PFICs and the Statute of Limitations- Finally Some Good News
By Anthony Diosdi Many U.S. investors in foreign mutual funds aware of the painful Passive Foreign Investment Company (“PFIC”) rules. Under the PFIC rules, U.S. investors who do not make a Qualified Electing Fund (“QEF”) election are taxed under a special excess distribution regime. Under this regime, the U.S. investor is allowed to defer taxation of the PFIC’s undistributed income until the PFIC makes an excess distribution. An excess distribution includes the following:1) A gain realized on the sale of PFIC stock, and2) Any actual distribution made by the PFIC, but only to the extent the total actual distributions received by the U.S. investor for the year exceeds 125 percent of the average actual distribution received by the investor in the preceding three taxable years (or, if shorter, the investor’s…