How to Report Capital Gain Income from PFIC

[MAC18]

I have long term capital gain income from a Passive Foreign Investment Company (FFIC).  I have completed form 8621 (not supplied by TurboTax) showing the amount of gain.  Since form 8621 is not included with TurboTax, how do I manually get TurboTax to include this gain on the appropriate line of part II of my Schedule D?

[PattiF]

You will need to print and mail your return to add Form 8621. You cannot manually include that information in the TurboTax program.  

Please see this discussion in TurboTax about this subject.

[PattiF · Accepted solution]

 To enter the capital gain, follow these instructions:

•  Click on Income & Investments
• Scroll to Investments and Savings and click on Start (or Edit or Review)
• Click on Add Investments. And then Continue on the next page
•  Choose to Enter a different way
• Pick Stocks, Bonds, Mutual Funds and Continue
• Which bank or brokerage sent you a 1099-B for these sales?, Enter name of brokerage, and Continue
• Answer questions on next page and Continue
• Now, Choose how to enter your sales, One by one, Continue
• Continue past the page Look for your sales on your 1099-B
• You can enter your sales on the next page.
• In the first box, Sales section, Choose Short-term (or long-term) did not receive 1099-B form

Continue with the information for your sales

[MAC18]

Thank you Patti.  A PFIC does not generate a 1099-B so I did the following which seems to work best for my situation (and pretty much follows the instructions you gave me):                                                                                                             

Wages and Income

Investment Income

Stocks, Mutual Funds and Bonds.  I clicked "Update"

Add more sales

I answered "No".  I do not have a 1099-B

Description:  Capital Gain from QEF - form 8621

Date sold is 12/31/22

I entered the capital gain as the sale proceeds and I entered zero as my cost.

Holding Period is Long Term Box F (no 1099-B)

[MAC18]

It would be nice if TurboTax could add form 8621to its product.  It would be very easy for TurboTax's software to tie in 8621 and have it feed into Schedule D (for capital gains) and Schedule 1 (for ordinary income).  This would also provide TurboTax customers the added benefit of being able to e-file.

[fcp3]

But why did you use zero as your cost basis in reporting the sale?

Did you include any of this sale information on 8621 itself?  

[joann44]

It would NOT be easy for the program to include 8621 and most taxpayers shouldn't be trying to DIY that form anyway.  Even professional software doesn't do the calculations for the form, not counting very highly specialized software.  Tax professionals nearly always have to calculate that form outside of TurboTax to include it.  The odds of an individual taxpayer getting that form right are about as good as winning the lottery jackpot. It is almost never a simple form.  If you've made the proper elections for a QEF, that's the simplest way, but it still is very complex and no way should TurboTax ever offer that form. 

It's not a form for the average tax payer to attempt or even most tax professionals.   If you think it's "easy", you probably don't fully understand the form. 

[MAC18]

I calculate my share of the PFIC's capital gain by using information reported to me on the PFIC's Annual Statement.  The annual statement is the closest thing I have to a 1099 or k-1 as PFIC income does not get reported on either of of those tax forms.   All I am provided with on the Annual Statement is the ordinary income and capital gain per share.  I don't have sell proceeds and cost data for the capital gain.  By entering the gain as the proceeds and zero for cost, I am getting the correct amount of taxable gain to be reported on Schedule D.

[MAC18]

I make the QEF election.  That is pretty simple.  I just report my share of the ordinary income on line 6a of form 8621 and my share of the capital gain on line 7a of form 8621 using the information provided to me in the PFIC's Annual Statement.  It doesn't get much easier - at least for those making the QEF election. I suspect other aspects of the form are much more complicated.  From my experience, completing form 8621 is much easier than dealing with k-1's which TurboTax does include in its product.

[fcp3]

Thanks. When you earlier said you used zero as cost basis, I thought you were referring to a gain on the sale of the PFIC itself, but I understand now you are reporting your pro rata share of the PFIC’s capital gains every year.

[Alex Hill]

I second the request for basic support for the form. I don't think the poster is asking (and I'm certainly not) for TurboTax to do the calculations for me. I would like some tax software to allow me to input the results of my calculations on Form 8621 and then manually include the resulting income in other forms (Schedule D in the case of pro rata share of net capital gains).

It is incredibly frustrating that in my case — an American abroad who has simple index ETF investments, long term buy and hold only, in my country of residence (Canada) and has to file US taxes by virtue of my citizenship but never owes anything to the US due to foreign tax credit and/or exclusion — I have to file on paper because of this form, and this form only. The IRS still hasn't processed my 2021 taxes, filed on paper in June 2022!

(I wound up in this thread trying to figure out precisely which line to post QEF gains on in Schedule D.)

[MAC18]

It is my understanding that long term capital gains from a PFIC go on line 10 of schedule D.  That is where I reported my gain.  Regarding the lack of support TurboTax has for form 8621, I don't understand how less expensive competitor software, like TaxAct includes form 8621 with their product, but TurboTax does not.

[Dave-K]

This is a Cap Gain Distribution not a sale.  So here is what I did.  I created a new 1099-DIV for the company that had the PFIC Cap Gain Distribution (the same company you list on the 8621) . Then in line 2a enter in your Cap Gain Distribution.  This flows to Schedule B Box 2a Cap Gain Distribution with the name of the company and then flows to Schedule D Line 13 LT Cap Gain Distribution.  Since you file the 8621 and Schedule B (with the company name paying the Cap Gain Distribution) and Schedule D the documentation will be pretty good.  Of course as mentioned elsewhere here you have to print and mail in a paper copy of your return to add in the 8621 form.  I also insert the 8621 in my PDF copy of the forms I send in. 

I agree that TurboTax should include form 8621 at least for anything reported as "Election To Treat the PFIC as a QEF" and line 6a to 7c filled out.  That part is not so hard.  Perhaps if anything but 8621 Part II A is checked they could just say "Sorry this isn't supported by TurboTax"