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Tax Perils of Passive Foreign Investment Companies for U.S. Shareholders: Reporting Obligations, Planning

PFIC Rules, Determining Company Status, Exceptions, Allocation of Income, Qualified Electing Fund Regime

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Wednesday, September 20, 2023

Recorded event now available

or call 1-800-926-7926

This CLE/CPE course will guide tax professionals and advisers on the tax challenges and reporting obligations of U.S. shareholders of passive foreign investment companies (PFICs) under current tax law. The panel will discuss key tax provisions impacting the reporting of income from PFICs by U.S. taxpayers, exceptions, allocation of income, qualified electing fund, and available planning techniques.


U.S. taxpayers may be subject to unexpected federal income tax and reporting requirements if they are shareholders of a PFIC. Tax counsel, advisers, and taxpayers must grasp key tax provisions and planning techniques to limit or avoid unintended tax liability.

The PFIC regime imposes a set of U.S. tax rules that are among the most demanding in all of the Internal Revenue Code. The PFIC rules expose U.S. taxpayers owning stock in PFICs to an ordinary income and accrued interest regime that is complicated and expensive. Although the PFIC regime aims to prevent U.S. persons from deferring U.S. taxation on passive investments held through foreign companies, taxpayers may avoid the ordinary income and interest treatment by electing to be taxed currently on income from their PFIC holdings.

The primary mechanism for opting out of the PFIC regime is the election to treat the PFIC as a QEF. This election allows U.S. taxpayers to preserve capital gain treatment for their PFIC gains and to avoid interest accrual by paying tax currently on their pro-rata share of income and gain from the QEF.

This additional election--which involves gain recognition--is reported on Form 8621. Alternatively, taxpayers holding PFIC stock may be able to make a mark-to-market election for their PFIC stock, reporting proceeds from deemed sales annually as ordinary income, but only if the PFIC stock is publicly traded.

Listen as our expert panel goes beyond the basics to provide a thorough discussion of the applicability of PFIC rules, determining foreign company status, the implications of new tax law provisions, QEF elections, and other planning techniques to avoid the PFIC regime.



  1. Overview of PFIC rules and critical provisions
  2. Identifying assets that are subject to PFIC rules
  3. Mechanisms to remove the PFIC "taint"
  4. Impact of new tax law provisions
  5. Best practices in allocating and reporting PFIC income


The panel will review these and other relevant issues:

  • How the new tax law provisions impact PFIC rules
  • Identifying assets that qualify as PFIC holdings
  • Exceptions to the PFIC rules
  • Ensuring effective allocation of income and compliance with PFIC reporting obligations
  • Planning techniques available to limit or avoid the application of PFIC rules


Owsley, John
John C. Owsley

Senior Manager, International Tax and Transaction Services
Ernst & Young

Mr. Owsley has experience in advising companies with regard to their international tax issues. He works with companies...  |  Read More

Peng, Stephen
Stephen M. Peng

Managing Director
Ernst & Young

Prior to joining EY, Mr. Peng was a tax attorney at the IRS Office of Associate Chief Counsel (International) focused...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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