Anyone notice that between 12/31/21 and 12/31/22, the EUR value went up but the USD value declined?
My understanding is that the way US IRS rules work (warning: I’m not an auditor and you need to consult your tax adviser), for M2M you would take the net gain in EUR and then multiply it by the FX. This shows a gain.
However, to you personally, you shipped off USD to buy something (IMGA), it’s current price in EUR is worth less in USD now due to Uncle Sam and FX, and therefore you really have a net loss. In fact, if you sold it and converted back to USD on 12/31/22, you would realize that net loss which IRS rules say (so far) that you did not lose as far as M2M accounting goes…
Your gains and losses are always calculated in USD. A gain in EUR can be offset by a loss in FX such that your net in USD is a loss. I believe I illustrated examples somewhere up-chain, or in some thread somewhere.
(The situation is actually slightly different when it comes to bonds, which for some reason are treated in a very specific way in Sec988. I’d have to dig out my notes on this. However, we’re not talking about bonds here, so I won’t bother.)
That is what M2M is. You are marking to market. Which is to say you are, for paper purposes, “realizing” the gain or loss as of that moment, whether or not you actually did so.
Then the following year, you determine your gain/loss based on the value you assigned to your stake as of 12/31 of last year.
This is not unique to PFIC, either. Many things in trading world are mark-to-market, notably Section 1256 contracts (primarily futures, but also forwards and some straddles) and FX trading.
Also, fwiw, my understanding is that a consistent use of FX rates is needed for M2M.
My accountant uses the IRS published average rate. Meaning that on 12/31/2021 USDEUR could be 1.13 and 1/1/2022 (the next day) it could be 1.05. Which really f’s with the realized gain/loss for M2M. QEF has the advantage of IMGA factoring all the FX data into the percentages such that you (the investor) don’t do any FX conversions.
Yes. It doesn’t have to be the IRS rates though. It just needs to be consistent. Use OANDA’s published FX rates, note it, and always use that so you can show you aren’t trying to game the system.
IMO it all comes out in the wash and it’s just when you are going to take the gain or loss one way or the other.
Hi all, US citizen on the cusp of taking the IMGA plunge and just wanted to check in with the lot of you to see how things have been going wrt PFIC.
I am working with Bison Bank (who have been good to work with so far). I have an excellent accountant here in the US. Before I pull the trigger on the purchase, though, I just want to get a sense for how big (or small) of a headache this has been for each of you over the last year when filing your taxes in the US.
I’ve filed taxes twice since owning IMGA. We get the statements from Bison and our accountant reports it in the IRS forms. I think she also attaches one of the Bison statements. Pretty straight forward so far.
you will have to get your PFIC statement from IMGA usually in March so I’ve had to file an extension both years now. Bison’s statement at year end values your non IMGA account and any money you may hold in it. As others have said, once you get somewhat familiar it’s ok. I use expattaxtools.com for PFIC valuation (they give you numbers and show you where to plug them in). Then use Taxes For Expats for tax prep. Used another service last year and they were horrible. I was going to do myself but its difficult to get the forms without the right Microsoft operating system, etc so I just had someone else do it.
Slightly off-topic, but has anyone figured out a way to track their IMGA investment using a U.S. service like Personal Capital or Mint?
I use Personal Capital to track all my investments in one place, but given the fact that IMGA is foreign, and Bison Bank no doubt doesn’t work w Personal Capital, I’m having trouble finding a workaround to fold IMGA into the rest of my investment tracking.