It’s a one way election. The default is that there is no special treatment. You can elect QEF, or MTM. You can wait to elect QEF or MTM. Once you elect, though, that’s it, you’ve chosen and that’s that. Or, it’s painful/messy to change it, anyway. It’s unclear. I’d have to dig at it a lot harder for any clarity.
No, I don’t believe so.
I’ve spoken about this before, and this is also the view of my tax lawyer and accountant (not the same people, by the way, though they work for the same firm.) The IRS isn’t out to pounce on esoteric errors. “Substantial compliance” is the benchmark. I believe I’ve even seen it enshrined in IRS code somewhere. “close” counts in horseshoes, curling, and in tax filings.
My belief would be that PFIC just doesn’t come up that much. Who would it affect on the whole?
a handful of people who use IB/Schwab to buy shares of some oddball Canadian royalty trusts, the dollar amounts of which are likely trivial
some folks living overseas who have investments overseas, who are already in a world of hurts
rich people investing in stuff overseas, who already need accountants and lawyers
multinational corporations and hedge funds
Not a huge customer base there for the average accountant.
The average US resident just isn’t going to run into CFC/PFIC regs, so the average accountant has no reason to look at it, and they ARE complex if you try to understand the whole scope of it. The specific case of the NGer who just owns a well-regulated QEF-conforming GV fund or two really isn’t all that complex - I and others have left plenty of bread crumbs here for the reasonably literate self-filer to be able to figure it out - but it’s not complicated because it’s such a well-defined, limited case; it gets messy super-fast once you step out of the box. However, I imagine a practitioner isn’t going to want to think about it in the same way. When they sign their name to the tax return, they’re taking on some non-trivial risk, and they’re going to want to understand everything that’s going on before they do that, which to them is going to mean understanding the broader body of knowledge, which means a fair bit of work… are you worth it? Better to send you to a specialist (who is gonna charge like it).
because it’s a bank. it’s not the fund. It knows nothing about the contents of the fund and can provide no relevant information. It just knows you have some N shares of fund Y. It duly reports them to the Portuguese authorities, no doubt. The IRS requires it to report FACTA value so it does that. Beyond that, what does it need to be doing?
Many thanks for your email.
We will issue that statement (and others) after the annual audit process of the funds is closed, which will happen on the 2nd half of March.
It will be sent to the banks as soon it will produced.
Bison is the depository and knows which of its customers are holding the fund (and which are American and need to report it). They should be also requesting the statement from the fund and then distributing to their clients. That’s all. The fund, on the other hand, probably does not have this information (or it would be distributing the material instead of requiring that it be requested).
You might think this should be the case, and I agree it might be nice if they provided more services for the fees charged, but they have no regulatory obligation to do so, and by European standards the fees they are charging are NOT all so high. You’re paying a bare-bones service fee. So you get bare-bones service. Which apparently does not include the transfer of PFIC statements.
I speak this from the POV of someone who has some experience with such matters. I’m not saying I like the situation, I am just saying that’s how it is.
I would guess that like many smaller entities, they have to audit their accounts, and then issue the paperwork.
If one normally deals with offshore reporting and/or MLPs, this seems to be a consistent timeline.
FWIW, the big guys pay big bucks to get their audits in first… think about all the companies that report FYE December audited accounts in January, including reconciliation, etc… lots of work for them to do to be in that reporting position
Exactly what the IMGA guy said, as reported verbatim above. I’m not in a HUGE rush, though this is holding up my taxes (and a big return, I think, depending on the IMGA numbers!)
Here’s the response I had from Bison asking for the PFIC:
Blockquote
The information regarding the PFIC has to be prepared by the Fund Manager. Here you have the contact of person Comercial Director of IMGA. The Bank will make available next month a annual statement.
A significant factor is, are you dependent on someone else doing their audited returns? If you can’t close your books until all the folks you’re dependent on for numbers close their books… chain reaction.
Most people who invest in private equity are, by now, used to filing extensions. My taxes generally get submitted in October. It upset me at first, but I’ve gotten used to it. Once you realize how little it matters, you become more relaxed about the whole matter and learn to laugh at everyone panicking to get their forms in before April 15th.
Oh yeah, and remember that these Portuguese funds have No Regulatory Obligation Whatsoever to crank out your PFIC statement on time. Sure, you as a client might not like it, and sure they may have made some commitment to crank out a PFIC statement, but good luck taking that to the IRS.
You’re not in Kansas any more. (Well, maybe you are, I can’t speak to that.) Never expected any of this kind of fun as part of your new passport did ya?
Since US taxes have to be settled in USD, I assume that for a M2M election, I’d calculate the USD value on Jan1 (#shares * EUR/share * USD/EUR) and on 31 Dec - that’s my gain-loss for the year. And IIRC, this is ORDINARY income - no capital gains aspect to this. I might be misremembering this, of course.
For QEF, the percentages given already factor the exchange rate, right? So I just take #shares * #days for each of the two, and that’s the ordinary and capital gains to report. And if the Euro tanked during the year, then the reported values could easily show a loss.
Anyway - something people probably already know about, but given this is only the 2nd year I’ve done this, still learning the ropes… The frustrating part is dealing with all of this and deriving ZERO value from it, while the SEF process grinds on. But that’s for another thread.
MTM is ordinary, yes, since it can’t really be quantified and by definition isn’t over a year.
You always convert all amounts to USD as of the appropriate time and then calculate. this can get a little tricky since say your PFIC shows a EUR 1000 cap gain… convert to USD as of… when? There is an official published IRS exchange rate you can use, or you can use EOY, just be consistent in what you do, don’t try to time it or gain it.
If you are given a number in USD, you can just use it as is, of course. But not all PFIC statements come through as USD.
I quote ‘loss’ as (1) I’m still learning my way though this and so could be wrong, and (2) the ‘loss’ could be due to exchange rate fluctuations.
Does the form from IMGA show negative percentages? Something else?
As a simplistic example, say I buy 5 shares at 1€ each (value 5.00 €) , and a EURUSD of 1.10. My USD value is 5.50$. A year later, my 5 shares have appreciated 5% (value: 5.25€) but the EURUSD is at 1.01. Now my USD value would be 5.30$ So I ‘lost’ 0.20$. (5.50$ - 5.30$)
So, even though the underlying asset appreciated, due to the dollar being stronger, I lost value when I apply the exchange rates.
How would this be reported via the form from IMGA?
Alternatively, if I am a clueless n00b, please help educate me
If the PFIC form is in EUR, then you convert to USD, and your gain/loss as shown on 8621 is whatever it is in USD terms irrespective of what the form might show. Since it is the line items that carry over, you convert each line item to USD as it sits.
I would be inclined to use the official USD-EUR rate as listed by IRS, but I don’t see an issue with using the 12/31 value as long as you are consistent about its application year to year.
This is in the instructions somewhere I am fairly sure.
My issue is that last year I did M2M, not knowing any better, and not having the PFIC form from IMGA. This year, I assume I have the option of shifting to QEF.
However, the 2022 tax year was (for me) very complicated, and while I did a fair amount of tax planning, doing the PFIC and having to file for an extension (where I’m still on the hook for anything I owe as of 15 Apr) leaves me thinking the M2M is more of a sure bet.
In the M2M scenario, assuming I’m reading the instructions correctly (and yes, I will consult a tax advisor), I can claim as a ‘loss’, (up to the previous ‘gain’ reported) against ordinary income. And I have ‘loss’ in quotes as per my previous post, due to the dollar being stronger, the overall USD value dropped.
So perhaps more than anything I’m trying to educate myself on how this works so that when I do talk to the CPA, I can ask intelligent questions and maybe even understand the answers
