PFICs and IRS Form 8621 Assessments: Tech Talk

PFICs and IRS Form 8621 Assessments: Tech Talk

Congratulations to tax attorneys Robert S. Schwartz & Elizabeth C. Petite on a great win! The Tax Court's recent decision in Roberto Toso and Marcela Salman v. Commissioner US Tax Court, Dkt. 8324-15 151 TC ___ No. 4, September 4, 2018 sheds some light on two aspects of reporting foreign income from Passive Foreign Investment Companies to the IRS. The first item is that the IRS got hoisted by its own process. PFIC income does not necessarily change AGI, but rather Form 8621 calculates income and then imposes the highest marginal rate to create a tax due, then this tax due goes on a tax return AFTER adjusted gross income is calculated, along with interest.. Meaning, not all unreported PFIC income is subject to the substantial understatement rule that can open a tax return for an additional 3 years of audit. Also, the Tax Court ruled, in a believed-case of first impression, that the HIRE Act only applies to foreign informational returns that were open when the HIRE Act was signed into law. Meaning, if a foreign information return assessment statute ASED) was closed in 2010, the HIRE Act does not open it. However, post-2010, any unfiled foreign informational return (Form 8938, Form 5471, Form 5472, Form 8865, Form 8858, Form 926, Form 3520, Form 3520-A) can keep an assessment open indefinitely. Yet, a proper disclosure can close those open years, even if there was unreported income. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/0qawBZUpn5Q IRS Medic