Do I need to file Form 8621

Forum|Forum|3 years ago
March 27, 2023
1 reply
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I bought $20,000 of a PFIC, PHYS, that has no income or capital gains of it's own this year. On form 8621 instructions IRS says joint returns are exempt from filing 8621 if less than $50,000 invested and no income, cap gains or sales of the investment.

PHYS apparently has never produced income or cap gains.

Does this mean that we do not have to file 8621 until the year we sell PHYS for a capital gain?

Best answer by JohnW152

Based on the facts you're providing, it doesn't appear that you meet any of the requirements that would trigger the need to file Form 8621 for this tax year.

That doesn't necessarily mean that you wouldn't have to file the form until you make a sale for a capital gain. There are a number of scenarios that might require Form 8621 to be filed.

According to Passive Foreign Investment Corporation (PFIC) under Who Must File in the Instructions for Form 8621:

Generally, a U.S. person that is a direct or indirect shareholder of a PFIC must file Form 8621 for each tax year under the following five circumstances if the U.S. person:

Receives certain direct or indirect distributions from a PFIC,
Recognizes gain on a direct or indirect disposition of PFIC stock,
Is reporting information with respect to a Qualified Electing Fund (QEF) or section 1296 mark-to-market election,
Is making an election reportable in Part II of the form, or
Is required to file an annual report pursuant to section 1298(f). See the Part I instructions, later, for more information regarding the person that must file pursuant to section 1298(f).

You'll notice that any one of these scenarios will trigger the requirement to file Form 8621, but your fact situation doesn't seem to be among them. Please see the Instructions for more information.

JohnW152Answer

Level 15

Based on the facts you're providing, it doesn't appear that you meet any of the requirements that would trigger the need to file Form 8621 for this tax year.

That doesn't necessarily mean that you wouldn't have to file the form until you make a sale for a capital gain. There are a number of scenarios that might require Form 8621 to be filed.

According to Passive Foreign Investment Corporation (PFIC) under Who Must File in the Instructions for Form 8621:

Generally, a U.S. person that is a direct or indirect shareholder of a PFIC must file Form 8621 for each tax year under the following five circumstances if the U.S. person:

Receives certain direct or indirect distributions from a PFIC,
Recognizes gain on a direct or indirect disposition of PFIC stock,
Is reporting information with respect to a Qualified Electing Fund (QEF) or section 1296 mark-to-market election,
Is making an election reportable in Part II of the form, or
Is required to file an annual report pursuant to section 1298(f). See the Part I instructions, later, for more information regarding the person that must file pursuant to section 1298(f).