Can a US partnership make a QEF election?
Thus, any qualified electing fund (QEF) or mark to market (MTM) elections with respect to the PFIC will be made at the U.S. partner level. This is a departure from the existing rules, which treat the domestic partnership as the U.S. shareholder for purposes of making such PFIC elections.
When can you make a QEF election?
Under Code section 1295(b)(2), a QEF election may be made for a taxable year at any time on or before the due date (determined with regard to extensions) for filing the return for the taxable year.
What is a foreign partnership for US tax purposes?
Foreign Partnerships. A foreign partnership is any partnership (including an entity classified as a partnership) that is not organized under the laws of any state of the United States or the District of Columbia or any partnership that is treated as foreign under the income tax regulations.
What is a Qualified Electing Fund election?
The QEF or Qualified Electing Fund election under §1295 is optional method of taxation available for certain PFICs. This election most closely mirrors the US taxation of US mutual funds and allows for capital gains treatment of some of the income as long as any prior §1291 gain has been dealt with.
Who must file form 8621?
More In Forms and Instructions
A U.S. person that is a direct or indirect shareholder of a passive foreign investment company (PFIC) files Form 8621 if they: Receive certain direct or indirect distributions from a PFIC. Recognize a gain on a direct or indirect disposition of PFIC stock.
Is there a penalty for not filing form 8621?
Penalties for failure to file Form 8621 could include a $10,000 penalty (under Form 8938), and suspension of the statute of limitations with respect to the U.S. shareholder’s entire tax return until Form 8621 is filed.
How do I report QEF income?
The gain is reported on Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, filed with the taxpayer’s federal income tax return.
Can a partnership be a PFIC?
Section 1298(f) imposes a reporting requirement on each U.S. person who is a shareholder of a passive foreign investment company (PFIC). For section 1298(f) reporting purpose, a U.S. partnership is treated as an entity and classified as a shareholder if it owns (directly or indirectly) stock in a PFIC.
What is a Section 1294 election?
26 U.S. Code § 1294 – Election to extend time for payment of tax on undistributed earnings.
How do I create a 645 election?
The trustees of each qualified revocable trust (QRT) and the executor of the related estate, if any, use Form 8855 to make a section 645 election. This election allows a QRT to be treated and taxed (for income tax purposes) as part of its related estate during the election period.
Does a foreign partnership need to file a US tax return?
A foreign partnership is not required to file a partnership return, if the foreign partnership does not have gross income that is (or is treated as) effectively connected with the conduct of a trade or business within the United States (ECI) and does not have gross income (including gains) derived from sources within …
Can a US partnership have foreign partners?
A partnership must pay the withholding tax for a foreign partner even if the partnership does not have a U.S. TIN for that partner. Foreign partners must attach Copy C of Form 8805 to their U.S. income tax returns to claim a credit for their share of the IRC section 1446 tax withheld by the partnership.
How do I avoid PFIC status?
Make a check-the-box election.
This is a special election for foreign companies (but can be made retroactively up to three years in the past). Treat the foreign company as a U.S. partnership (and file a 1065 partnership return). This would help you avoid the PFIC issue.
What is a Section 1295 election?
1295. Qualified Electing Fund. I.R.C. § 1295(a) General Rule — For purposes of this part, any passive foreign investment company shall be treated as a qualified electing fund with respect to the taxpayer if—
What is QEF election for PFIC?
Under the Qualified Electing Fund (QEF) election, a U.S. person is taxed on the pro-rata share of the mutual fund’s earned income for U.S. tax purposes, split between ordinary earnings that are taxed as ordinary income and net capital gains which are taxed as capital gains at potentially preferential rates.