Contact UsWorking on Form 8621 for a client who owns some Canadian mutual funds in her investment account. She has not made the Mark to Market or QEF elections so I think I complete Part V of Form 8621 but I am confused by Line 15b. The line description on the form is unclear and instructions missing.
TaxConnections Members... Answer This Question
Want To be One of Our Tax Experts? Register Here
Tax Professional Answers
Mary Beth Lougen EA USTCP
The calculations to determine the correct Form 8621 Line 15b are often overlooked for two reasons. First, there is no clear explanation of what is needed and second, the number needs to be adjusted any time there has been an excess distribution subject to 1291 tax in the prior years.
A separate Part V must be completed for each block of shares, which means that Line 15b must be calculated for each share (or block of shares). The amount of distributions received in the prior three years will be reduced by the amount of those distributions that were subject to 1291 tax in the year of distribution, and if the shareholder has only owned the investment for a partial year the line 15b amount would be increased by the distributions that would have been received had the shareholder owned the investment for the entire year.
There are lots of moving pieces when you work with Passive Foreign Investment Companies (PFICs) and I have found spreadsheets can be woefully inadequate for being able to make all the required calculations and carry forward adjustments for PFICs. Form 8621 Calculator is an online software program that does all of the calculations based on the numbers entered from client statements and it allows me to finish a form in under 15 minutes. The software provides a set of calculation PDFs so you can see each of the line 15b adjustments were made and they are set to carry forward to the next year.
Leave a Comment
416 weeks ago
A separate Part V must be completed for each block of shares, which means that Line 15b must be calculated for each share (or block of shares). The amount of distributions received in the prior three years will be reduced by the amount of those distributions that were subject to 1291 tax in the year of distribution, and if the shareholder has only owned the investment for a partial year the line 15b amount would be increased by the distributions that would have been received had the shareholder owned the investment for the entire year.
There are lots of moving pieces when you work with Passive Foreign Investment Companies (PFICs) and I have found spreadsheets can be woefully inadequate for being able to make all the required calculations and carry forward adjustments for PFICs. Form 8621 Calculator is an online software program that does all of the calculations based on the numbers entered from client statements and it allows me to finish a form in under 15 minutes. The software provides a set of calculation PDFs so you can see each of the line 15b adjustments were made and they are set to carry forward to the next year.