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Re:PFIC question (1 viewing) (1) Guest
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TOPIC: Re:PFIC question
#7007
J. forge (User)
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PFIC question 7 Years, 5 Months ago Karma: 0  
Can someone please explain what PFIC is in simple tax terms and what mark to market is and how PFIC and mark to market go together?
 
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tbm1231 (User)
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Re:PFIC question 7 Years, 4 Months ago Karma: 0  
ok, here is as simple as i can make it:

Lets say you invested in a foreign mutual fund and that mutual fund earned income, but because it was situs in a tax exempt country, there was never any tax imposed on the net income and the mutual fund didnt show any income. So, Uncle Sam has a rule that says that you need to pay tax on the gains from the passive foreign investments company income. And if its too hard to calculate the gain do to unknown cost basis, then we can simply you the mark to market election ("MTM". This MTM election simple takes to value at 12/31 and subtracts it from the value at 1/1 of the same year. The difference is gain/loss.

This is a very easy way of calculating gain, but you must make an effective election on the form and attach it to your tax return.

Hope that was simple enough?
 
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#7026
J. forge (User)
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Re:PFIC question 7 Years, 4 Months ago Karma: 0  
That was really helpful, thanks for the clarification. I think i get it. Question: hoe to i make the election to mark to market on the return? Where is this done?
 
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#7035
steve (Admin)
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Re:PFIC question 7 Years, 4 Months ago Karma: 3  
I thought it would be relevant to add that you must make the MTM election on the original return. The exception is for amended returns filed under the IRS voluntary disclosure program (VDP) for reporting offshore accounts. For people participating in the VDP, you can elect the MTM election on the amended returns.
 
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#7054
J. forge (User)
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Re:PFIC question 7 Years, 4 Months ago Karma: 0  
Thanks Steve. One more question. If there are consecutive MTM losses, do to losses get carried forward only, or can you carry them back to prior years where there was MTM income?
 
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