Thatâs an excellent resource. Thank you! Has anyone seen any fund commit in writing that they will determine their PFIC status every year and if they determine they are a PFIC, provide a PFIC statement that meets IRS requirements? I havenât.
Found another resource of whatâs required on the PFIC Annual Statement.
Annual election requirements of the PFIC or intermediary -
(1) PFIC Annual Information Statement. For each year of the PFIC ending in a taxable year of a shareholder to which the shareholderâs section 1295 election applies, the PFIC must provide the shareholder with a PFIC Annual Information Statement. The PFIC Annual Information Statement is a statement of the PFIC, signed by the PFIC or an authorized representative of the PFIC, that contains the following information and representations -
(i) The first and last days of the taxable year of the PFIC to which the PFIC Annual Information Statement applies;
(ii) Either -
(A) The shareholderâs pro rata shares of the ordinary earnings and net capital gain (as defined in § 1.1295-1(a)(2)) of the PFIC for the taxable year indicated in paragraph (g)(1)(i) of this section; or
(B) Sufficient information to enable the shareholder to calculate its pro rata shares of the PFICâs ordinary earnings and net capital gain, for that taxable year; or
(C) A statement that the foreign corporation has permitted the shareholder to examine the books of account, records, and other documents of the foreign corporation for the shareholder to calculate the amounts of the PFICâs ordinary earnings and the net capital gain according to Federal income tax accounting principles and to calculate the shareholderâs pro rata shares of the PFICâs ordinary earnings and net capital gain;
(iii) The amount of cash and the fair market value of other property distributed or deemed distributed to the shareholder during the taxable year of the PFIC to which the PFIC Annual Information Statement pertains; and
(iv) Either -
(A) A statement that the PFIC will permit the shareholder to inspect and copy the PFICâs permanent books of account, records, and such other documents as may be maintained by the PFIC to establish that the PFICâs ordinary earnings and net capital gain are computed in accordance with U.S. income tax principles, and to verify these amounts and the shareholderâs pro rata shares thereof; or
(B) In lieu of the statement required in paragraph (g)(1)(iv)(A) of this section, a description of the alternative documentation requirements approved by the Commissioner, with a copy of the private letter ruling and the closing agreement entered into by the Commissioner and the PFIC pursuant to paragraph (g)(2) of this section.
I reached out to Optylon Krea regarding their NEXT fund and asked if they were providing a PFIC statement annually. They told me that the bank holding the participation units (like Bison Bank), will do this reporting.
I am not sure if this is unique to the NEXT fund, but why would the holding bank know anything about a fundâs activities? I figured I would check my assumptions here before clarifying with Optylon Krea. This seems incorrect to me.
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@loheiman: Did you already check with the funds listed in this thread and are still open? Wondering if the data there is accurate (maybe the funds did not firmly commit to providing a PFIC statement).
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That makes no sense. The bank would not have the information required to create a PFIC statement - you have to know the full composition of the fund and the the income/expenses. This sounds like Optylon doesnât know what theyâre talking about in the first place, which sounds like a great reason to run away.
Some of us have had to have extended conversations with these funds to get them to understand the PFIC rules in the first place; itâs unique to Americans, Americans are a new phenomenon in the PT GV arena, and far too many Amcits have no idea about PFIC or QEF or 5471 or 8938 or FBAR in the first place so these funds arenât necessarily going to be learning from their clients and/or are going to say âbut these other people havenât asked for it so why should we do it for youâ.
Bluecrow has committed to it. Rock is aware of the regs and their counsel says they are not as of this time a PFIC but will provide the appropriate statement if you feel it appropriate to elect. (Thatâs been a whole other topic of debate up-thread.)
I searched this thread (and sub group) for a reference to the NEST/NEXT funds and PFIC. All I could find were discussions on BlueCrow and Rock Capital (none managed by Optylon Krea).
If you have the time, could you link me to the thread you are referring to? I would appreciate it.
Look at posts 47-49 in this thread.
Yea I understand that Rock has provided a signed statement saying they will issue a PFIC statement though maybe after april 30th each year! Havenât seen it from Blue crow.
My concern is that none of these funds have put in their management regulations thus I donât think they really have any teeth. And if they donât provide them, or they provide them but it doesnât meet the IRS requirements, we cannot elect the QEF which then means weâre totally screwed with the default PFIC treatment.
Its true but you have to have a little faith in people.
There is no reason why they wouldnât do what they say, especially if they put it in writing.
Its a relatively trivial tasks and you are paying for it anyway, so they have nothing to lose by issuing the PFIC statement.
In my interactions with Rock, they seem quite professional and honest.
Well my concern is that theyâd be hesitant to include the clause that says the investor is free to review the fundâs books and all other documentation the fund used to determine the earnings and capital gains. That statement is required to be included. Example of the statement:
Mackenzie International Equity Index ETF will, upon receipt of a request, permit you to inspect and copy their permanent books of
account, records, and other such documents as may be maintained by Mackenzie International Equity Index ETF to establish that their
respective ordinary earnings and net capital gains are computed in accordance with U.S. income tax principles, and to verify these
amounts and your pro-rata shares thereof.
I know for a fact that at least one of those funds has that statement in their planned statement. Havenât seen a draft for the other fund yet but expect it to also be there. Both funds plan to have their statement out by the end of March.
Itâs just another thing to clarify with a fund before you invest, and if they arenât willing to prove to your satisfaction, then donât. Mostly though you shouldnât have an issue. You are, through the depository shares, an owner of the fund and have a fair bit of legal right to know whatâs on the books.
As JeffB stated The PFIC statements is purely a US investor issue and need. I talked to the firm that is doing the accounting work for Rock and they categorically stated the following in an email
âŠhas been hired to produce an annual information statement which will assist US shareholders who make a qualified electing fund election report on Form 8621."
Same with Greytech II and MedCapital.
Another one hedged saying âwell we are still looking into itâŠâ NEXT !
Good information, thank you for the update!
For folks who recently joined the thread, Rock Capital management advised me of their belief that they are not a PFIC, and they offered to provide a letter justifying their position. However, they are also committing to produce the necessary documentation that a âUS personâ investor would need for a QEF election on form 8621.
Optylon is the Advisor to NEST/NEXT. The Fund Manager is STAG. STAG is also the Fund Manager for CGA. I talked to STAG yesterday and received the same answer about issuance of information to declare a QEF designation for CGA and NEXT. They gave the same answer, that the bank would provide it. Which of course is bogus based on your summary above. How can a bank have access to the books of the fund for all the investors! So these funds clearly, unless I am missing something, would not meet the Annual Report Criteria to make a QEF designation
Larry, are you willing to disclose the funds you mentioned? I am having a difficult time finding a fund to do just that. Thanks!
Ravi, I just talked to the fund manager of both NEXT and CGA, STAG Funds. They unequivocally said the bank would such as, BIG or BISON would provide the PFIC information. Which is completely bogus.
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