemed dividend election, the shareholder's stock is not treated as stock in a PFIC.

Special Rules

For purposes of this election, the following apply.

  • The basis of the shareholder's stock is increased by the amount of the deemed dividend. The manner in which the basis adjustment is made depends on whether the shareholder is a direct or indirect shareholder. See Regulations section 1.1298-3(c)(6).

  • For purposes of the PFIC rules only, the shareholder's new holding period begins on the day following the termination date.

  • The term “post-1986 earnings and profits” means the undistributed earnings and profits of the PFIC (as of the close of the taxable year that includes the termination date without reduction for dividends distributed during the taxable year) accumulated in tax years beginning after 1986 during which the CFC was a PFIC and while the shareholder held the stock.

Line 3 Attachment

The shareholder must attach a statement to Form 8621-A that shows the calculation of its pro rata share of the post-1986 earnings and profits of the former PFIC that is treated as distributed to the shareholder on the termination date. The post-1986 earnings and profits may be reduced (but not below zero) by the amount that the shareholder satisfactorily shows was previously included in its income or in the income of another U.S. person. The shareholder shows this by including in the statement mentioned above the following information:

  • The name, address, and identifying number of the U.S. person and the amount that was included in income;

  • The tax year in which the amount was previously included in income;

  • The provision of law under which the amount was previously included in income;

  • A description of the transaction in which the shareholder acquired the stock of the former PFIC from the other U.S. person; and

  • The provision of law under which the shareholder's holding period includes the holding period of the other U.S. person.

For more information on making Election A, see Regulations section 1.1298-3(c) and Regulations section 1.1298-3(e).

How To Make the Election

To make this election, check box A in Part I and complete Part II, lines 1, 2, and 3, and Part IV.

Election B. Late Deemed Sale Election With Respect to a Former PFIC

This is a deemed sale election under section 1298(b)(1) that is made with respect to a former PFIC after the time prescribed in Regulations section 1.1298-3(b)(3) has elapsed.

Who May Make the Election

This election may be made by a U.S. person that is a shareholder of a former PFIC.

Effect of Election

A shareholder making this election is deemed to have sold the former PFIC stock on the termination date for its fair market value. The gain from the deemed sale is taxed under section 1291 as an excess distribution received on the termination date. After the deemed sale election, the shareholder's stock is not treated as stock in a PFIC.

Special Rules

For purposes of this election, the following apply.

  • The basis of the shareholder's stock is increased by the gain recognized on the deemed sale. The manner in which the basis adjustment is made depends on whether the shareholder is a direct or indirect shareholder. See Regulations section 1.1298-3(b)(5).

  • For purposes of the PFIC rules only, the shareholder's new holding period of the stock begins on the day following the termination date.

  • The election may be made for stock on which the shareholder will realize a loss, but that loss cannot be recognized. In addition, there is no basis adjustment for a loss.

How to Make the Election

To make this election, check box B in Part I and complete Part II, lines 1, 2, and 4, and Part IV. For more information regarding making Election B, see Regulations section 1.1298-3(b) and Regulations section 1.1298-3(e).

Election C. Late Deemed Dividend Election With Respect To a Section 1297(e) PFIC

This is a deemed dividend election under section 1298(b)(1) that is made by a shareholder (defined earlier) with respect to a Section 1297(e) PFIC that is also a CFC after the time prescribed in Regulations section 1.1297-3(c)(4) has elapsed.

Who May Make the Election

The election may be made by a shareholder of a foreign corporation that is a Section 1297(e) PFIC with respect to that shareholder.

Effect of Election

A shareholder making this election is treated as receiving a dividend of its pro rata share of the post-1986 earnings and profits of the Section 1297(e) PFIC on the CFC qualification date. The deemed dividend is taxed under section 1291 as an excess distribution, allocated only to the days in the shareholder's holding period during which the foreign corporation qualified as a PFIC. For this purpose, the shareholder's holding period ends on the day before the CFC qualification date. After the deemed dividend election, the shareholder's stock is not treated as stock in a PFIC.

Special Rules

For the purpose of this election, the following apply:

  • The basis of the shareholder's stock is increased by the amount of the deemed dividend. The manner in which the basis adjustment is made depends on whether the shareholder is a direct or indirect shareholder. See Regulations section 1.1297-3(c)(6).

  • For purposes of the PFIC rules only, the shareholder's new holding period begins on the CFC qualification date.

  • The term “post-1986 earnings and profits” means the undistributed earnings and profits of the PFIC (as of the day before the CFC qualification date) accumulated in taxable years beginning after 1986 during which the CFC was a PFIC and while the shareholder held the stock.

Line 7 Attachment

The shareholder must attach a statement to Form 8621-A that shows the calculation of its pro rata share of the post-1986 earnings and profits of the Section 1297(e) PFIC that is treated as distributed to the shareholder on the CFC qualification date. The post-1986 earnings and profits may be reduced (but not below zero) by the amount that the shareholder satisfactorily shows was previously included in its income or in the income of another U.S. person. The shareholder shows this by including in the statement mentioned above the following information:

  • The name, address, and identifying number of the U.S. person and the amount that was included in income;

  • The tax year in which the amount was previously included in income;

  • A description of the transaction in which the shareholder acquired the stock of the Section 1297(e) PFIC from the other U.S. person; and

  • The provision of law under which the shareholder's holding period includes the holding period of the other U.S. person.

How to Make the Election

To make this election, check box C in Part I and complete Part III, lines 5, 6, and 7, and Part IV.

For more information on making Election C, see Regulations sections 1.1297-3(c) and (e).

Election D. Late Deemed Sale Election With Respect To a Section 1297(e) PFIC

This is a deemed sale election under section 1298(b)(1) that is made with respect to a Section 1297(e) PFIC after the time prescribed in Regulations section 1.1297-3(b)(3) has elapsed.

Who May Make the Election

This election may be made by a U.S. person that is a shareholder of a foreign corporation that is a section 1297(e) PFIC with respect to such shareholder.

Effect of Election

A shareholder making this election is deemed to have sold the Section 1297(e) PFIC stock on the CFC qualification date for its fair market value. The gain from the deemed sale is taxed under section 1291 as an excess distribution received on the CFC qualification date. After the deemed sale election, the shareholder's stock is not treated as stock in a PFIC.

Special Rules

For purposes of this election, the following apply.

  • The basis of the shareholder's stock is increased by the gain recognized on the deemed sale. The manner in which the basis adjustment is made depends on whether the shareholder is a direct or indirect shareholder. See Regulations section 1.1297-3(b)(5).

  • For purposes of the PFIC rules only, the shareholder's new holding period begins on the CFC qualification date.

  • The election may be made for stock on which the shareholder will realize a loss, but that loss cannot be recognized. In addition, there is no basis adjustment for a loss.

How To Make the Election

To make this election, check box D in Part I and complete Part III, lines 5, 6, and 8, and Part IV.

For more information on making Election D, see Regulations sections 1.1297-3(b) and (e).

Part IV. Computation of Tax and Interest Due

Line 9a

Enter the amount treated as an excess distribution under the deemed dividend or deemed sale election. This amount is:

  • In the case of a former PFIC making a deemed dividend election, the amount on line 3 of Part II.

  • In the case of a former PFIC making a deemed sale election, the amount on line 4 of Part II.

  • In the case of a Section 1297(e) PFIC making a deemed dividend, the amount on line 7 of Part III.

  • In the case of a Section 1297(e) PFIC making a deemed sale election, the amount on line 8 of Part III.

Lines 9b and 10

Determine the allocation of the excess distribution to all applicable taxable years on a separate sheet and attach it to Form 8621-A. Divide the amount on line 9a by the number of days in your holding period. The holding period of the stock is treated as ending on:

  • The termination date, in the case of a former PFIC making a deemed sale or deemed dividend election;

  • The CFC qualification date, in the case of a Section 1297(e) PFIC making a deemed sale election; and

  • The day before the CFC qualification date, in the case of a Section 1297(e) PFIC making a deemed dividend election.

Determine the amount allocable to each tax year in your holding period by adding the amounts allocated to the days in each such tax year. Then:

  • Add the amounts allocated to the tax years before the foreign corporation became a PFIC (pre-PFIC years) and amounts allocated to the election year. Enter the sum on line 10.

  • With respect to the amounts allocated to each tax year in your holding period other than the election year and the pre-PFIC years, see the instructions for line 14.

Lines 11 and 12

The shareholder's income tax liability is generally the amount shown on the “total tax” line of the return.

Line 14

Determine the increase in tax for each tax year in your holding period other than the election year and pre-PFIC years (i.e., for each PFIC year). An increase in tax is determined for each PFIC year by multiplying the part of the distribution or disposition allocated to each year (see Lines 9b and 10, earlier) by the highest rate of tax under section 1 or section 11, whichever applies, in effect for that tax year. Add the increases in tax computed for all PFIC years. Enter the aggregate increases in tax (before credits) on line 14.

Line 15

To figure the foreign tax credit, figure the total creditable foreign taxes attributable to the excess distribution (line 9a) amount. This amount includes, for 10% or greater corporate shareholders, any taxes deemed paid under section 902. Both the direct and indirect foreign taxes must be creditable under general foreign tax credit principles and the shareholder must choose to claim the foreign tax credit.

The excess distribution taxes (the creditable foreign taxes attributable to an excess distribution) are allocated in the same manner as the excess distribution is allocated. See the instructions for Lines 9b and 10 and Line 14, earlier. Those taxes allocated to pre-PFIC tax years and the election year are taken into account for the election year under the general rules of the foreign tax credit.

The excess distribution taxes allocated to a PFIC year only reduce the increase in tax figured for that tax year (but not below zero). No carryover of any unused excess distribution taxes is allowed.

When you dispose of PFIC stock, the above foreign tax credit rules apply only to the part of the gain that, without regard to section 1291, would be treated under section 1248 as a dividend.

Line 16

This amount is the aggregate increases in taxes on the excess distribution within the meaning of section 1291(c)(2).

Line 17

Compute the interest on each net increase in tax for the period beginning on the due date (without regard to extensions) of your income tax return for the tax year to which an increase in tax is attributable and ending with the due date (without regard to extensions) of your income tax return for the election year.

Lines 18 and 19

The line 18 subtotal represents all amounts due as of the due date (without regard to extensions) of the shareholder's income tax return for the election year. The shareholder making the late deemed dividend or late deemed sale election must pay additional interest on the amount on line 18 from the due date (without regard to extensions) of its income tax return for the election year up to and including the date the Form 8621-A and payment are filed with the IRS. Include this interest amount on line 19.

Closing Agreement

If the election year is a closed taxable year, file the closing agreement on page 3 of the form in duplicate. Both copies must contain original signatures. Photocopies of signatures are not acceptable. The closing agreement on page 3 of the actual form you file is the IRS copy. The photocopy of the closing agreement that you attach to the 4-page form is the taxpayer copy. Write “Taxpayer Copy” in the upper margin of this copy. File the taxpayer copy as the first attachment after the 4-page form. The taxpayer copy will be returned to you after an authorized IRS official has signed it.

Identifying number.   Individuals should enter a social security number or a taxpayer identification number issued by the IRS. All other entities must enter an employer identification number.

Balance Sheet

If the shareholder is making a late deemed sale election with respect to a former PFIC or a Section 1297(e) PFIC (Election B or D) the shareholder is required to complete the balance sheet on page 4 of Form 8621-A.

Note.

If the PFIC uses the U.S. dollar approximate separate transactions method of accounting (DASTM), the balance sheet should be prepared and translated into U.S. dollars according to Regulations section 1.985-3(d), rather than U.S. GAAP.

Line 11

You must attach to Form 8621-A a written narrative for each intangible asset describing how the asset valuation was determined. This narrative must include all pertinent valuation information including whether the valuation was done by a third party. If the valuation was done by a third party, include the name and business address of that third party in the narrative.


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