PFIC- form 8621

[Magoya]

I'm a US person who bought Central Fund of Canada ( Amex CEF A ) shares in 2009 in a taxable US brokerasge account.CEF is a PFIC closed end mutual fund which hold physical gold and silver, and doesn't pay ordinary earnings or net capital gains,dividends are nil ( $0.01).I did not sell any stocks in 2009 or 2010.These shares went up in both years.

No actual income to report.
I omitted these shares in F1040 and schedules B & D and TD F90-22.1 timely filed.
The questions are :
1) should I file F8621 ? for both years?
2)If I didin't get any distribution or gain, can I enter Part III lines 5-6-7 and ignore Part IV ?

"A tax liability under the excess distribution rules arise only when an actual distribution is made by the PFIC, or when the US investor disposes of his investment in the PFIC"

Any help would be greatly appreciated.

[greyfri]

I'm a US person who bought Central Fund of Canada ( Amex CEF A ) shares in 2009 in a taxable US brokerasge account.CEF is a PFIC closed end mutual fund which hold physical gold and silver, and doesn't pay ordinary earnings or net capital gains,dividends are nil ( $0.01).I did not sell any stocks in 2009 or 2010.These shares went up in both years.

No actual income to report.
I omitted these shares in F1040 and schedules B & D and TD F90-22.1 timely filed.
The questions are :
1) should I file F8621 ? for both years?
2)If I didin't get any distribution or gain, can I enter Part III lines 5-6-7 and ignore Part IV ?

"A tax liability under the excess distribution rules arise only when an actual distribution is made by the PFIC, or when the US investor disposes of his investment in the PFIC"

Any help would be greatly appreciated.

1) I don't think you need to file the FBAR form for a fund held in a US brokerage account. No harm doing so, though.

2) You are not specifically required to file form 8621. BUT, if you don't file, you are subject to the 'default' taxation regime when you sell. This is a very punitive regime. You have to pay tax at the highest marginal rate (35%) for each year on gains for that year + an interest charge. And there is a terrible paperwork nightmare if you've been buying and selling. I would assume that a gold and silver fund has likely gone up a lot in recent years.

3) Now the good news. The fund you bought is a QEF (Qualified Electing Fund), which means that it provides detailed information on undistributed capital gains and dividends to shareholders. Note that the IRS is interested in taxing undistributed capital gains and dividends from PFICs. Even better news, I think the fund had no undistributed capital gains and dividends.

So you should back file form 8621 for both years and indicate that you want to take the QEF election. I think you may need to attach it with a 1040x, although nothing else on your taxes should change. You might want to attach a letter explaining that you just learned about the PFIC status of this fund. Since there is no tax liability, I doubt it would cause a problem. If we're talking a large sum here, you might want to talk with an experienced CPA who understands PFICs in case there is some other procedure to follow to make sure the retroactive election is granted. But do try and go for the QEF election. (Indian mutual funds aren't QEFs, so this option is not available to holders of Indian mutual funds -- unfortunately). Otherwise you have to pay taxes unnecessarily when you sell.

[Magoya]

Thanks for your complete and detailed answer.
I'll give a try as per your recommendations.
Pace and Prosperity to all.