The PFIC regime is increasingly becoming relevant as to many different provisions of the Internal Revenue Code, including (1) qualifying dividend income as described under 1(h)(11); (2) related person deductions under 267(a)(3)(B); (3) the application of grantor trust rules under 672(f); and (4) the constructive ownership rules of 1260.Additionally, several legislative proposals aim at increasing information reporting requirements relating to PFIC interests.
Numerous rulings have been issued by the IRS in recent years while no regulations, either proposed or temporary, have been issued.
The only other guidance has been to modify the PFIC reporting requirements in response to a comment.
Section 1298(a)(3) provides that stock owned directly or indirectly by a trust is treated as owned proportionately by its beneficiaries. Sutherland partners have significant experience in obtaining IRS PFIC guidance, through administrative pronouncements or rulings (and have obtained some of the rulings discussed above).
Further, 1298(a)(5) addresses the disposition of an indirectly owned PFIC, the foreign liquidating corporation in this case, and treats a trust beneficiary (as a result of 1298(a)(3)) as having made an indirect disposition of PFIC stock. Further, Sutherland attorneys have prepared preliminary or full assessments as to a company's status as a PFIC, have consulted on issues relating to the filing of IRS tax returns or tax audits on PFICs, have reviewed public disclosures on PFIC issues, and have generally assisted companies with other technical as well as practical PFIC issues and planning.
Each of PFIC A, PFIC B, Partnership X, and Partnership Y adopted (or were required to adopt) a taxable year ending on November 30 in order to allow the Subsidiary PFICs additional time to provide accurate Annual Information Statements. The Electing Shareholders were not deemed to own for PFIC purposes the shares of the Subsidiary PFICs. To be a Subsidiary PFIC, Partnership Y was required to have a QEF election in effect for all periods in which it held stock in the Subsidiary PFIC. beneficiaries had an ascertainable interest in the trust.