Quick Answer: Can You Be A PFIC And A CFC?

What is the purpose of CFC?

The mission of the CFC is to promote and support philanthropy through a program that is employee focused, cost-efficient, and effective in providing all federal employees the opportunity to improve the quality of life for all..

Is capital gain subpart F income?

Only certain types of income to which Subpart F rules apply flow-through to US shareholders personal 1040 obligation, but losses do not . Subpart F Income is taxed at ordinary tax rates (not at the lower dividend or capital gain rate).

Are ETFs considered PFICs?

As these securities primarily hold investments that are passive in nature they are generally considered to be PFICs. Exchange Trade Funds (ETFs) listed on a Canadian stock exchange are generally PFICs; however, ETFs listed on a U.S. stock exchange that are set up as U.S. domestic entities are not.

What is a form 8865?

A US person who is a partner in a foreign partnership (or an entity electing to be taxed as a partnership) is required to file Form 8865 to report the income and financial position of the partnership and to report certain transactions between the partner and the partnership.

Do I need to file Form 8621?

Together with your tax return, you need to file Form 8621. This applies for each separate PFIC you are a shareholder if you: receive direct or indirect distributions from a PFIC. recognize a gain on a direct or indirect disposition of PFIC stock.

What is PFIC Annual Information Statement?

The PFIC Annual Information Statement contains information to enable you, should you so choose based on the advice of your tax advisors in light of your personal tax circumstances, to elect to treat the Golden Queen entity as a qualified electing fund (“QEF”).

Can a foreign partnership be a PFIC?

The asset test is based on gross assets. Foreign partnerships can be considered PFICs by U.S. reporting standards depending on what type of income they generate. It is very easy not to pay attention to some PFICs that are imbedded in other investments vehicles, i.e. publicly traded partnerships.

What is a PFIC for US tax purposes?

The passive foreign investment company (PFIC) regime aims to discourage US persons from forming a foreign corporation and using that company to invest in primarily passive investments, thereby attempting to shift income out of the US federal tax net.

Who should file Form 8621?

A U.S. person that owns stock of a foreign corporation and elects to treat such stock as the stock of a qualifying insurance corporation under the alternative facts and circumstances test within the meaning of section 1297(f)(2) must file a limited-information Form 8621.

How can I check my PFIC status?

In determining PFIC status when applying the Income Test and Asset Test, the statute provides a general look-through rule when a tested foreign corporation owns, directly or indirectly, at least 25% of the value of the stock of another corporation (a “Look-Through Subsidiary” or “LTS”) (the “Look-Through Rule”).

Is a foreign bank a PFIC?

The 1986 law exempted foreign banks and securities dealers that were licensed in the United States from being classified as PFICs. The new regulations deal with the status of foreign banks, financial institutions and securities dealers that are licensed to practice in their own countries but not in the United States.

What does CFC stand for?

CFCAcronymDefinitionCFCChlorofluorocarbonCFCCombined Federal CampaignCFCControlled Foreign CorporationCFCCouples for Christ166 more rows

What qualifies as a PFIC?

A passive foreign investment company (PFIC) is a corporation, located abroad, which exhibits either one of two conditions, based on either income or assets: At least 75% of the corporation’s gross income is “passive”—that is, derived investments or other sources not related to regular business operations.

What is a CFC tax?

Controlled foreign corporation (CFC) rules are features of an income tax system designed to limit artificial deferral of tax by using offshore low taxed entities. … Generally, certain classes of taxpayers must include in their income currently certain amounts earned by foreign entities they or related persons control.

What does QEF stand for?

quod erat faciendum”Q.E.F.,” sometimes written “QEF,” is an abbreviation for the Latin phrase “quod erat faciendum” (“that which was to be done”).

What income is subject to Gilti?

GILTI is calculated as the total active income earned by a US firm’s foreign affiliates that exceeds 10 percent of the firm’s depreciable tangible property.

Is cash a passive asset?

Cash is a passive asset, even if it is working capital. Since the company does not yet have IP or other business assets, it will be deemed a PFIC under the asset test.

What is a form 8621?

Form 8621 is an election that may be filed by the shareholders of a foreign corporation that is a “passive foreign investment company” or PFIC.

How is PFIC income taxed?

All capital gains from the sale of PFIC shares are treated as ordinary income for federal income tax purposes and thus are not taxed at preferential long-term capital gain rates (Sec. 1291(a)(1)(B)).

How do I avoid PFIC status?

A U.S. shareholder can avoid the PFIC interest charge and the conversion of capital gains into ordinary income by timely filing a QEF election.