What Form 8865 Taxpayer 2023-2024

Hi, I'm Steve Fox. This video covers the tax and interest regime related to passive foreign investment companies, or P FICs, with a calculation example. Click here for the video with full coverage of P FICs. A P FIC includes any foreign mutual fund and any other foreign corporation that has more than a threshold level of passive income or passive assets. There is no minimum shareholding level for a P FIC - one share is enough. A U.S. person who owns shares of a company that qualifies as a P FIC has three basic choices: qualified electing fund or QEF, mark-to-market, or the tax and interest regime. If no choice is made on Form 8621, the tax and interest regime applies to all excess distributions. So first, let's define excess distribution. An excess distribution is the portion of distributions by a P FIC during the year that is in excess of 125 percent of the average distributions for the prior three years, plus any gain on any disposition of the shares. All dispositions count, even those that would otherwise be non-taxable. P FIC rules specifically provide that gain on any sort of disposition of P FIC shares is included in the tax and interest regime, notwithstanding any other provision of law. That means any way you stop owning the shares triggers the tax and interest regime. Here's how it works: anytime you get an excess distribution or sell shares of a P FIC, you must apportion the excess distribution, including gain, among the days you owned the shares. Any gain or distribution apportioned to post-1986 non-QEF days outside the current year is removed from current taxable income. Amounts apportioned to pre-1987 years stay in current year taxable income. For years in which you had a QEF election in effect, amounts apportioned to those...