The income received by the Fund is reinvested into the Fund. This process does not affect the number of shares, only its value (NAV).
This Fund is an accumulation Fund and not a distribution one, means that it does not pay income to the shareholders, as mentioned above, the income received by the Fund is reinvested into it.
If there was any income distributed to the Fund’s shareholders, it would appear as “Cash/property distribution” on the table of the PFIC statement (below).
(picture of extra column on the statement )
Here’s how I interpreted it, and I completely cop to the fact that I could be dead wrong.
I’ve based this on the assumption that there are a fixed number of shares in the fund, and as a result, the reinvestment raises the NAV of each share. As opposed to distributing it and thus lowering the NAV; albeit we as investors would have cash in hand to compensate for the lower NAV.
Again, I don’t claim this is correct, merely how I (perhaps naively) interpreted Jorge’s response.
Column 1
Column 2
Column 3
Number of fund shares
1,000,000
Assuming number of shares in fund is fixed.
Original total value
1,000,000,000
Value / Share
1,000
Earnings / share
5% = 50
New fund value (original + (EPS * #shares))
1,000,000,000 + (50 * 1,000,000) = 1,050,000,000
Reinvested in underlying assets but number of shares does not increase
This math doesn’t square though - the whole thing started when we realized the increase in share price does not match the reported earnings
I suppose the charitable and possibly correct way to understand that is, that the fund’s shares are undervalued on the market. i.e. the assets they own increased in value, but that is not reflected in the price of the shares because at the most basic level people aren’t buying it
Anyway, taxes filed (or nearly, I need to mail them still)
FreeTaxUSA still doesn’t efile the 8621, so I have to mail everything. I hear from reddit that https://www.efile.com/ supports efiling the 8621, but I was already mostly done by the time I got there, so it’s USPS for me. But maybe I’ll try it next year, and maybe some of you are worse procrastinators than I am and can use it
Another question occurred to me…if we assume that we have gains in IMGA once we cash out because of citizenship or permanent residency (or other reasons), that means we’ll have capital gains to pay in Portugal. On the other hand, we’ve been paying ordinary income and CGs in the USA for the last 5+ years. Can those US taxes reduce the gains we’ve had so we end up paying less in Portugal had we not been taxed in the USA? I know foreign tax payments on worldwide income can offset income taxes in the USA, but does that also work in Portugal?
You don’t pay capital gains (on “movable” assets such as stocks or fund units) to Portugal unless you live there when liquidating your investment. In general it’s your country of residence that have the taxation rights for those.
I saw somewhere here that a poster asked if the PFIC reporting on capital gains and ordinary income was net of IMGA’s management and ops fees or if those needed to be considered when reporting to the IRS. I confirmed with Mario that what they report is net of their fees.
Question for the group - are the Bison fees deductible somehow on IRS form 8621?
You know, my first instinct is to say no because it’s an advisory fee and those are specifically not deductible… but given that SOME of the fees are specifically associated with a security, you can call those a carry charge. You can’t top-line deduct it, but it’d be like a commission, you’d add it to your basis, so you get some tax benefit from it at the end of the day.
I don’t know why I never thought of this. I suppose because it doesn’t affect me immediately.
Now, this would NOT include any Bison charges that are associated with having the account open like the account management fee, statement and document charges, etc. That’s not even close to the same thing. But the custody fee, plus any purchase/sale charges - the charge has to be related to the security, and you have to track it specifically and documentedly, so it’s a recordskeeping nightmare, but yeah I bet it is. PITA, but over 5 years, it adds up enough to matter.
Charges for paying a dividend I would think comes straight off the dividend - it’s money you never got, and never had a choice in the matter about, the bank took it before you even got it. But this might be harder because you chose to use that bank.
Greetings, all. Has anyone attempted to use the Qualified Electing Fund (QEF) on IMGA? I don’t understand all the nuances to this election, but benefits are pretty clear. Does IMGA qualify for this election?
I have a basic/stupid question. The Euro has appreciated significantly since we made our investment. Since the QEF is reported in the number of shares X gain reported on PFIC (USD), the appreciation in EURO should not have an effect on tax paid unless we sell the investment, correct?
Yes, the figures reported on a PFIC AIS that reflect the ordinary income and net capital gains of your shares in a fund that were initially calculated in EUR can increase the taxes you will pay in the U.S. when the EUR appreciates against the USD. QEF inclusions increase basis, which offsets gains when you sell your position.
Most PFIC Annual Information Statements (AIS) present figures in USD. The Fund computes its results in EUR, then translates them to USD for reporting. When the euro strengthens, that translation step itself produces higher USD ordinary earnings and net capital gain. The same portfolio performance can generate a larger inclusion simply because the exchange rate moved.
