Author Topic: PFIC classification for US investors  (Read 14153 times)

muscleman

  • Hero Member
  • *****
  • Posts: 3339
Re: PFIC classification for US investors
« Reply #20 on: April 26, 2015, 10:40:46 AM »
Just to confirm, buying PFIC stocks in a 401k plan should be fine, right? I got confused about the discussion of PFIC and ERISA accounts vs traditional IRA.
I am muslceman. I have more muscle than brain!


muscleman

  • Hero Member
  • *****
  • Posts: 3339
Re: PFIC classification for US investors
« Reply #21 on: May 15, 2015, 11:10:45 AM »
I am interested in buying some PFICs in my 401k, but I felt bewildered that the following IRS announcement doesn't include 401k.
http://www.irs.gov/pub/irs-drop/n-14-28.pdf

an
organization or an account that
 is exempt from tax under
section 501(a) because it is
described in section 501(c), 501(d), or 401(a);
a state college or uni
versity described in
section 511(a)(2)(B); a plan described in se
ction 403(b) or 457(b); an individual
retirement plan or annuity as defined in
section 7701(a)(37); or
a qualified tuition
program described in section 529 or 530.


Why would IRA and 401a be exempt from the PFIC issues but not 401k?
I am muslceman. I have more muscle than brain!

Jurgis

  • Hero Member
  • *****
  • Posts: 5270
    • Porfolio
Re: PFIC classification for US investors
« Reply #22 on: March 30, 2016, 04:15:34 PM »
Since there was renewed interest, I'm gonna post the list of CoBF favorite possibly PFICs:

Exor EXOSF - possibly
Premier Diversified Holdings PRDGF - pretty definitely
Clarke CLKFF - pretty definitely depending on year
PSHZF - Pershing Square - definitely
TPRE - possibly
GLRE - possibly

I'd like to hear any definite stories about clawbacks based on ERISA that Ham Hockers mentioned on page 1 of this thread. Any data? I did not find anything useful online regarding ERISA/PFICs.
"Human civilization? It might be a good idea." - Not Gandhi
"Before you can be rich, you must be poor." - Nef Anyo
"Money is an illusion" - Not Karl Marx
--------------------------------------------------------------------
"American History X", "Milk", "The Insider", "Dirty Money", "LBJ"

muscleman

  • Hero Member
  • *****
  • Posts: 3339
Re: PFIC classification for US investors
« Reply #23 on: March 30, 2016, 09:29:14 PM »
Since there was renewed interest, I'm gonna post the list of CoBF favorite possibly PFICs:

Exor EXOSF - possibly
Premier Diversified Holdings PRDGF - pretty definitely
Clarke CLKFF - pretty definitely depending on year
PSHZF - Pershing Square - definitely
TPRE - possibly
GLRE - possibly

I'd like to hear any definite stories about clawbacks based on ERISA that Ham Hockers mentioned on page 1 of this thread. Any data? I did not find anything useful online regarding ERISA/PFICs.

EXOR is definitely not a PFIC. The rule says if it holds more than 20% of a company's stock, then it should use look through approach. EXOR's major holdings are all over 20%, so the look through method shows it is not a PFIC.

TPRE and GLRE. No. PFIC has exceptions for banks and insurance companies.

I am muslceman. I have more muscle than brain!

Jurgis

  • Hero Member
  • *****
  • Posts: 5270
    • Porfolio
Re: PFIC classification for US investors
« Reply #24 on: March 31, 2016, 06:53:18 AM »

TPRE and GLRE. No. PFIC has exceptions for banks and insurance companies.

That's actually not quite true. There was IRS proposal in 2015 to deal exactly with hedge-funds-masquarading-as-insurance-companies. I did not find info if it went through or not.
"Human civilization? It might be a good idea." - Not Gandhi
"Before you can be rich, you must be poor." - Nef Anyo
"Money is an illusion" - Not Karl Marx
--------------------------------------------------------------------
"American History X", "Milk", "The Insider", "Dirty Money", "LBJ"

rohitc99

  • Full Member
  • ***
  • Posts: 191
Re: PFIC classification for US investors
« Reply #25 on: March 31, 2016, 07:55:23 AM »
I wrote to clarke inc and they have confirmed they are mostly likely not a PFIC. ofcourse, there is always the disclaimer to check with your accountant

muscleman

  • Hero Member
  • *****
  • Posts: 3339
Re: PFIC classification for US investors
« Reply #26 on: March 31, 2016, 09:01:55 PM »
It sounds like there is no worry if you buy PFICs in IRA or 403b. I am curious why 401k is NOT included in the exemption here. It makes no sense.

http://www.ey.com/Publication/vwLUAssets/US_persons_holding_PFIC_stock_through_tax-exempt_organizations_or_accounts_will_be_exempt_from_Form_8621_filing_requirements/$FILE/2014US_CM4364_US%20persons%20holding%20PFIC%20stock%20through%20tax-exempt%20orgs%20to%20be%20exempt%20from%20Form%208621%20filing%20reqs.pdf


"In Notice 2014-28, the IRS announced that it will amend the definition of
“shareholder” in the Section 1291 regulations to exempt US persons who indirectly
own stock in “passive foreign investment companies” (PFICs) through certain taxexempt
accounts and entities from being required to file Form 8621 for those PFICs
under Section 1298(f). The Notice covers PFICs owned by Individual retirement
accounts (i.e., IRAs), individual retirement annuities, qualified pension and deferred
compensation plans described in Sections 401(a), 403(b) or 457(b), tax-exempt
entities (e.g., charities), religious and apostolic organizations, state colleges and
universities, and qualified tuition programs, but not PFICs owned by charitable
remainder trusts described in Section 664."
I am muslceman. I have more muscle than brain!