PFIC rules for American who invested in LTF/RMF

[geodesic]

Hi everyone,

I am trying to process my taxes for the year 2013, and I am stumped on how to proceed with the US side.

In order to reduce my Thai taxes, I took advantage of both the LTF and RMF deductions. I have now found out that this has exposed me to archane laws on the US side about Passive Foreign Investment Corporations, and that if I don't handle things properly, I could be exposed to punitive tax measures in the future.

Can someone who is an expert please explain this to me?

As I understand it, I can either choose a "Mark to Market" option, or I can elect to treat the income as a QEF. But when I read the form my eyes glazed over. The first question it asked is "enter the portion of line 6a that is included as income under section 951 or that may be excluded under section 1293(g)".

Excuse me? What the heck is section 951 or section 1293(g), and do either of those include normal earned income?

I don't make all that much money. I am well under the foreign income exclusion limit. I am just trying to do the best I can to provide for my family and establish some kind of retirement fund, which I would like to be denominated in Baht, as that is where all my expenses will be. This form 8621 seems needlessly abstruse.

Can anyone who is familiary with the US tax code explain to me what I should do if I am just a normal guy who doesn't have much money and just want to provide for my family?

Anyone who states that renouncing citizenship is not a smart move has obviously never tried to comply with the US tax code. This is just unnecessarily punitive. It makes me want to go back to being unemployed.

[Misty]

Hi geodesic,

I tend to agree that Form 8621 is obtuse. Although I would agree that RMFs and LTFs would be considered PFICs, unfortunately I don't think Thai RMFs and LTFs meet the standards for QEF treatment on Form 8621. Your best bet may be to go with the mark-to-market option, if you qualify to use that. But perhaps someone like Lanny who is a CPA can jump on here to verify that.

As you note, this is a technical area. Also the rules/requirements may be changing, so your best bet is to check with a CPA or other US tax advisor on this.

Hope this helps. Misty