PFIC Transactions That Should Be Ignored for Form 8621
This guide explains which PFIC transactions actually trigger U.S. tax and Form 8621 reporting, and which internal transactions can be ignored for purposes of sections 1291, 1293, and 1296.
IRS Principles for Ignoring PFIC Transactions
Under IRC §1291, only two events create PFIC tax consequences:
- Distributions from a PFIC (including excess distributions).
- Gain on the sale or other disposition of PFIC stock.
Under §1293 (QEF) and §1296 (MTM), only statutory basis adjustments—annual inclusions or deductions—affect Form 8621.
Therefore, if a transaction is not: a real distribution, a real purchase/sale of PFIC units, or a QEF/MTM basis adjustment, it must be classified as Ignore.
Official IRS Sources
- IRS Form 8621 Instructions — Distributions & disposition rules https://www.irs.gov/instructions/i8621
- IRC §1291 (Excess distribution regime) law.cornell.edu/uscode/text/26/1291
- IRC §1293 (QEF basis adjustments) law.cornell.edu/uscode/text/26/1293
- IRC §1296 (Mark-to-market PFIC) law.cornell.edu/uscode/text/26/1296
Common PFIC Transactions That Should Be Ignored
Internal Transactions Usually Mapped as “Ignore”
The entries below generally reflect internal accounting only—no cash received, no units bought or sold, and no QEF or MTM basis adjustment. For §1291 and §1296 purposes, they are normally classified as Ignore:
- “Investment earnings” that simply explain changes in NAV (taxable or non-taxable on the local statement).
- PIE or PIR tax charges recorded inside the policy or wrapper.
- Policy charges, mandated fees, platform fees, admin fees, and management fees netted inside the fund.
- Automatic rebalancing or model-portfolio adjustments between sub-funds.
- Pure valuation changes or internal unit revaluations that do not change the number of units you hold.
When building your PFIC data set for Form 8621, mark these rows as Ignore so they are fully excluded from:
- Section 1291 excess-distribution calculations.
- Mark-to-market income or loss under section 1296.
- Cost basis, gain/loss, and any reported distributions.
The only rows you should carry into the PFIC engine are: actual cash/property distributions, purchases and sales of PFIC units, and clearly identified QEF or MTM basis adjustments.
| Date | Details | Units | Value |
|---|---|---|---|
| 2018-09-18 | Investment earnings (non-taxable) | 0.28 | 0.28 |
| 2018-09-19 | Investment earnings (taxable) | -8.50 | -8.50 |
| 2018-09-21 | Mship Fee | -2.81 | -2.81 |
| 2018-09-20 | PIE Tax | 4.46 | 4.46 |
| 2018-09-28 | Fee | -8.42 | -8.42 |
| 2018-10-11 | Account Fee | -1.33 | -1.33 |
| 2018-10-12 | Management Fees | -3.53 | -3.53 |