A structural analysis of why PFIC §1291 computations exceed Excel's architecture — and how pfic.xyz resolves the mechanical failure points with a computation engine designed for Form 8621.
All references cite 26 U.S.C. §1291, §6621, and the official Instructions for Form 8621 (Rev. 12‑2024).
§1291 requires a 3‑year historical average of distributions to compute the 125% threshold for current‑year excess distributions. This is mechanically simple but operationally fragile.
Excel failure mode: PFIC computations span decades. Current-year numbers become next year's prior-year inputs. One corrupt file or mis‑copied value distorts all subsequent Line 15b computations.
Professionally, this mode doesn't break Excel — but it consumes review bandwidth and multiplies risk across years. If you still believe this is something Excel can reliably handle, it indicates an incomplete understanding of §1291 excess-distribution mechanics — see PFIC §1291 Calculation Explained — Form 8621 Line 16a Technical Reference.
Under §1291(c)(3), deferred tax portions allocated to PFIC years must accrue interest using quarterly §6621 rates, applied with daily compounding. The Form 8621 instructions repeat this requirement for Line 16f.
Excel failure mode: A 10‑year holding period requires 40 quarterly rate lookups. Updating the rate table, maintaining a correct VLOOKUP map, and avoiding calendar drift costs more time than the tax value it produces.
Manually sourcing interest-rate history is a structural inefficiency, not an intellectual task.
Most PFIC investors acquire shares through recurring purchases. Each lot has its own basis and holding period; §1291(b)(3)(A) requires per‑block (per‑holding‑period) treatment.
Excel failure mode: 60 monthly lots create horizontal sheet growth, replicating full §1291 tax+interest logic for every lot. Reviewing such a file in a professional setting is impractical.
At this stage, the spreadsheet becomes a structural liability for any peer review or partner sign‑off.
Partial disposals require FIFO unless specific identification rules are met. Each sale must consume oldest lots first, update remaining quantities, and recompute holding periods and interest.
Excel failure mode: Excel formulas are stateless. FIFO requires a stateful inventory engine. Pure formulas fail. VBA can do it — but maintenance collapses during filing season.
When users insert rows, alter order, or update historical data, FIFO macros break. Runtime errors turn the preparer into emergency IT support, precisely when §1291 accuracy is most critical.
§1291 computations combine requirements that Excel is not built to handle:
The calculator implements a deterministic engine for:
One cup of coffee — try it, and decide whether it's worth it for your workflow, designed to eliminate the highest‑risk failure point in PFIC compliance.