Section 1291 is the default—and harshest—method of PFIC taxation, treating gains and excess distributions as if they were received evenly over the holding period and taxing them at the highest rate for each prior year. Calculating the resulting tax and interest is notoriously complex, but our software can handle it in minutes, saving you time and frustration.

The Mark-to-Market election under §1296 is a more favorable PFIC tax method than §1291, though not as beneficial as a QEF. It requires tracking annual gains, losses, and basis adjustments per share—a complex process made simple by our software, which handles the regulations, calculations, and tracking with the ease of checking a box.

The QEF election under §1295 offers the most favorable PFIC tax treatment, resembling U.S. mutual fund taxation and allowing capital gains treatment—if prior §1291 gains are addressed. Though it involves phantom income and detailed per-share tracking, our Form 8621 calculator simplifies both Pedigreed and Unpedigreed QEF calculations, even when tax years don’t align.

A deemed sale allows taxpayers making a QEF election to “purge” prior PFIC gains by recognizing them under §1291 and paying the associated tax and interest. If skipped, §1291 rules apply upon actual sale—but with our software, making the election is as easy as checking a box, automatically switching to pedigreed QEF calculations.

Did your client just become subject to U.S. taxation? By applying the transitional rule and making a Mark-to-Market election in that first year, you can avoid §1291 tax on built-in gains and step up the PFIC’s basis to fair market value. Our Form 8621 Calculator handles this automatically—just enter the value on the date of change.