uncletravlingphil

Hi everyone,

I am a UK citizen/US resident. I have read all the advice about not holding PFICs in the UK yet I find myself in that position.

I am dealing with a specialist expat tax preparer who I think knows what they are doing and is being very helpful, and (for very fair price) is going to prepare my FBAR and Form 8621s for me. However there is one question that I am struggling to clarify with them so thought I would turn to the forum.

I hold five funds with Hargreaves Lansdown in the UK: they are all “accumulation unit” funds – that means any and all distributions/income from the fund are automatically reinvested and are reflected in the value of the units themselves, and not in the quantity of units I own. (This is unlike how my US Vanguard funds work, where I receive a distribution and Vanguard automatically buys new units on my behalf).

This means that distributions/income are essentially invisible to me – any distributions that the funds make are not listed on my account or in my statements but are reflected in increasing value of the units themselves.

Does the IRS expect me to somehow nevertheless find out the value of these invisible distributions? Or is it enough to simply tell them the BOY and EOY value of each fund?

Many thanks!

Phillip

nun

Did you make a QEF declaration?

uncletravlingphil

No, have not done that.

Cook_County

Hargreaves Landsown do not deal with US residents at all. This is set out here on their website:Open a Fund & Share Account | Hargreaves Lansdown
You will probably want to move to less toxic investment choices.

nun

So did you make a "mark to market" declaration?, in which case you declare the total gain over the year and get taxed at your marginal income tax rate. I would sell these funds asap and move the money to US mutual funds.

MidAtlantic

Incorrect. I have a SIPP with them with no issues and they know that I am a US resident. I cannot add to it.

uncletravlingphil

Yes, same here. I told them I was US resident and they said not a problem but please don't add any money.

uncletravlingphil

I've heard of mark-to-market but don't fully understand what that means.

uncletravlingphil

Thanks for replies so far folks, but I'm not looking for financial advice, nor assistance in the big question that I'm sure we are all wrestling with (namely do I want to stay in the US under President Drumpf and so should I be moving assets over here with the exchange rate where it is).

I am just looking to understand what I have to do to report the immutable facts of what my UK assets did in 2015. Any hints on what is involved in making a QEF/Mark-to-market declaration would be really useful. I need to know if I need to be calling HL now or whether I can get by with just stating my BOY and EOY asset values on my IRS forms.

Thanks all!!!!!

Phil

Neillc37

I have reported a large number of PFIC to the IRS on form 8621. My calcs were reviewed by a revenue agent. We had funds that had accumulation accounts were the fund value just grows. We also had funds that paid out a dividend and reinvested it.
Remember the PFIC rules are for anti-deferral. They are to prevent funds from deferring income so they penalize you on that income at sale time via sec 1291. So funds with accumulation accounts are examples of stuff they wanted to punish. So you don't report those as dividends. I only reported true dividends that were used to buy new shares or ones that where paid out. The accumulation stuff will get captured by sec 1291 tax and interest.

Neillc37

Isn't it highly unlikely that the funds in question have reported the correct information to the US to enable the poster to elect QEF?
More likely is that a foreign fund would want nothing to do with America and it's crazy laws.

Neillc37

In order to avoid sec 1291 he would need to make this election when he first purchased the funds or when he became a US person. Retroactive elections are not allowed.
If for example he elected mark to market now after having held the shares as a US person for many years he would trigger sec 1291 taxes as if he sold right?
It may essentially be too late to elect in a manner that doesn't cost and arm and a leg.
Currently you can stop being a US person and take your PFICs with you. Temp regs though have the US trying to impose a deemed sale on the assets when you leave. So they really want to ding you all ways.

Cook_County

I doubt one could do M2M within a SIPP as the funds are unlikely to be publicly traded on a recognized stock exchange; but you'd have to check.
The trouble with a SIPP is the annual 3520-A and 3520 reporting; if it owns PFICs, the reporting is indeed even worse.

Neillc37

If the funds are in a SIPP wouldn't that vehicle match the 'primarily used for retirement' that's in the tax treaty? Then you wouldn't have to report the funds as PFIC. There is even an exemption from filling 8621.

uncletravlingphil

My funds are not in a SIPP, ISA or anything else.