Form 8621 PFICs

[The Real Halloween]

TP is filing 2019 MFJ return and has PFICs. The total value of PFICS on December 31, 2019 was USD33,000. It is my understanding that if PFIC’s value does not exceed USD50,000 (de minimis holdings exception), MFJ taxpayer can rely on this reporting exception but my reading of the Form 8621 instructions (page 5) seems to indicate that exception only for Part 1 of Form 8621 not the entire Form 8621 (A shareholder is not required to complete Part I with respect to a specific section 1291 fund). Any idea?

Thank you for your time and comment.

[itonewbie]

Depending on the type holdings and how it's held, there could be other information reporting and or filing requirements.

The dollar thresholds are just part of the conditions.  There are other requirements that need to be met.  See §1.1298-1(c)(2) for more details.

[The Real Halloween]

@itonewbie Thanks for your time and comment.

TP met all the 3 conditions spelled out in 1.1298-1(c)(2): threshold met as PFIC value is less than $50,000 on December 31, 2019, TP did not have excess distribution in 2019 (2019 distribution is less than 2018 distribution, 2018 is the year PFIC was acquired) and no QEF election has been made in 2018 and 2019.

Therefore, TP does not need to file 2019 Form 8621. Is this correct?

The IRS Form 8621 page 5 instruction on the de minimis exception is misleading as it waiving only completion of part 1 of Form 8621.  Is this right?

[itonewbie · Accepted solution]

Based on what you stated, your client probably met the conditions.  I'd assume you have reviewed activities within the funds to determine there's no excess distribution as defined in the Code.  Doing it wrong could be very costly and will keep the SOL open.