Become a Member

written by reader PFIC

By i963208, April 12, 2012

Travis, This question is in regards to Sandstorm Gold. I don’t understand exactly what a PFIC is. Am I responsible for taxes on money that I have not even seen yet. Please explain or direct me to a website that explains this concept more clearly. I have quite a few shares and don’t want to be caught off guard with a huge tax bill.

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

guest

12345

This site uses Akismet to reduce spam. Learn how your comment data is processed.

1 Comment
Inline Feedbacks
View all comments
Travis Johnson, Stock Gumshoe
April 13, 2012 8:43 am

PFIC’s are Passive Foreign Investment Companies — the reporting and tax requirements were set up to prevent passive pass-through foreign corporations that folks used as tax shelters, but they also get applied to foreign mutual funds and some REITs and royalty-type foreign companies. Many companies with US investors declare their PFIC status, making a declaration of their opinion based on their understanding of IRS rules, but it’s apparently very complex and the specific measures are subject to some interpretation. Franco-Nevada, for example, declared that yes, they were a PFIC last year but that they do not expect to be one this year. International Royalty did consider themselves to be a PFIC before they were taken over by Royal Gold.

Sandstorm, however, has said in the past that they’re NOT going to make such a determination. I hope that will change, particularly if and when they get a US listing in the future and have to pay more attention to the needs of US investors.

PFIC holdings, in my understanding, require making a decision about how to report and filing reports, either a variation of pass-through income to take account of the income Sandstorm makes in the year, or a mark-to-market approach that basically seems to tax you on the annual movement in shares of the stock (ie, creating a taxable gain from a paper gain, even if you don’t sell). I have never filed PFIC forms and I’m not an accountant, I’ve tried to read up on this recently because folks ask me about it quite a bit, but I really can’t give any guidance for fear of providing bad information (IRS agents, I expect, must also find PFIC rules confusing).

Here are the basic IRS instructions for the form:
http://www.irs.gov/instructions/i8621/ch01.html
And I don’t know of the wikipedia page on this is accurate, but it is fairly clear:
http://en.wikipedia.org/wiki/Passive_foreign_investment_company

Add a Topic
334
Add a Topic
2512
Add a Topic
210
👍 21714

We use cookies on this site to enhance your user experience. By clicking any link on this page you are giving your consent for us to set cookies.

More Info  
55
0
Would love your thoughts, please comment.x
()
x