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Department of the Treasury
Internal Revenue Service
Instructions for Form 8621

(Rev. December 2020)

(Use with the December 2018 revision of Form 8621.)
Information Return by a Shareholder of a Passive Foreign Investment Company or
Qualified Electing Fund

Section references are to the Internal Revenue (that is, Part I), as well as to report
Code unless otherwise noted. General Instructions information in Parts III through VI of the
form and to make elections in Part II of
Future Developments Who Must File the form. For example, a U.S. person
For the latest information about that has made a section 1296
developments relating to Form 8621, Qualifying Insurance mark-to-market election with respect to
and its instructions, such as legislation Corporation a PFIC will file a single Form 8621 and
enacted after they were published, go to A U.S. person that owns stock of a complete Part I and Part IV.
IRS.gov/Form8621. foreign corporation and elects to treat
Indirect shareholder. Generally, a
such stock as the stock of a qualifying
U.S. person is an indirect shareholder of
What’s New insurance corporation under the
a PFIC if it is:
With respect to the recently added alternative facts and circumstances test
checkbox for Qualifying Insurance within the meaning of section 1297(f)(2) • A 50%-or-more shareholder of a
foreign corporation that is not a PFIC
Corporations (see the Reminders must file a limited-information Form
and that directly or indirectly owns stock
section below for details), the 8621. For details, see Election To Be
of a PFIC,
attachment requirement has been Treated as a Qualifying Insurance
clarified in the instructions for that Corporation, later. • A shareholder of a PFIC where the
PFIC itself is a shareholder of another
election. See item number 3 under How Passive Foreign Investment PFIC,
to make the election under the • A 50%-or-more shareholder of a
instructions for Election To Be Treated Corporation (PFIC)
domestic corporation where the
as a Qualifying Insurance Corporation. Generally, a U.S. person that is a direct domestic corporation owns a section
or indirect shareholder of a PFIC must 1291 fund, or
With respect to certain amounts on file Form 8621 for each tax year under A direct or indirect owner of a
•
Form 8621 that are reported on income the following five circumstances if the pass-through entity where the
tax returns, some of the references to U.S. person: pass-through entity itself is a direct or
Form 1040 (on pages 10 through 13 of
these instructions) have been updated 1. Receives certain direct or indirect indirect shareholder of a PFIC.
to reflect further redesign of Form 1040 distributions from a PFIC, For more information on determining
for tax year 2020. 2. Recognizes gain on a direct or whether a U.S. person is an indirect
indirect disposition of PFIC stock, shareholder, see Regulations section
The line 16f instructions were 1.1291-1(b)(8).
modified to update the Revenue Ruling 3. Is reporting information with
for the rates for interest determined respect to a Qualified Electing Fund For purposes of these rules, a
under section 6621. (QEF) or section 1296 mark-to-market pass-through entity is a partnership, S
election, corporation, trust, or estate.
Reminders 4. Is making an election reportable However, a U.S. person that owns
in Part II of the form, or stock of a PFIC through a tax-exempt
Election to be treated as a Qualifying organization or account described in the
5. Is required to file an annual report
Insurance Corporation. A checkbox list below is not treated as a shareholder
pursuant to section 1298(f). See the
was added on page 1 of Form 8621 for of the PFIC.
Part I instructions, later, for more
shareholders of stock of a foreign An organization or an account that is
information regarding the person that •
corporation that elect to treat such stock exempt from tax under section 501(a)
must file pursuant to section 1298(f).
as the stock of a qualifying insurance because it is described in section
corporation under section 1297(f)(2), A separate Form 8621 must be filed 501(c), 501(d), or 401(a).
which was added by section 14501 of for each PFIC in which stock is held • A state college or university
the Tax Cuts and Jobs Act (TCJA). For directly or indirectly. In the case of a described in section 511(a)(2)(B).
more information, see Election To Be chain of ownership, under the five • A plan described in section 403(b) or
Treated as a Qualifying Insurance circumstances described above, unless 457(b).
Corporation, later. otherwise provided, if the shareholder • An individual retirement plan or
owns one PFIC and through that PFIC annuity as defined in section 7701(a)
owns one or more other PFICs, the (37).
shareholder must file a Form 8621 for • A qualified tuition program described
each PFIC in the chain. in section 529 or 530.
A single Form 8621 may be filed • A qualified ABLE program described
in section 529A.
with respect to a PFIC to report the
information required by section 1298(f)

Oct 21, 2020 Cat. No. 10784P

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Interest holder of pass-through enti- 1. The corporation is not publicly D) or deemed dividend election
ties. In general, the following interest traded for the tax year and (Election E) (if eligible). If the
holders must file Form 8621, unless an 2. The corporation (a) is a controlled shareholder properly makes a deemed
exception applies. foreign corporation within the meaning sale election or deemed dividend
1. A U.S. person that is an interest of section 957 (CFC), or (b) makes an election in connection with its QEF
holder of a foreign pass-through entity election to use adjusted basis. election, then the PFIC will become a
pedigreed QEF (as defined in
that is a direct or indirect shareholder of Publicly traded corporations must Regulations section 1.1291-9(j)(2)(ii))
a PFIC. use fair market value when determining with respect to the shareholder.
2. A U.S. person that is considered PFIC status using the asset test.
(under sections 671 through 679) the Note. A shareholder that receives a
Look-thru rule. When determining if a
shareholder of PFIC stock held in trust. distribution from an unpedigreed QEF
foreign corporation is a PFIC, the
(defined in Regulations section
3. A U.S. partnership, S corporation, foreign corporation is treated as if it
1.1291-9(j)(2)(iii)) is also subject to the
U.S. trust (other than a trust that is directly held its proportionate share of
rules applicable to a shareholder of a
subject to sections 671 through 679 for the assets and directly received its
section 1291 fund (see below).
the PFIC stock), or U.S. estate that is a proportionate share of the income of
direct or indirect shareholder of a PFIC. any corporation in which it owns at least Basis adjustments. A shareholder's
25% of the stock (by value). basis in the stock of a QEF, or in any
Note. U.S. persons that are interest property through which the shareholder
holders of pass-through entities CFC overlap rule. A 10% or more U.S.
is treated as owning stock of a QEF, is
described in 3 above must file Form shareholder (defined in section 951(b))
increased by the earnings included in
8621 if the pass-through entity fails to that includes in income its pro rata share
gross income and decreased by a
file such form or the U.S. person is of subpart F income for stock of a CFC
distribution from the QEF to the extent
required to recognize any income under that is also a PFIC generally will not be
of previously taxed amounts.
section 1291. subject to the PFIC provisions for the
same stock during the qualified portion Section 1291 Fund
When and Where To File of the shareholder's holding period of A PFIC is a section 1291 fund if:
Attach Form 8621 to the shareholder's the stock in the PFIC. This exception
tax return (or, if applicable, partnership does not apply to option holders. For 1. The shareholder did not elect to
or exempt organization return) and file more information, see section 1297(d). treat the PFIC as a QEF or make a
mark-to-market election with respect to
both by the due date, including Note. The attribution rules of section the PFIC, or
extensions, of the return at the Internal 1298(a)(2)(B) will continue to apply 2. The PFIC is an unpedigreed QEF
Revenue Service Center where the tax even if the foreign corporation is not (as defined in Regulations section
return is required to be filed. treated as a PFIC with respect to the 1.1291-9(j)(2)(iii)).
If you are not required to file an shareholder under section 1297(d).
income tax return or other return for the Tax Consequences for
Qualified Electing Fund (QEF)
tax year, file Form 8621 directly with the Shareholders of a Section 1291
Internal Revenue Service Center, Election
Ogden, UT 84201-0201. A PFIC is a QEF if a U.S. person who is Fund
a direct or indirect shareholder of the Shareholders of a section 1291 fund are
Definitions and Special PFIC elects (under section 1295(b)) to subject to special rules when they
treat the PFIC as a QEF and complies receive an excess distribution (defined
Rules with the requirements described in below) from, or recognize gain on the
Passive Foreign Investment section 1295(a)(2). See the instructions sale or disposition of the stock of, a
Company (PFIC) for Election A, later, for information on section 1291 fund. A distribution may be
making this election. partly or wholly an excess distribution.
A foreign corporation is a PFIC if it
The entire amount of gain from the
meets either the income or asset test
described next. Tax Consequences for disposition of a section 1291 fund is
1. Income test. 75% or more of the Shareholders of a QEF treated as an excess distribution.
corporation's gross income for its tax • A shareholder of a QEF must Excess distributions. An excess
year is passive income (as defined in annually include in gross income as distribution is the part of the distribution
section 1297(b)). ordinary income its pro rata share of the received from a section 1291 fund in the
2. Asset test. At least 50% of the ordinary earnings of the QEF and as current tax year that is greater than
average percentage of assets long-term capital gain its pro rata share 125% of the average distributions
(determined under section 1297(e)) of the net capital gain of the QEF. received in respect of such stock by the
held by the foreign corporation during • The shareholder may elect to extend shareholder during the 3 preceding tax
the tax year are assets that produce the time for payment of tax on its share years (or, if shorter, the portion of the
passive income or that are held for the of the undistributed earnings of the QEF shareholder's holding period before the
production of passive income. (Election B) until the QEF election is current tax year). No part of a
terminated. distribution received or deemed
Basis for measuring assets. When • If the QEF election is not made with received during the first tax year of the
determining PFIC status using the asset respect to the first year of the shareholder's holding period of the
test, a foreign corporation may use shareholder’s holding period in the stock will be treated as an excess
adjusted basis if: PFIC, the shareholder may be able to distribution.
make a deemed sale election (Election

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The excess distribution is determined • Stock in certain PFICs described in
on a per share basis and is allocated to Regulations section 1.1296-2(d). Specific Instructions
each day in the shareholder's holding
period of the stock. See section 1291(b) For additional information, including Important: All line references to Form
(3) for adjustments that are made when special rules for regulated investment 1120 and Form 1040 are to the 2020
determining if a distribution is an excess companies (RICs) that own PFIC stock, forms. Other entities should use the
distribution. see Regulations section 1.1296-1 and comparable line on their tax return.
1.1296-2.
Portions of an excess distribution are
treated differently. The portions Excepted Specified
Tax Consequences
allocated to the days in the current tax Foreign Financial Assets
year and the shareholder's tax years in After a PFIC shareholder elects to mark Reported
its holding period before the foreign the stock to market under section 1296,
Check this box only if the Form 8621
corporation qualified as a PFIC the shareholder either:
filer also files Form 8938, Statement of
(pre-PFIC years) are taxed as ordinary 1. Includes in income each year an Specified Foreign Financial Assets, for
income. The portions allocated to the amount equal to the excess, if any, of the tax year and includes this form in the
days in the shareholder's tax years the fair market value of the PFIC stock total number of Forms 8621 reported on
(other than the current tax year) in its as of the close of the tax year over the line 4 of Part IV, Excepted Specified
holding period when the foreign shareholder's adjusted basis in such Foreign Financial Assets, of Form 8938.
corporation was a PFIC are not included stock; or For more information, see the
in income, but are subject to the 2. Is allowed a deduction equal to Instructions for Form 8938, generally,
separate tax and interest charge set the lesser of: and in particular, Duplicative Reporting
forth in section 1291(c). and the specific instructions for Part IV,
a. The excess, if any, of the
See the instructions for Part V, later. adjusted basis of the PFIC stock over its Excepted Specified Foreign Financial
Exempt organizations. If a fair market value as of the close of the Assets.
shareholder of a PFIC is a tax-exempt tax year; or
Election To Be Treated as
organization, the rules of section 1291 b. The excess, if any, of the amount
will apply only if a dividend from the of mark-to-market gain included in the a Qualifying Insurance
PFIC would be taxable to the gross income of the PFIC shareholder Corporation
shareholder under subchapter F. for prior tax years over the amount
Coordination of mark-to-market re- allowed such PFIC shareholder as a Who may make the election. A U.S.
gimes with section 1291. deduction for a loss with respect to such person that is a shareholder of a
Shareholders of a PFIC that is marked stock for prior tax years. corporation that fails to qualify as a
qualifying insurance corporation (QIC)
to market under section 1296 or any (as defined in section 1297(f)(1)) solely
other Code provision may be subject to See the instructions for Part II,
section 1291 in the first tax year in Election C, and Part IV, later, for more because its applicable insurance
which the shareholder marks to market information, including special rules that liabilities make up 25% or less of its total
the PFIC stock. See Regulations may apply in the year that a mark-to- assets may elect to treat the stock as
sections 1.1291-1(c)(4) and 1.1296-1(i). market election is made. stock of a qualifying insurance
corporation if:
Basis adjustment. If the stock is held
Mark-to-Market Election 1. The corporation’s applicable
directly, the shareholder's adjusted
A U.S. shareholder of a PFIC may elect basis in the PFIC stock is increased by insurance liabilities make up at least
to mark to market the PFIC stock under the amount included in income and 10% of its total assets; and
section 1296 if the stock is “marketable decreased by any deductions allowed. If 2. Based on the applicable facts
stock.” See the instructions for Election the stock is owned indirectly through and circumstances, the corporation is
C, later, for information on making this foreign entities, see Regulations section predominantly engaged in an insurance
election. 1.1296-1(d)(2). business, and its failure to satisfy the
Marketable stock. Marketable stock 25% threshold is due solely to
is: Additional Information runoff-related or rating-related
circumstances involving such insurance
• PFIC stock that is regularly traded (as Required business.
defined in Regulations section
1.1296-2(b)) on: Reportable transaction disclosure
statement. A 10% shareholder (by When to make the election.
1. A national securities exchange vote or value) of a QEF may also be Generally, the shareholder must make
that is registered with the Securities and required to file Form 8886 if the QEF is this election by the due date, including
Exchange Commission (SEC), considered to have participated in a extensions, of the shareholder’s tax
2. The national market system reportable transaction pursuant to return for the tax year for which the
established under section 11A of the Regulations section 1.6011-4(c)(3)(i) taxpayer is relying on the alternative
Securities Exchange Act of 1934, or (G). See Form 8886, Reportable facts and circumstances test to meet
3. A foreign securities exchange Transaction Disclosure Statement, and the definition of a qualifying insurance
that is regulated or supervised by a Regulations section 1.6011-4 for corporation.
governmental authority of the country in additional information. How to make the election. Follow
which the market is located and has the these steps to make the election.
characteristics described in Regulations 1. Check the box on page 1 of Form
section 1.1296-2(c)(1)(ii). 8621.

Instructions for Form 8621 (Rev. 12-2020) -3-

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2. Provide the identifying Reference ID number. A reference ID reference ID number with the new
information for the shareholder and the number is required in the applicable reference ID number assigned to the
foreign corporation (Name, Address, entry space above Part I of the form only PFIC, QEF, or QIC.
Identifying Number (if any)) only. You do in cases where no EIN was entered for • In the case of an entity classification
not have to complete any other part of the PFIC, QEF, or QIC. However, filers election that is made on behalf of a
the Form 8621 if you are only filing the are permitted to enter both an EIN and a PFIC, QEF, or QIC on Form 8832,
form to make this election. reference ID number. If applicable, enter Regulations section 301.6109-1(b)(2)(v)
3. The U.S. person is required to the reference ID number (defined requires the PFIC, QEF, or QIC to have
attach either: below) you have assigned to the PFIC, an EIN for this election. For the first year
• A statement provided by the foreign QEF, or QIC. that Form 8621 is filed after an entity
classification election is made on behalf
corporation (and signed by a A “reference ID number” is a number of the PFIC, QEF, or QIC on Form 8832,
responsible officer of the foreign established by or on behalf of the U.S. the new EIN must be entered in the
corporation or an authorized person identified at the top of page 1 of applicable entry space above Part I of
representative of the foreign the form that is assigned to a PFIC, Form 8621 and the old reference ID
corporation) that the foreign corporation QEF, or QIC with respect to which Form number must be entered in the
satisfied the requirements of section 8621 reporting is required. These applicable entry space just below. In
1297(f)(2) during the foreign numbers are used to uniquely identify subsequent years, the Form 8621 filer
corporation's tax year. Specifically, if the the PFIC, QEF, or QIC in order to keep may continue to enter both the EIN and
foreign corporation failed to qualify as a track of the entity from tax year to tax the reference ID number, but must enter
QIC under section 1297(f)(1) solely year. The reference ID number must at least the EIN.
because the ratio of applicable meet the requirements set forth below.
insurance liabilities to total assets for You must correlate the reference ID
the tax year is 25% or less, the Note. Because reference ID numbers numbers as follows: New reference ID
statement must (1) indicate that the ratio are established by or on the behalf of a number [space] Old reference ID
was at least 10%, along with a U.S. person filing Form 8621, there is no number. If there is more than one old
calculation of the ratio (with the resultant need to apply to the IRS to request a reference ID number, you must enter a
ratio double underlined); (2) include a reference ID number or for permission space between each such number. As
statement indicating whether the failure to use these numbers. indicated above, the length of a given
to satisfy the 25% test was the result of reference ID number is limited to 50
runoff-related or rating-related Note. In general, the reference ID characters and each number must be
circumstances, along with a brief number assigned to a PFIC, QEF, or alphanumeric and no special characters
description of those circumstances; and QIC on Form 8621 has relevance only are permitted.
(3) include information that establishes to Form 8621 and should not be used
that the foreign corporation has met the with respect to the PFIC, QEF, or QIC Note. This correlation requirement
“predominately engaged in an insurance on other IRS forms. applies only to the first year the new
reference ID number is used.
business” requirement described in Requirements. The reference ID
Proposed Regulations section number must be alphanumeric (defined
1.1297-4(d)(2). below) and no special characters or Part I. Summary of Annual
• A publicly available statement (such spaces are permitted. The length of a
Information
as in a public filing, disclosure given reference ID number is limited to
statement, or other notice provided to 50 characters. Who Must Complete Part I
U.S. persons that are shareholders of
the foreign corporation) that it satisfied For these purposes, the term In general, all shareholders required to
the requirements of section 1297(f)(2) “alphanumeric” means the entry can be file Form 8621 under section 1298(f)
during the foreign corporation's tax year. alphabetical, numeric, or any and the regulations thereunder must
This publicly available statement must combination of the two. complete Part I. However, a shareholder
include the same three items noted in The same reference ID number must of a PFIC that is marked to market
the first bulleted item above. be used consistently from tax year to tax under a Code provision other than
year with respect to a given PFIC, QEF, section 1296 (such as section 475) is
Address and Identifying or QIC. If for any reason a reference ID not required to complete Part I unless it
number falls out of use (for example, the is subject to section 1291 with respect
Number to the PFIC pursuant to Regulations
PFIC, QEF, or QIC no longer exists due
Address. Include the suite, room, or to disposition or liquidation), the section 1.1291-1(c)(4)(ii). See TD 9806.
other unit number after the street reference ID number used for that PFIC, Shareholders filing a joint return may
address. If the post office does not QEF, or QIC cannot be used again for file a single Form 8621 with respect to a
deliver mail to the street address and another PFIC, QEF, or QIC for purposes single PFIC in which each joint filer
the shareholder has a P.O. box, enter of Form 8621 reporting. owns an interest.
the box number instead. There are some situations that
Identifying number. Individuals warrant correlation of a new reference Shareholders that are the first U.S.
should enter a social security number or ID number with a previous reference ID person in the chain of ownership.
a taxpayer identification number issued number when assigning a new Regulations section 1.1298-1 generally
by the IRS. All other entities should reference ID number to a PFIC, QEF, or requires a U.S. person that is at the
enter an employer identification number QIC. For example: lowest tier in a chain of ownership (that
(EIN). • In the case of a merger or acquisition, is, the first U.S. person in the chain of
a Form 8621 filer must use a reference ownership) and that is a shareholder
ID number which correlates the previous (including an indirect shareholder) of a

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PFIC to complete Part I for each PFIC • A U.S. grantor of a domestic grantor complete Part I with respect to indirect
owned by that shareholder during the trust is not required to complete Part I if ownership of a specific section 1291
shareholder’s tax year. the trust is a domestic liquidating trust or fund if the shareholder meets the
Specific filing requirements apply a widely held fixed investment trust, as $5,000 exception with respect to the
with respect to domestic grantor trusts, described in Regulations section section 1291 fund on the last day of the
as described further in these 1.1298-1(b)(3)(i). In these shareholder’s tax year and the
Instructions. circumstances, the domestic grantor shareholder does not receive an excess
trust is required to complete Part I. distribution from, or recognize gain on
Exceptions to these filing In certain situations, a shareholder the sale or disposition of the stock of,
•
requirements are described below who is a member or beneficiary of (or the section 1291 fund. For purposes of
under Exceptions to Filing Part I. participant in) an arrangement treated determining whether a shareholder
Shareholders that are not the first as a foreign pension fund under a U.S. satisfies the $5,000 threshold, the
U.S. person in the chain of owner- income tax treaty that owns an interest shareholder takes into account only the
ship. In general, an indirect in a PFIC is not required to complete value of the shareholder’s proportionate
shareholder that is not the first U.S. Part I with respect to the PFIC. See share of the section 1291 fund.
person in the chain of ownership is not Regulations section 1.1298-1(c)(4). For more information, see
required to complete Part I unless the • A U.S. beneficiary of a foreign Regulations section 1.1298-1(c)(2).
indirect shareholder: nongrantor trust or foreign estate is not
• Is treated as receiving an excess required to complete Part I with respect Line Instructions
distribution from the PFIC; to the stock of the PFIC that is owned by Line 1. Describe each class of shares
• Is treated as recognizing gain that is the trust or estate unless it has made a held by the shareholder.
treated as an excess distribution as a QEF or section 1296 mark-to-market
result of a disposition of the PFIC; election, received an excess Line 2. Provide the date during the tax
• Is required to include an amount in distribution, or recognized gain treated year that the shares were acquired, if
income under section 1293(a) with as an excess distribution with respect to applicable.
respect to the PFIC, unless another the stock of the PFIC. See Regulations Line 3. List the number of shares held
shareholder through which the indirect section 1.1298-1(b)(3)(ii). at the end of the tax year.
shareholder owns the PFIC files under Exempt organizations. In general, if Line 4. Indicate the value of the shares
section 1298(f) with respect to the PFIC a shareholder of a PFIC is a tax-exempt held at the end of the tax year.
and no other exception applies; organization, the shareholder is Shareholders may rely upon periodic
• Is required to include an amount in required to complete Part I only if account statements provided at least
income under section 1296(a) with income derived with respect to the PFIC annually to determine the value of a
respect to the PFIC, unless another stock would be taxable to the PFIC unless the shareholder has actual
shareholder through which the indirect shareholder under subchapter F. See knowledge or reason to know based on
shareholder owns the PFIC files under Regulations section 1.1298-1(c)(1). readily accessible information that the
section 1298(f) with respect to the PFIC;
or Exception if aggregate value of statements do not reflect a reasonable
• Is required to report the status of a shareholder’s PFIC stock is $25,000 estimate of the PFIC’s value.
section 1294 election with respect to the or less. A shareholder is not required Line 5. Indicate the type of PFIC and
PFIC. to complete Part I with respect to a the amount of any excess distribution or
See Regulations section 1.1298-1(b) specific section 1291 fund if the gain treated as an excess distribution
(2) for further information. shareholder meets the $25,000 under section 1291, inclusion under
exception on the last day of the section 1293, and inclusion or
Domestic grantor trusts. In general, shareholder’s tax year and the deduction under section 1296.
a U.S. grantor of a domestic grantor shareholder does not receive an excess
trust that owns an interest in a PFIC distribution from, or recognize gain on Note. In cases in which a shareholder’s
(directly or indirectly) through one or the sale or disposition of the stock of, ownership interest in a PFIC is not
more foreign entities must complete the section 1291 fund. For purposes of denominated in shares, the shareholder
Part I with respect to that PFIC interest. determining whether a shareholder must provide the information for lines 1
See Regulations sections 1.1291-1(b) satisfies the $25,000 threshold, the through 4 based on its form of
(8)(iii)(D) and 1.1298-1(b)(1)(iii). In shareholder takes into account all PFIC ownership in the PFIC.
those circumstances, a domestic stock (QEFs, section 1291 funds, and
grantor trust is not required to complete PFIC stock subject to a section 1296
Part I with respect to the stock of the mark-to-market election) owned directly Part II. Elections
PFIC that is owned by the grantor. For or indirectly other than PFIC stock
certain exceptions, see Regulations owned through another U.S. person or A. Election To Treat the PFIC as
section 1.1298-1(b)(3)(i). PFIC stock owned through another a QEF (Section 1295 Election)
Exceptions to Filing Part I PFIC. Shareholders filing a joint return Who May Make the Election
have a combined threshold of $50,000
A shareholder is exempt from instead of $25,000 for purposes of this Generally, a U.S. person that owns
completing Part I if it meets one of the exception. stock in a PFIC, directly or indirectly,
exceptions described below. may make Election A to treat the PFIC
For more information, see as a QEF.
Special rules for estates and trusts. Regulations section 1.1298-1(c)(2).
Certain U.S. grantors and beneficiaries Note. A separate election must be
of estates and trusts may qualify for an Exception if the value of sharehold-
exception to filing Part I. er’s indirect PFIC stock is $5,000 or made for each PFIC that the
less. A shareholder is not required to shareholder wants to treat as a QEF.

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Exception. A tax-exempt organization retroactive election under the consent years to which a section 1295 election
that is not taxable under section 1291 regime (described below). applies.
may not make the election. In addition, a Protective statement regime.
tax-exempt organization that is not Under the protective statement regime, How To Make the Election
taxable under section 1291 is not a shareholder may preserve the ability For the tax year in which the section
subject to a QEF election made by a to make a retroactive election if the 1295 election is made, the shareholder
pass-through entity. shareholder: must do the following.
Chain of ownership. In a chain of 1. Reasonably believed, as of the 1. Check box A in Part II of Form
ownership, only the first U.S. person due date for making the QEF election, 8621.
that is a direct or indirect shareholder of that the foreign corporation was not a 2. Complete the applicable lines of
the PFIC may make the election. PFIC for its tax year that ended during Part III. Include the information provided
Pass-through entities. A QEF that year (retroactive election year); in the PFIC Annual Information
election made by a domestic 2. Filed a Protective Statement (see Statement Annual Intermediary ,
partnership, S corporation, or estate is below) with respect to the foreign Statement, or a combined statement
made in the pass-through entity's corporation, applicable to the retroactive (see below) received from the PFIC.
capacity as a shareholder of a PFIC. election year, in which the shareholder 3. Attach Form 8621 to a timely filed
The entity will include the QEF earnings describes the basis for its reasonable tax return (or, if applicable, partnership
as income for the year in which the belief; or exempt organization return).
PFIC's tax year ends. The interest 3. Extended, in the Protective
holder in the pass-through entity takes Statement, the periods of limitations on For each subsequent tax year in
the income into account under the rules the assessment of taxes under the PFIC which the election applies and the
applicable to inclusions of income from rules for all tax years to which the corporation is treated as a QEF, the
the pass-through entity. protective statement applies; and shareholder must:
Affiliated groups. The common parent 4. Complied with the other terms 1. Complete the applicable lines of
of an affiliated group of corporations that and conditions of the protective Part III, and
joins in filing a consolidated income tax statements. 2. Attach Form 8621 to a timely filed
return makes the QEF election for all tax return (or, if applicable, a
members of the affiliated group that are The Protective Statement must be
shareholders in the PFIC. An election by attached to the shareholder's tax return partnership or exempt organization
a common parent is effective for all for the shareholder's first tax year to return).
members of the group that own stock in which the statement will apply. For
the PFIC at the time the election is required content of the statement and Annual Election Requirements of
made or any time thereafter. other information, see Regulations the PFIC or Intermediary
section 1.1295-3(c).
PFIC Annual Information Statement.
For more information on who may Consent regime. Under the For each year of the PFIC ending in a
make the election, see Regulations consent regime, a shareholder that has tax year of a shareholder to which the
section 1.1295-1(d). not satisfied the requirements of the QEF election applies, the PFIC must
protective regime may request that the provide the shareholders with a PFIC
When To Make the Election IRS permit a retroactive election. The Annual Information Statement. The
consent regime applies only if:
Generally, a shareholder must make the statement must contain certain
election to be treated as a QEF by the 1. The shareholder reasonably information, including:
due date, including extensions, for filing relied on tax advice of a competent and 1. The shareholder's pro rata share
the shareholder's income tax return for qualified tax professional; of the PFIC's ordinary earnings and net
the first tax year to which the election 2. The interest of the U.S. capital gain for that tax year, or
will apply (the “election due date”). See Government will not be prejudiced if the 2. Sufficient information to enable
Retroactive election below for consent is granted; the shareholder to calculate its pro rata
exceptions. The foreign corporation will 3. The shareholder requests share of the PFIC's ordinary earnings
be treated as a QEF with respect to the consent before the PFIC status issue is and net capital gain for that tax year.
shareholder for the tax year in which the raised on audit; and
election is made and for each For other information required to be
subsequent tax year of the foreign 4. The shareholder satisfies the included in the PFIC Annual Information
corporation ending with or within a tax procedural requirements under Statement, see Regulations section
year of the shareholder for which the Regulations section 1.1295-3(f)(4). 1.1295-1(g).
election is effective. For more information on making a Annual Intermediary Statement. If
Retroactive election. A shareholder retroactive election, see Regulations the shareholder holds stock in a PFIC
may make a QEF election for a tax year section 1.1295-3. through an intermediary, an Annual
after the election due date (a retroactive Intermediary Statement may be issued
election) only if: Special Rules in lieu of the PFIC Annual Information
• The shareholder has preserved its For rules relating to the invalidation, Statement. For the definition of an
right to make a retroactive election termination, or revocation of a section intermediary, see Regulations section
under the protective statement regime 1295 election, see Regulations section 1.1295-1(j). For details on the
(described below), or 1295-1(i). Also, see Regulations section information that should be included in
• The shareholder obtains the 1.1295-1(c)(2) for rules relating to the the Annual Intermediary Statement, see
permission of the IRS to make a Regulations section 1.1295-1(g)(3).

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Combined statements. A PFIC that How To Make the Election general, when a shareholder makes a
mark-to-market election for PFIC stock
owns directly or indirectly any shares of Take these steps to make this election.
stock in one or more PFICs may provide in a year other than the first year in
1. Check box B in Part II.
its shareholders with a PFIC Annual which the shareholder holds stock in the
Information Statement in which it 2. Complete lines 8a through 9c of PFIC and no QEF election is in effect,
combines its own required information Part III. the PFIC stock is treated as sold at fair
market value on the last day of the tax
and representations with the information For more information on making year for which the election is made, and
and representations of any lower-tier Election B, see Temporary Regulations the gain is treated as an excess
PFIC. Similarly, an intermediary through section 1.1294-1T. distribution subject to section 1291. In
which a shareholder indirectly holds
stock in more than one PFIC may See Part VI for annual reporting addition, any distributions made during
provide the shareholder with a requirements for outstanding section the year with respect to the PFIC stock
combined Annual Intermediary 1294 elections. are subject to section 1291. See section
Statement. For more information, see 1296(j) and Regulations section 1.1296-
Regulations section 1.1295-1(g)(4). C. Election To Mark to Market 1(i).
PFIC Stock (Section 1296
Documentation. For all tax years D. Deemed Sale Election in
subject to the section 1295 election, the Election) Connection with a QEF Election
shareholder must keep copies of all Who May Make the Election Who May Make the Election
Forms 8621, attachments, and PFIC Generally, an election to mark to market This is a deemed sale election under
Annual Information Statements or PFIC stock under section 1296 may be section 1291(d)(2)(A). This election may
Annual Intermediary Statements. Failure made by: be made by a U.S. person that elects to
request of the IRS may result in •
to produce these documents at the A U.S. person who owns (or is treated treat a PFIC as a QEF for a foreign
as owning) marketable stock (defined corporation's tax year following its first
invalidation or termination of the section earlier) in a PFIC at the close of such tax year as a PFIC included in the
1295 election. See Regulations section person's tax year, or shareholder's holding period (an
circumstances, the IRS will consider •
1.1295-1(f)(2)(ii). In rare and unusual A RIC that meets the requirements of unpedigreed QEF). A shareholder
section 1296(e)(2).
requests for alternative documentation making this election is deemed to have
sold the PFIC stock as of the first day of
to verify the ordinary earnings and net For more information, see section the PFIC's first tax year as a QEF (the
capital gain of the PFIC. For more 1296 and Regulations section 1.1296-1. qualification date) for its fair market
information, see Regulations section See sections 1296(f) and (g) and value.
1.1295-1(g)(2). Regulations sections 1.1296-1(e) and
B. Election To Extend Time for (h)(1)(ii) for information regarding stock
Payment of Tax owned through certain foreign entities. Special Rules
For purposes of this election, the
Who May Make the Election When To Make the Election following apply.
A shareholder of a QEF may make This election must be made on or before • The gain from the deemed sale is
taxed as an excess distribution received
Election B to extend the time for the due date (including extensions) of on the qualification date.
payment of the tax on its share of the the U.S. person's income tax return for The basis of the shareholder’s PFIC
undistributed earnings of the fund for the tax year in which the stock is •
stock held directly, or the stock or other
the current tax year. If a U.S. marked to market under section 1296. A property owned directly by the
partnership is a shareholder of a QEF, section 1296 election by a CFC is made shareholder through which ownership of
the election is made at the partner level. by its controlling domestic shareholders the PFIC is attributed to the
(as defined in Regulations section shareholder, is increased by the gain
Special Rules 1.964-1(c)(5)). For more information, recognized. The manner in which the
• If this election is made, interest will be see Regulations section 1.1296-1(h)(1) basis adjustment is made depends on
imposed on the amount of the deferred (ii). Once made, the election applies to whether the shareholder is a direct or
tax. This interest must be paid on the all subsequent tax years unless the indirect shareholder. See Regulations
termination of the election (see the election is revoked or terminated section 1.1291-10(f).
instructions for Part VI, line 24, later). pursuant to Regulations section Solely for purposes of applying the
• The election cannot be made for any 1.1296-1(h)(3). •
PFIC rules, the shareholder's holding
earnings on shares disposed of during period of the stock begins on the
the tax year or for a tax year that any How To Make the Election qualification date.
portion of the shareholder's pro rata Take these steps to make this election. • The election may be made for stock
share of the fund's earnings is included on which the shareholder will realize a
in income under section 951 (relating to 1. Check box C in Part II.
loss, but that loss cannot be recognized.
CFCs). 2. Complete either (a) Part V to In addition, there is no basis adjustment
calculate the amount due under section for a loss.
When To Make the Election 1291 (when required, as generally • After the deemed sale, the PFIC
described in the next paragraph), or (b) becomes a pedigreed QEF with respect
Generally, this election must be made Part IV to calculate the gain or loss on to the shareholder.
by the due date, including extensions, of the stock in all other cases.
the shareholder's tax return for the tax
year for which the shareholder reports Coordination of Election C with sec-
the income related to the deferred tax. tion 1291 for first year of election. In

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When To Make the Election earnings relate to a period in which the • The provision of law under which the
PFIC was a CFC). shareholder's holding period includes
This election must be made by the due
date, including extensions, of the • The basis of the shareholder's PFIC the holding period of the other U.S.
stock held directly, or the stock or other person.
shareholder's original tax return (or by
property owned directly by the
filing an amended return within 3 years For more information on making
shareholder through which ownership of
of the due date of the original return) for Election E, see Regulations section
the PFIC is attributed to the
the tax year that includes the 1.1291-9.
shareholder, is increased by the amount
qualification date.
of the deemed dividend. The manner in F. Deemed Sale Election with
which the basis adjustment is made
How To Make the Election depends on whether the shareholder is Respect to a Former PFIC or
Take these steps to make this election. a direct or indirect shareholder. See “Section 1297(e) PFIC”
1. Check box D in Part II. Regulations section 1.1291-9(f). Who May Make the Election
• Solely for purposes of applying the
2. Enter the gain or loss on line 15f PFIC rules, the shareholder's holding This is a deemed sale election under
of Part V. period begins on the qualification date. section 1298(b)(1) and Regulations
3. If a gain is entered, complete section 1.1297-3(b) or 1.1298-3(b). This
election may be made by:
line 16 to report the tax and interest due When To Make the Election A U.S. person that is a shareholder of
on the excess distribution. •
This election must be made by the due a foreign corporation that no longer
For more information regarding date (including extensions) of the qualifies as a PFIC under either the
making Election D, see Regulations shareholder's original tax return (or by income or asset test of section 1297(a),
section 1.1291-10. filing an amended return within 3 years or
of the due date of the original return) for • A U.S. shareholder (as defined in
E. Deemed Dividend Election in the tax year that includes the section 951(b)) that owns stock in a
Connection with a QEF Election qualification date. foreign corporation that is a CFC and a
Who May Make the Election PFIC, but that is not treated as a PFIC
How To Make the Election with respect to the U.S. shareholder
This is a deemed dividend election under section 1297(d).
under section 1291(d)(2)(B). This Take these steps to make this election.
election may be made by a U.S. person 1. Check box E in Part II. Such persons may elect to treat the
that elects to treat a PFIC that is also a 2. Enter the dividend on line 15e of stock of the foreign corporation as sold
CFC as a QEF for the foreign Part V as an excess distribution. for its fair market value on the last day of
corporation's tax year following its first the last tax year of the foreign
tax year as a PFIC included in the 3. Complete line 16 to figure the tax
corporation in which it was treated as a
shareholder's holding period (an and interest due on the excess
PFIC (termination date) or the first day
unpedigreed QEF). distribution.
on which the qualified portion of the
A shareholder making this election is Attachments. The shareholder must shareholder’s holding period in the
treated as receiving a dividend equal to attach a statement to Form 8621 that section 1297(e) PFIC begins
its pro rata share of the post-1986 demonstrates the calculation of its pro (qualification date), as applicable.
earnings and profits (defined below in rata share of the post-1986 earnings
Special Rules) of the PFIC on the and profits of the PFIC that are treated Special Rules
qualification date (defined under the as distributed to the shareholder on the • The gain from the deemed sale is
instructions for Election D, earlier). The qualification date. The post-1986 taxed as an excess distribution.
deemed dividend is taxed as an excess earnings and profits may be reduced • The basis of the shareholder’s PFIC
distribution, allocated only to the days in (but not below zero) by the amount that stock held directly, or the stock or other
the shareholder's holding period during the shareholder satisfactorily property owned directly by the
which the foreign corporation qualified demonstrates was previously included shareholder through which ownership of
as a PFIC. For this purpose, the in its income or in the income of another the PFIC is attributed to the
shareholder's holding period ends on U.S. person. The shareholder shareholder, is increased by the amount
the day before the qualification date. demonstrates this by including in the of the excess distribution taxed to the
statement mentioned above the shareholder making Election F. The
following information: manner in which the basis adjustment is
Special Rules • The name, address, and identifying made depends on whether the
For purposes of this election, the number of the U.S. person and the shareholder is a direct or indirect
following apply. amount that was included in income; shareholder. See Regulations sections
• The term “post-1986 earnings and • The tax year in which the amount was 1.1297-3(b)(5) and 1.1298-3(b)(5).
profits” means the undistributed previously included in income; • Solely for purposes of applying the
earnings and profits of the PFIC (as of • The provision of law under which the PFIC rules, the new holding period of
the day before the qualification date) amount was previously included in the stock begins on the date after the
accumulated and not distributed in tax income; termination date or on the qualification
years beginning after 1986 during which • A description of the transaction in date, as applicable.
the foreign corporation was a PFIC and which the shareholder acquired the • Election F may be made for stock on
while the shareholder held the stock stock of the PFIC from the other U.S. which there would be a loss, but the loss
(but without regard to whether the person; and is not recognized.

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For more information on making this • The basis of the shareholder’s PFIC the Section 1297(e) PFIC that is treated
election, see Regulations sections stock held directly, or the stock or other as distributed to the shareholder on the
1.1297-3(b) (section 1297(e) PFIC) and property owned directly by the CFC qualification date, including a
1.1298-3(b) (former PFIC). shareholder through which ownership of schedule that shows the calculation of
the PFIC is attributed to the this amount as required under
When To Make the Election shareholder, is increased by the amount Regulations section 1.1297-3(c)(5)(ii).
of the deemed dividend. The manner in In addition, if the shareholder filed a
This election must be made by the due which the basis adjustment is made Form 5471 for the Section 1297(e) PFIC
date of the shareholder’s original tax depends on whether the shareholder is for the election year, attach Schedule J
return (or by filing an amended return a direct or indirect shareholder (as (Form 5471).
within 3 years of the due date, as defined earlier). See Regulations
extended under section 6081, of the section 1.1297-3(c)(6). The post-1986 earnings and profits
•
original return) for the tax year that Solely for purposes of applying the may be reduced (but not below zero) by
includes, as appropriate, either the PFIC rules, the shareholder’s new the amount that the shareholder
termination date or qualification date. holding period begins on the CFC satisfactorily shows was previously
However, see Form 8621-A (and qualification date. included in its income or in the income
Regulations sections 1.1297-3(e) and
of another U.S. person. The shareholder
1.1298-3(e)) if the 3-year period has
expired. When To Make the Election shows this by including in the statement
mentioned above the following
Make this election by the due date of
information:
How To Make the Election the shareholder’s original return (or by
filing an amended return within 3 years • The name, address, and identifying
number of the U.S. person and the
Take these steps to make this election. of the due date, as extended under
amount that was included in income.
1. Check box F in Part II. section 6081, of the original return) for
2. Enter the gain or loss on line 15f the tax year that includes the first day on • A description of the transaction in
which the shareholder acquired the
of Part V. If a gain, complete the rest of which the qualified portion of the
stock of the Section 1297(e) PFIC from
Part V. shareholder’s holding period in the PFIC
the other U.S. person.
begins, as determined under section
G. Deemed Dividend Election 1297(d). However, see Form 8621-A • The tax year in which the amount was
previously included in income.
With Respect to a “Section (and Regulations section 1.1297-3(e)) if
1297(e) PFIC” the 3-year period has expired. • The provision of law under which the
shareholder's holding period includes
the holding period of the other U.S.
Who May Make the Election How To Make the Election person.
This is a deemed dividend election Take these steps to make this election.
under section 1298(b)(1) and
Regulations section 1.1297-3(c). This 1. Check box G in Part II. For more information on making
Election G, see Regulations section
election may be made by a shareholder 2. Enter the excess distribution on 1.1297-3(c).
that is a U.S. shareholder (as defined in line 15e of Part V.
section 951(b)) of a foreign corporation 3. If the excess distribution is H. Deemed Dividend Election
that is a CFC and a PFIC, but that is not greater than zero, complete line 16 to With Respect to a Former PFIC
treated as a PFIC with respect to the figure the tax and interest due on the Who May Make the Election
U.S. shareholder under section 1297(d). excess distribution.
4. Attach to Form 8621 the This is a deemed dividend election
Special Rules information specified below. under section 1298(b)(1) and
Regulations section 1.1298-3(c). This
A shareholder making this election is
election may be made by a shareholder
treated as receiving a dividend of its pro Attachments of a foreign corporation that no longer
rata share of the post-1986 earnings
and profits (defined later in The shareholder must attach a qualifies as a PFIC under either the
Attachments) of the section 1297(e) statement to Form 8621 that shows the income or asset test of section 1297(a)
PFIC on the CFC qualification date (as calculation of its pro rata share of the if the foreign corporation was a CFC
defined in Regulations section post-1986 earnings and profits of the during its last tax year as a PFIC.
1.1297-3(d)). The deemed dividend is section 1297(e) PFIC (as defined in
taxed under section 1291 as an excess Regulations section 1.1291-9(j)(2)(v)) Special Rules
distribution, allocated only to the days in that is treated as distributed to the
the shareholder’s holding period during shareholder on the CFC qualification A shareholder making this election is
which the foreign corporation qualified date. treated as receiving a dividend of its pro
as a PFIC. For this purpose, the • The CFC qualification date, as rata share of the post-1986 earnings
shareholder’s holding period ends on defined in Regulations section and profits (defined below in
the day before the CFC qualification 1.1297-3(d), for the Section 1297(e) Attachments) of the former PFIC on the
date. After the deemed dividend PFIC. termination date (as defined in
election, the shareholder’s stock is not • The beginning and ending dates of Regulations section 1.1298-3(d)). The
treated as stock in a PFIC. the tax year of the shareholder in which deemed dividend is taxed under section
the CFC qualification date falls (that is, 1291 as an excess distribution,
For purposes of this election, the the election year). allocated only to the days in the
following rules apply: • The shareholder’s pro rata share of shareholder’s holding period during
the post-1986 earnings and profits of which the foreign corporation qualified
as a PFIC. For this purpose, the

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shareholder’s holding period ends on the termination date falls (that is, the Lines 6 and 7
the termination date. After the deemed election year).
dividend election, the shareholder’s • The shareholder’s pro rata share of Lines 6a and 7a. Enter on lines 6a and
stock is not treated as stock in a PFIC. the post-1986 earnings and profits of 7a, respectively, your pro rata share of
the former PFIC that is treated as the ordinary earnings and net capital
For purposes of this election, the distributed to the shareholder on the gain of the QEF. The PFIC should
following rules apply: termination date, including a schedule provide these amounts or information
• The basis of the shareholder’s PFIC that shows the calculation of this that will help you determine your pro
stock held directly, or the stock or other amount as required under Regulations rata share. See Annual Election
property owned directly by the section 1.1298-3(c)(5)(ii). In addition, if Requirements of the PFIC or
shareholder through which ownership of the shareholder filed a Form 5471 for Intermediary, earlier.
the PFIC is attributed to the the former PFIC for the election year, Lines 6b and 7b. Your share of the
shareholder, is increased by the amount attach Schedule J (Form 5471). ordinary earnings and net capital gain of
of the deemed dividend. The manner in the QEF is reduced by the amounts you
which the basis adjustment is made The post-1986 earnings and profits include in income under section 951 for
depends on whether the shareholder is may be reduced (but not below zero) by the tax year with respect to the QEF.
a direct or indirect shareholder (as the amount that the shareholder Your share of these amounts may also
defined earlier). See Regulations satisfactorily shows was previously be reduced as provided in section
section 1.1298-3(c)(6). included in its income or in the income 1293(g).
• Solely for purposes of applying the of another U.S. person. The shareholder
Line 6c. This amount is treated as
PFIC rules, the shareholder’s new shows this by including in the statement
ordinary income on your tax return.
holding period begins on the day mentioned above the following
following the termination date. information. For a noncorporate taxpayer, include
• The name, address, and identifying this amount as “other income” on
When To Make the Election number of the U.S. person and the Schedule 1 (Form 1040), line 8, or on
This election must be made by the due amount that was included in income. the comparable line of other
date of the shareholder’s original return • The tax year in which the amount was noncorporate tax returns. For a
(or by filing an amended return within 3 previously included in income. corporate taxpayer, include this amount
years of the due date, as extended • The provision of law under which the as “other income” on line 10 of Form
under section 6081, of the original amount was previously included in 1120, or on the comparable line of other
return) for the tax year that includes the income. corporate tax returns.
first day on which the qualified portion of • A description of the transaction in Line 7c. See the instructions for the
the shareholder’s holding period in the which the shareholder acquired the Schedule D used for your tax return.
PFIC begins, as determined under stock of the former PFIC from the other Portions of the net capital gain may
section 1297(d). However, see Form U.S. person. have to be reported on different lines of
8621-A (and Regulations section • The provision of law under which the Schedule D, depending upon the
1.1298-3(e)) if the 3-year period has shareholder’s holding period includes information provided by the QEF
expired. the holding period of the other U.S. concerning the section 1(h) categories
person. of net capital gains and amounts
How To Make the Election thereof, derived by the QEF. See
For more information on making Regulations section 1.1293-1(a)(2) for
Take these steps to make this election. Election H, see Regulations section three options a QEF may use to report
1. Check box H in Part II. 1.1298-3(c). and calculate capital gain.
2. Enter the excess distribution on Line 8
line 15e of Part V. Part III. Income From a If you receive a distribution from the
3. If the excess distribution is QEF QEF during the current tax year, the
greater than zero, complete line 16 to distribution is first treated as a
For any tax year in which the foreign
figure the tax and interest due on the distribution out of the earnings and
corporation is not treated as a QEF
excess distribution. profits of the QEF accumulated during
because it is not a PFIC under section
4. Attach to Form 8621 the 1297(a), the shareholder is not required the year. If the total amount distributed
information specified below. to complete Part III. However, the (line 8b) exceeds the amount included
section 1295 election is not terminated. in income (line 8a), the excess is treated
Attachments If the foreign corporation is treated as a as distributed out of the most recently
The shareholder must attach a PFIC in any subsequent tax year, the accumulated earnings and profits. This
statement to Form 8621 that shows the original election continues to apply and amount is not taxable to you if you can
calculation of its pro rata share of the the shareholder must include in Part III satisfactorily demonstrate that the
post-1986 earnings and profits of the its pro rata share of ordinary earnings excess was previously included in your
former PFIC that is treated as and net capital gain and must also income or the income of another U.S.
distributed to the shareholder on the comply with the section 1295 annual person. This is demonstrated by
termination date. reporting requirements. attaching a statement to Form 8621 that
includes the information listed under
• The termination date, as defined in All QEF shareholders complete lines Attachments for Election E, earlier. If the
Regulations section 1.1298-3(d), for the 6a through 7c. If you are making excess has not been previously
former PFIC. Election B, also complete lines 8a included in your income or the income
• The beginning and ending dates of through 9c. of another U.S. person, then the excess
the tax year of the shareholder in which

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is subject to tax according to the rules of the stock, the excess is treated as returns. Other entities should include
section 301(c). ordinary income. this amount on the comparable line of
their tax return. However, RICs, for
Line 9 If the adjusted basis of the stock is purposes of section 851(b), should treat
more than the fair market value as of the this amount as a dividend.
Line 9a. Enter the total tax on your total close of the tax year, the excess is
taxable income (including your share of allowed as a deduction, but only to the If the adjusted basis of the stock
undistributed earnings of the QEF) for extent of, the lesser of: (line 13b) is more than its fair market
the tax year (for example, from Form value (line 13a), the excess is a loss
1120, Schedule J, line 11; or Form 1. The amount of the excess and is entered on line 13c as such.
1040, line 24). (line 10c), or Furthermore, the filer must complete
For this purpose, “undistributed 2. The Unreversed inclusions lines 14a and 14b, and, if applicable,
earnings” is the excess, if any, of the (defined below) with respect to such line 14c.
amount included in gross income under stock (line 11).
Line 14a. Enter any Unreversed
section 1293(a) over the sum of the This amount is treated as an ordinary inclusions with respect to the stock (see
amount of any distribution and the loss and as a deduction allowable in definition, earlier).
portion of the amount attributable to computing adjusted gross income.
stock in the QEF that you transferred or Line 14b. Enter the loss from line 13c,
otherwise disposed of before the end of Unreversed inclusions. Unreversed but only to the extent of unreversed
the QEF's tax year. inclusions are the excess of the inclusions on line 14a. This loss is
amounts that were included in income treated as ordinary loss. Corporations
Line 9b. Calculate your total tax as if under the section 1296 mark-to-market and individuals should include the loss
your total taxable income did not include rules for prior tax years over the on the “other income” line of their tax
your share of the undistributed earnings amounts allowed as a deduction under returns. Other entities should include
of the QEF (line 8e). Enter this amount the section 1296 mark-to-market rules this amount on the comparable line of
on line 9b. for prior tax years. See section 1296(d) their tax return.
Line 9c. For corporations, enter this and Regulations section 1.1296-1(a)(3).
Line 14c. Enter the amount by which
deferred tax on Form 1120, Schedule J, Lines 10c and 12. Corporations and the loss on line 13c is more than the
in brackets to the left of the entry space individuals should include the gain or unreversed inclusions. This amount is
for line 11. Subtract this deferred tax (loss) on the “other income” line of their subject to the rules generally applicable
amount from the sum of lines 7, 8, and tax returns. Other entities should include to losses provided elsewhere in the
10, and enter the difference on line 11. this amount on the comparable line of Code and regulations thereunder. See
For individuals, enter this deferred their tax return. However, RICs, for Regulations section 1.1296-1(c)(4)(ii).
tax on Form 1040 in brackets to the left purposes of section 851(b), should treat
Multiple dispositions. In the case of
of the entry space for line 24. Subtract amounts included in income as a
this deferred tax amount from the sum dividend. multiple dispositions, attach a statement
for each disposition using the same
of lines 22 and 23, and enter the If a CFC makes a section 1296 format shown on lines 13 through 14c.
difference on line 24. mark-to-market election with respect to Then:
a PFIC in which it owns stock, any • Enter “multiple” on lines 13a, 13b,
line 10c gain is treated as foreign and 14a.
Part IV. Gain or (Loss) personal holding company income and • Enter your net ordinary gains on
From a Section 1296 any line 12 loss is treated as a line 13c (do not enter any net losses on
Mark-to-Market Election deduction that is allocable to foreign line 13c).
A shareholder that has made a personal holding company income. • Enter your net ordinary losses on
mark-to-market election under section Lines 13 through 14c line 14b.
1296 with respect to PFIC stock • Enter your net “other” losses on
completes lines 10a through 12 with Complete lines 13 through 14c if you line 14c.
respect to PFIC stock that the sold or otherwise disposed of any
shareholder holds at the close of its tax section 1296 stock during the tax year. For more information relating to
year, and lines 13a through 14c, with For purposes of lines 13 through 14c, mark-to-market elections under section
respect to PFIC stock that it sold or “section 1296 stock” is any stock for 1296, see Regulations sections
disposed of during its tax year. which the taxpayer has made a 1.1296-1 and 1.1296-2.
mark-to-market election pursuant to
As discussed earlier in section 1296(a), which is in effect for the
Mark-to-Market Election, a shareholder tax year and for which the coordination Part V. Distributions From
may be required to complete Part V, rule of Regulations section 1.1296-1(i) and Dispositions of Stock
rather than Part IV, in the first year in does not apply. of a Section 1291 Fund
which a mark-to-market election is
Line 13c. If the fair market value of the
made. See section 1296(j) and See Section 1291 Fund, earlier, for the
stock on the date of sale or disposition
Regulations sections 1.1291-1(c)(4) and definition of a section 1291 fund and
(line 13a) is more than the U.S. person's
1.1296-1(i). also for a brief summary of the tax
adjusted basis in the stock on the date consequences for shareholders of a
Lines 10a Through 12 of sale or disposition (line 13b), the section 1291 fund.
If the fair market value of the PFIC stock line 13c excess is a gain and is treated
as of the close of the tax year is more as ordinary income. Corporations and Also, see Section 1291 Fund and
than the U.S. person's adjusted basis in individuals should include the gain on Mark-to-Market Election, earlier, for a
the “other income” line of their tax brief discussion of when a shareholder
may be subject to section 1291 in the

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year that it makes a mark-to-market current tax year is less than 3, divide the Determine the amount allocable to
election under any provision of the amount on line 15b by that number. each tax year in your holding period by
Code, including section 1296. adding the amounts allocated to the
Complete a separate Part V for each Line 15e days in each such tax year. Add the
excess distribution. That is, if you amounts allocated to the pre-PFIC and
receive a distribution from a section Nonexcess distribution. The current tax years. Enter the sum on
1291 fund with respect to shares for nonexcess distribution is the lesser of line 16b.
which you have different holding line 15a or line 15d. This amount is
periods, complete lines 15a through 15e taxed according to the rules of section This amount is treated as ordinary
separately for each block of shares that 301. To the extent that section 301(c)(1) income (for example, individuals and
has the same holding period is applicable, include the amount as a corporations should enter this amount
(“applicable stock”). If you dispose of dividend on your income tax return. For on the “other income” line of their tax
stock in a section 1291 fund for which corporations, include this amount on return).
you have different holding periods, Form 1120, Schedule C, line 14. For Line 16c. Determine the increase in tax
complete line 15f for each block of individuals, include this amount on Form for each tax year in your holding period
shares that has the same holding 1040, line 3b (and, if applicable, on (other than the current tax year and
period. Schedule B (Form 1040), line 5). pre-PFIC years). An increase in tax is
Line 15 Excess distributions. If you received determined for each PFIC year by
more than one distribution during the tax multiplying the part of the excess
Lines 15a and 15b year with respect to the applicable distribution allocated to each year (as
Enter your total distributions from the stock, the excess distribution is determined on line 16a) by the highest
section 1291 fund with respect to the apportioned among all actual rate of tax under section 1 or section 11,
applicable stock for the periods distributions. Each apportioned amount whichever applies, in effect for that tax
indicated. is treated as a separate excess year. Add the increases in tax computed
distribution. for all years. Enter the aggregate
increases in tax (before credits) on
Note. A 10%-or-greater domestic Line 15f. Gain recognized on the line 16c.
corporation shareholder might be able disposition of stock of a section 1291
to claim a deemed paid foreign tax fund is treated as an excess distribution. The following table sets forth the
credit under section 902 with respect to Loss realized on the disposition of stock highest rate of tax in effect under
a distribution from a section 1291 fund of a section 1291 fund is not taken into section 1 (applicable to individuals) for
in the fund’s tax year beginning before account under section 1291 and thus, calendar years 1987 through 2020.
January 1, 2018. See Form 1118, for example, does not reduce the
Foreign Tax Credits—Corporations, to amount of total gain subject to section Tax Rates
calculate the taxes deemed paid and 1291. However, the loss may be
the gross-up amount. recognized under another provision of Tax year(s) (based Highest rate of tax in
Line 15a. If the holding period of the the Code and reported accordingly. on calendar year effect under IRC
applicable stock began in the current Stock of a section 1291 fund is taxpayer) section 1
tax year, there is no excess distribution considered disposed of if it is sold, 2018–2020 37%
and you should complete Part V as transferred, or pledged.
2013–2017 39.6%
follows: Enter on line 15a the total
distributions you received from the Line 16 2003–2012 35%
section 1291 fund with respect to that Lines 16a and 16b 2002 38.6%
stock during the current tax year. If you Determine the taxation of the excess 2001 39.1%
did not dispose of that stock during the distribution on a separate sheet and 1993–2000 39.6%
tax year, do not complete the rest of attach it to Form 8621. Divide the
Part V. If you did dispose of that stock amount on line 15e or 15f, whichever 1991–1992 31%
during the tax year, skip lines 15b applies, by the number of days in your 1988–1990 28%
through 15e and complete lines 15f and holding period. The holding period of 1987 38.5%
16. the stock is treated as ending on the
If the holding period of the applicable date of the distribution or disposition.
stock began in the current tax year, the Line 16d. To figure the foreign tax
credit, the shareholder of a section 1291
line 15a amount is taxed according to Special rules apply to the holding
fund figures the total creditable foreign
the rules of section 301. To the extent period if:
taxes attributable to the distribution.
that section 301(c)(1) is applicable, • The deemed dividend election
This amount includes the withholding
include the amount as a dividend on (Election E) is made. See the
taxes paid by the shareholder on the
your income tax return. For instructions earlier for Election E.
distribution and, in the case of the tax
corporations, include this line 15a • The mark-to-market election (Election
year of a section 1291 fund that begins
amount on Form 1120, Schedule C, C) is made or was made in a prior year
before 2018, for 10%-or-greater
line 14. For individuals, include this (see section 1291(a)(3)(A)(ii)).
domestic corporate shareholders, any
line 15a amount on Form 1040, line 3b • The deemed dividend election with
taxes deemed paid under section 902.
(and, if applicable, on Schedule B (Form respect to a Section 1297(e) PFIC
These taxes must be creditable under
1040), line 5). (Election G) or with respect to a Former
general foreign tax credit principles and
Line 15c. Divide the amount on PFIC (Election H) is made. See the
the shareholder must choose to claim
line 15b by 3. If the number of tax years instructions for Election G and Election
in your holding period preceding the H, earlier.

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the foreign tax credit for the current tax For individuals, include the interest attributable (a loan, pledge, or
year. as part of the total for Schedule 2 (Form guarantee by the QEF to or for the
The excess distribution taxes (the 1040), line 8. Check box c on Schedule benefit of the taxpayer may cause a
creditable foreign taxes attributable to 2 (Form 1040), line 8, and enter deemed distribution of the earnings);
an excess distribution) are determined “1291INT” and the amount of the • A disposition of stock in the QEF,
by apportioning the total creditable interest in the entry space for that box. including a pledge by the taxpayer of
foreign taxes between the part of the For corporations, include the interest stock as security for a loan; or
distribution that is an excess distribution as part of the total for Form 1120, • A change of status of the QEF (that
and the part that is not. Schedule J, line 9g. See Instructions for is, a foreign corporation that is no longer
The excess distribution taxes are Form 1120, Schedule J, line 9g. a QEF or PFIC).
allocated in the same manner as the Line 22. Enter the earnings distributed
excess distribution is allocated. See or deemed distributed as a result of the
Part VI. Status of Prior
Excess distributions, earlier. Those events described on line 21. Earnings
taxes allocated to pre-PFIC tax years Year Section 1294 are treated as distributed out of the
and the current tax year are taken into Elections and Termination most recently accumulated earnings
account for the current tax year under of Section 1294 Elections and profits. Accordingly, an event will
the general rules of the foreign tax first terminate the most recently made
credit. Each person who has made a section
1294 election must (1) complete lines election.
The excess distribution taxes 17 through 20 to annually report the An election may be terminated in
allocated to a PFIC year only reduce the status of that election, and (2) complete whole or in part depending on the event
increase in tax figured for that tax year lines 21 through 24 to report the causing the termination. Examples are
(but not below zero). No carryover of termination of any section 1294 election as follows.
any unused excess distribution taxes is that occurred during the tax year. See • A distribution of earnings will
allowed. Temporary Regulations section terminate an election to the extent the
When you dispose of PFIC stock, the 1.1294-1T(h). election is attributable to the earnings
distributed.
above foreign tax credit rules apply only Line 17. Enter the last day of each tax A loan, pledge, or guarantee by the
to the part of the gain that, without year for which you made a section 1294 •
QEF made directly or indirectly to the
regard to section 1291, would be election that is outstanding. Enter as electing shareholder or related person
treated under section 1248 as a MM/DD/YYYY. Do not include an will terminate an election to the extent of
dividend. election made in the current tax year. the undistributed earnings equal to the
Line 16e. This amount is the total Line 18. Enter the undistributed amount loaned, secured, or guaranteed.
increase in tax and is included on your earnings of the QEF in the year for • A disposition of stock will terminate all
tax return as additional taxes. which the payment of tax was extended elections with respect to the
For individuals, include the amount by the section 1294 election entered on undistributed earnings attributable to
as part of the total for Form 1040, line 17. If the election was partially that stock.
line 16. Check box 3 on line 16 and terminated in a prior year, enter the • A change in status of the QEF will
enter “1291TAX” in the entry space for remaining undistributed earnings. terminate all elections.
that box. For more information, see
Line 19. Enter the tax for which
For corporations, enter this amount payment was extended by the section Regulations section 1.1294-1T(e).
on Form 1120, Schedule J, to the left of 1294 election entered on line 17. If the Line 23. Enter the deferred tax due
the entry space for line 2. Enter “Sec. election was partially terminated in the from the termination of the section 1294
1291” next to the amount and include it previous tax year, enter the balance of election. The deferred tax entered on
as part of the total for line 2. Other the deferred tax from line 25 of the prior line 19 is due if the election was
entities should use the comparable line year Form 8621. completely terminated. If the election
on their income tax return.
Line 20. Enter the accrued interest was only partially terminated, a
Line 16f. Interest is charged on each (determined under section 6621) on the proportionate amount of the deferred
net increase in tax for the period deferred tax. This is the interest accrued tax is due. That amount is determined
beginning on the due date (without from the due date (not including by multiplying the amount entered on
regard to extensions) of your income tax extensions) of the return for the year for line 19 by a fraction, of which the
return for the tax year to which an which the section 1294 election was numerator is the amount entered on
increase in tax is attributable and ending made until the date the current year's line 22 and the denominator is the
with the due date (without regard to return is filed. amount entered on line 18. The deferred
extensions) of your income tax return for tax is due by the due date of the
the tax year of the excess distribution. Line 21. Enter the event(s) that shareholder's income tax return (without
The amount of interest is determined occurred during the tax year that regard to extensions) for the year of
by using the rates and methods under terminated one or more of the section termination.
section 6621. See section 1291(c)(3) for 1294 elections reported on line 17. A
more information regarding the section 1294 election may be When the election is terminated,
computation of interest, and also see terminated voluntarily. However, an corporations include the deferred tax as
Revenue Ruling 2020-18, 2020-39 election will terminate automatically, in part of the total for Form 1120,
I.R.B. 584 (or successor Revenue whole or in part, when any of the Schedule J, line 11. Also, enter the
Ruling) for a list of historical interest following events occur: deferred tax to the left of line 11 and
rates under section 6621. • An actual or deemed distribution of label it as “Sec. 1294 deferred tax.”
earnings to which the election is

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For individuals, include the deferred For corporations, enter the amount of Lines 25 and 26. Complete lines 25
tax as part of the total for Schedule 2 section 1294 interest at the bottom right and 26 only if a section 1294 election is
(Form 1040), line 8. Check box c on margin of Form 1120, page 1, and label partially terminated. Enter on line 25 the
Schedule 2 (Form 1040), line 8, and it as “Sec. 1294 interest.” Also, include part of the deferred tax outstanding after
enter “1294DT” and the amount of the this amount in your check or money the partial termination of the section
deferred tax in the entry space for that order payable to the United States 1294 election. This amount should
box. Treasury. If you would otherwise receive equal line 19 minus line 23.
a refund, reduce the refund by the
Line 24. Enter the interest accrued on
interest due.
the deferred tax. Interest accrues Note. As indicated in the line 19
beginning on the due date (without For individuals, include the interest instructions, for next year, be sure to
regard to extensions) of your tax return from line 24 as part of the total for enter the line 25 amount of this year’s
for the tax year in which the section Schedule 2 (Form 1040), line 8. Check Form 8621 on line 19 of next year’s
1294 election is made and ending with box c on Schedule 2 (Form 1040), Form 8621.
the due date (without regard to line 8, and enter “1294INT” and the Enter on line 26 the accrued interest
extensions) of your tax return for the tax amount of the interest in the entry space remaining after the partial termination of
year of the termination. Interest is for that box. the section 1294 election. This amount
computed using the rates and methods should equal line 20 minus line 24.
under section 6621.

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Disclosure, Privacy Act, and Paperwork Reduction Act Notice.                                 We ask for the information on this form to carry out the 
Internal Revenue laws of the United States. Sections 6001, 6011, 6012(a), and 6109, and their regulations, require you to 
provide this information. We need this information to ensure that you are complying with the Internal Revenue laws and to allow 
us to figure and determine the right amount of tax. You must fill in all parts of the tax form that apply to you. If you do not file a 
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We may disclose your tax information to the Department of Justice for civil and criminal litigation, and to cities, states, the 
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You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless 
the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long 
as their contents may become material in the administration of any Internal Revenue law.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for 
individual taxpayers filing this form is approved under OMB control number 1545-0074 and the estimated burden for business 
taxpayers is approved under OMB control number 1545-0123. The estimated burden for all other taxpayers who file this form is 
shown below.

Recordkeeping. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 hr., 58 min.
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Preparing and sending the form to the IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           20 hr., 34 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we 
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Instructions for Form 8621 (Rev. 12-2020)                                          -15-

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