US IMGA investors tax filing

Admittedly, my purchase went through late in the calendar year (mid Dec), so perhaps there is some latency involved… dunno - am just speculating.

Beware that Turbotax doesn’t support efiling with form 8621. You need to paper file your return.

IMGA - Ações Portugal CAT R - PFIC_2021.pdf (1.3 MB)

Attached is the PFIC I got from IMGA - you can email them yourselves of course (and should!) but this is the info you’re looking for. I believe Bison also has this now and probably you can get it through them too, possibly they’ll put out their own form with your specific info?

Well, it is what you got, and you can file your taxes with it. You just have to do all the legwork of formatting into what you need it to be.

You have to figure out FBAR maximum account value yourself. Which you can, but it’s tedious, since you have to figure out the value of the account at every point in time, then apply exchange rate, and then see what the max value was.

Thank you for sharing.

Frankly I was going to estimate and add a few thousand but now you’re making me think I should make a spreadsheet haha

I read the FBAR instructions to mean that the maximum value (during the year) of any cash account (in the local currency) could be converted to dollars using the average exchange rate for the year or the published rate at the end of the year. Those exchange rates are available online. I believe the FBAR has a checkbox to designate which exchange rate was used.

That’s probably good enough.

“The maximum value of an account is a reasonable approximation of the greatest value of currency or nonmonetary assets in the account during the calendar year”

https://www.fincen.gov/reporting-maximum-account-value

So @eyedoc’s statement doesn’t seem wrong either.

Thank you!

For me, with reporting the FBAR, I think it’s most important to have accurate information on the accounts, rather than an exact value. To come up with a value, I try to error on the side of being too high vs too low. There are lots of variables in coming up with a value - valuation and currency conversion being the biggest for me.

As long as there is good faith compliance, I try not to worry about it.

FWIW - I sent email directly to IMGA and have yet to hear a response (about 1 week).

Moderator edit: Please don’t add email addresses publicly.

Yeah bem-vindo a Portugal

I emailed my lawyer and I think they pressured imga somehow, I had originally been introduced to someone directly at imga through them

Doing the calculations from the IMGA PFIC example + that youtube video (very handy, thank you!), I’m coming up with over 7k of additional income despite no distributions! This seems awfully punitive to those that invest in foreign funds.

When we sell, do we presumably get a favorable tax treatment where we only pay for the gains from the year we sold? Or are we just getting screwed

EDIT: according to what I can find, yes if we’ve paid tax on the PFIC already, you can sell without paying any more tax. Phew!

This is SOP - investors in PE in the US are taxed in the same way, namely, on a year to year passthru basis whether or not there’s a distribution.

I’ve discussed this at length elsewhere. Basically, folks investing in PE offshore are being held by the IRS to what are plus or minus the same rules for PE onshore. This makes perfect sense, really. It’s just that most people will never have run into this before, and of course no one in PT selling the funds have any knowledge of the matter with which to tell anyone that that’s what’s going to happen (nor indeed is it really their problem). I imagine some investors are going to find themselves seriously displeased to have to pay bunches of taxes out of their pocket with zero ability to sell any of the shares to pay the taxes with… hope they kept a good cash cushion…

makes one worry if it will be consistently provided on an annual basis

I eventually did hear back from IMGA, for whatever reason their published client email address flagged my request as spam. They were happy to provide the same doc you got, but suggested that Bison has all the client info, and that Bison should be the ones sending this out. Haven’t followed up there, will report back my experience.

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8938 is redundant , I agree. I just watched an hour long video last night by a US CPA/attorney who is connected to one of our RE funds we invested in. He said there are fines, though, if you don’t fill out all of them. fines run around 10,000 as stated by the IRS code! I’m getting them both filled out!

Also the 8621 has to be filed each year for every fund/account that you owned even for one day in that year was my understanding. We have 2 bank accounts and 2 different funds, so I think we’ll have 4 forms.

and then there is the FBAR form too…

Im not an expert, but those are the notes I took from the seminar. I’d say check it out with an accountant to verify if Im understanding it correctly. I plan to!

PFIC/QEF reporting example calculation

According to IMGA document

  1. Ordinary earnings is 0.000361 USD per unit per day
  2. Net capital gains is 0.003150 USD per unit per day

Assuming a holding period of 100 days and 62700 units (Invested 350k Euros on Oct 1st 2021 )

Ordinary earnings = 100 x 0.000361 x 62700 = 2263 USD
Net Capital gains = 100 x 0.003150 x 62700 = 19750 USD

So we report $2263 ordinary income and $19750 long term capital gain on form 1040 ?
All these gains are of course unrealized.

Questions

  1. Is above the dollar amounts that you see in your calculations and tax reporting ?
  2. Is the net capital gains always treated as long term in QEF ? In this example it was held less than a year.
  3. What happens when in a later time we sell the investment at a loss (The falling exchange rate) ?
  4. Seems straight forward to report this in the 8621 form. Any need for a CPA to do this ?
  1. I don’t have my actual numbers handy to compare, but sounds about right (I had fewer holding days so my numbers were smaller)
  2. Unsure offhand
  3. I assume you get to claim a loss and deduct it from your taxes like any other loss.
  4. I self reported. I’ll report back if I get arrested :stuck_out_tongue:

My tax advisor suggested taking the mark to market election, as the tax owed would be on the gain/loss for the calendar year; and that this (most likely) would result in a lower tax burden.

I’m sure it depends very much on the IMGA numbers, as well as the start/end per-unit value for a given year as to which is more tax advantageous.

Surprisingly for the 1st time ever, I’ve been looking at an investment and not wanting it to appreciate.