I've received a Schedule K-1 showing that the publicly traded partnership in which I owned shares was invested in a PFIC (passive foreign investment company). It shows that my share of the PFIC's earnings was $12 and that I received $9 in distributions.
On the Form 8621, when I make the QEF election, I put the $12 on line 6a and 6c. It says to enter this amount as ordinary income on my 1040. But, I'm not an accrual basis tax payer, but a cash basis tax payer. I only received $9 of the earnings, not the full $12. So I should only include the $9 as income on my tax return, shouldn't I?
And I also enter the $9 on line 8b? Do I enter anything else on lines 8 or 9? It's very confusing.
I'm confused about line 8 and 9. I just want to declare the income and pay tax on it, I don't want to defer paying taxes on the earnings or have to calculate interest on unpaid taxes. Do I really have to do that and keep track of that? Seriously, a whole $3?
The schedule K-1 says "These amounts are not included in your Schedule K-1 and may be required to be included in your taxable income as appropriate."
Also, how do I go about adding the tax on this to Turbotax? I thought the software would do my taxes for me but it doesn't appear that way. This seems very complex.
