Part VI. Information Regarding Passive Foreign Investment Companies (PFICs)

U.S. persons may be required to complete and file Form 8621 and/or include amounts in income with respect to PFICs owned through an S corporation. This includes PFICs with respect to which no qualified electing fund (QEF) or section 1296 mark-to-market (MTM) election has been made and unpedigreed QEFs (section 1291 funds), as well as PFICs with respect to which a pedigreed QEF, section 1296 MTM, or other election has been, or may be, made. For information regarding the requirement to file Form 8621, as well as certain filing exceptions, see Regulations section 1.1298-1 and the Form 8621 instructions.

Use the information provided in this Schedule K-3, Part VI (including any supplemental Attachments 5 and 6 from the S Corporation Instructions for Schedules K-2 and K-3 (Form 1120-S), if applicable), as instructed below to complete Form 8621 with respect to each PFIC for which you have a filing obligation. Additionally, for any PFIC that you own through your interest in the S corporation, use the information provided in this Schedule K-3, Part VI (including any supplemental Attachments 5 and 6, if applicable), to determine your income inclusion with respect to the PFIC (if any) and complete your U.S. federal income tax return.

If a PFIC reported on this Schedule K-3 also constitutes a CFC within the meaning of section 957 (PFIC/CFC) and you are a U.S. shareholder (within the meaning of section 951(b)) with respect to that PFIC/CFC, the information on this schedule with respect to that PFIC/CFC may not be relevant to you. The box in Section 1, column (m), will be checked if the PFIC also constitutes a CFC. See section 1297(d) for additional information. Note, however, if the S corporation elected to be treated as owning stock of a foreign corporation that is a PFIC/CFC within the meaning of section 958(a) under Proposed Regulations section 1.958-1(e)(2), and the S corporation is a U.S. shareholder of the PFIC/CFC during a tax year of the foreign corporation, the S corporation is not required to complete Schedules K-2 and K-3, Part VI, with information regarding that PFIC/CFC. You may, however, have inclusions with respect to that PFIC/CFC reported on Schedule K-1, line 10, “Other income (loss).”

Section 1—General Information

Columns (a) through (e). If you are required to complete Form 8621 with respect to a PFIC reported on this schedule, use this information to complete the Form 8621 background information.

Columns (f) through (i). If you are required to complete Form 8621 with respect to a PFIC reported on this schedule, enter this information on Form 8621, Part I, lines 1 through 4.

Note: If you are making an election under Regulations section 1.1291-10, 1.1297-3, or 1.1298-3 with respect to a PFIC reported in this Schedule K-3, Part VI, you may need additional information from the S corporation regarding the

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value of the PFIC shares reported in column (i) that is not reported here.

Column (j). This column will indicate to you (using the codes below) whether the S corporation has made an election with respect to the PFIC that binds the shareholders.

S Corporation Election Codes for Column (j)

Code Election type

QEF Qualified electing fund election

MTM Section 1296 mark-to-market election

Note: In general, if the S corporation has made a pedigreed QEF or section 1296 MTM election with respect to a PFIC, the S corporation is not required to complete Schedule K-3, Part VI, with respect to that PFIC if the S corporation files Form 8621 for that PFIC. In that case, you may not be required to file Form 8621 with respect to that PFIC and income inclusions with respect to the PFIC, if any, will be figured by the S corporation and reported to you in Schedule K-1, Part III. However, if the S corporation has made a pedigreed QEF or section 1296 MTM election with respect to a PFIC for which the S corporation does not file Form 8621, if the S corporation owns stock of an unpedigreed QEF, or if the S corporation is making a section 1296 MTM election with respect to stock in a PFIC in the current tax year if the current tax year is not the first year of the S corporation’s holding period in that stock (“non-initial section 1296 MTM election”), it is required to complete Schedule K-3, Part VI, with that PFIC’s information, and you may be required to file Form 8621 with respect to that PFIC. See Regulations section 1.1298-1(b)(2) and the Form 8621 instructions for additional information.

Additionally, if the S corporation marks to market stock of a PFIC as described in Regulations section 1.1291-1(c)(4), the S corporation generally does not need to report information about the PFIC in Schedules K-2 and K-3, Part VI. In such a case, the S corporation should report its MTM gain or loss on Schedule K and report your share of those amounts in Schedule K-1, Part III. Note, however, in such a case there may be instances in which you will need additional information from the S corporation to meet your tax obligations with respect to a PFIC for which the S corporation has marked to market the stock as described in Regulations section 1.1291-1(c)(4), such as when the section 1291 rules apply to you because the stock was not marked by the S corporation in the first year of its holding period. In such instances, the S corporation should provide you with the needed information and may use Schedule K-3, Part VI, to do so.

Columns (k) through (n). Use the information provided in these columns to make certain elections with respect to a PFIC in Form 8621, Part II. If you do not intend to make any election with respect to a PFIC reported in this Schedule K-3, Part VI, you may generally ignore these boxes for that PFIC.

If you are making an election under Regulations section 1.1291-9, 1.1297-3, or 1.1298-3 with respect to a PFIC/CFC, or a PFIC that is a former PFIC within the meaning of Regulations section 1.1291-9(j)(2)(iv), you may need additional information from the S corporation that is not reported in this Schedule K-3, Part VI, including information regarding the PFIC’s E&P.

Section 2—Additional Information on PFIC or Qualified Electing Fund (QEF)

Note: The S corporation will complete Section 2 with respect to each PFIC reported in Section 1, and each line completed for a PFIC in Section 1 corresponds to the same line in Section 2. If the PFIC has no current-year activity or has no other information for the S corporation to report in columns (c) through (o), the S corporation will only include the name and employer identification number (EIN) or reference ID number of the PFIC or QEF in columns (a) and (b) and will leave columns (c) through (o) blank with respect to that PFIC.

QEF Information

Columns (c) and (d). This information is to assist you in determining your income inclusions from certain PFICs with respect to which a QEF election has been made.

If the S corporation has made a pedigreed QEF election with respect to a PFIC, and the S corporation files Form 8621 for that PFIC, that PFIC will typically not be reported in Schedule K-3, Part VI. In that case, your share of the S corporation’s QEF inclusions, if any, will be reported to you in Schedule K-1, Part III. However, in the event the S corporation does not file Form 8621 for a PFIC with respect to which the S corporation has made a pedigreed QEF election, or if the S corporation owns stock of an unpedigreed QEF, you may be required to file Form 8621 for that PFIC. See Regulations section 1.1298-1(b)(2) for additional information.

If you are required to file Form 8621 with respect to a PFIC reported in Schedule K-3, Part VI, enter your share of the S corporation’s QEF ordinary earnings and net capital gain inclusions from columns (c) and (d) on Form 8621, Part III, lines 6a and 7a, respectively, and include these amounts in gross income on your U.S. federal income tax return unless you are making an election under section 1294 with respect to the QEF for the current tax year. If you are making a section 1294 election with respect to the QEF for the current tax year, use the rest of Form 8621, Part III, lines 8 and 9, to determine the amount of deferred tax with respect to the QEF for the current tax year.

Section 1296 Mark-to-Market Information

Columns (e) and (f). This information is to assist you in determining your gain or loss from certain PFICs with respect to which an MTM election under section 1296 has been made (MTM PFIC), including PFICs with respect to which the S corporation is making a non-initial section 1296 MTM election.

If the S corporation has made an MTM election under section 1296 with respect to a PFIC (other than a non-initial section 1296 MTM election), and the S corporation files Form 8621 for that MTM PFIC, that MTM PFIC will typically not be reported in Schedule K-3, Part VI. In that case, your share of the S corporation’s MTM gain or loss, if any, will be reported to you in Schedule K-1, Part III. However, in the event the S corporation does not file Form 8621 for an MTM PFIC or if the S corporation is making a non-initial section 1296 MTM election with respect to a PFIC, the shareholder may have a reporting obligation with respect to that PFIC. See Regulations section 1.1298-1(b)(2) for additional information. The S corporation is also not required to complete Schedule K-3, Part VI, with respect to a PFIC if it has marked stock of a PFIC to market as described in Regulations

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section 1.1291-1(c)(4), though it may provide you with certain information in Schedule K-3, Part VI, if the PFIC stock is not marked to market in the first year of the S corporation’s holding period.

If you are required to file Form 8621 with respect to an MTM PFIC reported in Schedule K-3, Part VI, enter the amount from column (f) on Form 8621, Part IV, line 10a. You may need additional information from the S corporation regarding your share of its adjusted tax basis in the MTM PFIC stock to complete the rest of Form 8621, Part IV. Your share of the S corporation’s adjusted tax basis in the MTM PFIC stock may be equal to your share of the fair market value (FMV) of the stock at the beginning of the prior tax year reported in column (e). However, your share of the S corporation’s adjusted tax basis in the MTM PFIC stock may not be equal to the FMV of the stock at the beginning of the prior tax year, depending on the amounts of the S corporation’s prior-year income inclusions and the amounts for which the S corporation was allowed a deduction with respect to the MTM PFIC. Once you determine your share of the S corporation’s adjusted tax basis in the MTM PFIC shares, enter this amount on Form 8621, Part IV, line 10b, and use the rest of Form 8621, Part IV, lines 10c through 12, to determine your MTM gain or loss to include in your U.S. federal income tax return.

Additionally, if the S corporation is making a non-initial section 1296 MTM election with respect to a PFIC, you should use the information for that PFIC in columns (g) through (o) and the corresponding instructions described below to determine whether you have received an excess distribution with respect to the PFIC stock, or whether your pro rata share of the S corporation’s section 1296(a) gain for the tax year (if any) is treated as an excess distribution. This will help you determine any corresponding other income, additional tax, and interest charges under section 1291.

Section 1291 and Other Information

Note: Generally, this information is to assist you in satisfying any information reporting obligations for, and in figuring income inclusions with respect to, section 1291 funds. However, except as otherwise provided, this information may be relevant to PFICs with respect to which a pedigreed QEF election, section 1296 MTM election (including a non-initial section 1296 MTM election), or other election has been made by you or the S corporation.

Column (g). This information is provided to help you assess your holding period in the PFIC stock through your ownership in the S corporation. Unless also provided in Section 1, column (g), with respect to an acquisition of stock in the PFIC during the S corporation’s tax year, these dates do not need to be entered on Form 8621 or on your U.S. federal income tax return.

Note: The dates entered in this column (g) will be the dates on which the S corporation acquired the PFIC stock. If you acquired your interest in the S corporation after the date listed with respect to a PFIC, you may have a different holding period with respect to the PFIC stock.

Column (h). Your share of the amount of cash and FMV of property distributed by the PFIC during the tax year may be reported in different parts of Form 8621, or not reported at all on Form 8621.

Note: Deemed distributions by QEFs are not reported in Schedule K-3, Part VI. If you make, or have made, an election under section 1294 and are deemed to have received a distribution from the QEF, this information is required to complete Form 8621. See section 1294(f) and Temporary Regulations section 1.1294-1T for additional information.

Note: If you have made a section 1294 election with respect to a QEF owned by the S corporation, a distribution of earnings by the QEF will terminate the section 1294 election to the extent the election is attributable to the earnings distributed. In such a case, enter the amount of the distribution on Form 8621, Part VI, line 22. See Temporary Regulations section 1.1294-1T(e) and the Form 8621, Part VI, instructions for additional information.

Column (i). This information is to help you assess any information related to the date of a distribution from a PFIC. You do not need to enter these dates on Form 8621 or on your U.S. federal income tax return.

Column (j). This information is to help you assess any available foreign tax credit attributable to an excess distribution from a section 1291 fund or PFIC with respect to which the S corporation is making a non-initial section 1296 MTM election in which you are a shareholder through your ownership in the S corporation. If you are required to file Form 8621 with respect to one of these types of PFICs owned by the S corporation, use this amount to determine your foreign tax credit to include on Part V, line 16d. See section 1291(g) for additional information on creditable foreign taxes.

Column (k). This information is to help you assess your excess distribution and resulting other income, additional tax, and interest charge with respect to each section 1291 fund in which you are a shareholder through your ownership in the S corporation or for a PFIC with respect to which the S corporation is making a non-initial section 1296 MTM election. If you are required to file Form 8621 with respect to one of these types of PFICs owned by the S corporation, use this amount to determine the amount to include on Form 8621, Part V, line 15b, and use the rest of Form 8621, Part V, lines 15 and 16, to determine the amount of any excess distribution and resulting other income, additional tax, and interest charge to include on your U.S. federal income tax return with respect to the section 1291 fund.

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Note: The information in column (k) is only relevant with respect to section 1291 funds and PFICs with respect to which the S corporation is making a non-initial section 1296 MTM election and is not relevant for any PFIC with respect to which a pedigreed QEF election or other section 1296 MTM election has been, or may be, made.

Column (l). This information is provided to help you assess the treatment to you on any disposition by the S corporation of stock in a PFIC in combination with column (g). These dates do not need to be entered on Form 8621.

Note: Your holding period of the PFIC stock may have begun on a different date than the S corporation’s holding period.

Columns (m) through (o). This information is to assist you in figuring any gain or loss on the S corporation’s disposition of PFIC stock.

For each section 1291 fund in which you are a shareholder through your ownership in the S corporation or for any PFIC with respect to which the S corporation is making a non-initial section 1296 MTM election for which you are required to file Form 8621, enter the amount from column (o), on Form 8621, Part V, line 15f, and use the rest of Form 8621, Part V, line 16, to determine the amount of any resulting other income, additional tax, and interest charge to include on your U.S. federal income tax return with respect to the PFIC.

For each MTM PFIC in which you are a shareholder through your ownership in the S corporation (including PFICs with respect to which the S corporation is making a non-initial section 1296 MTM election), and with respect to which you are required to file Form 8621, enter the amounts from columns (m) and (n), on Form 8621, Part IV, lines 13a and 13b, respectively. Complete the rest of Form 8621, Part IV, lines 13 and 14, to determine your MTM gain or loss to include on your U.S. federal income tax return.

For each QEF in which you are a shareholder through your ownership in the S corporation with respect to which you have previously made a section 1294 election, and for which you are required to file Form 8621, if amounts are reported in columns (m) through (o) with respect to that QEF, the disposition may have partially or completely terminated your election, and you may need to complete Form 8621, Part VI, lines 22 through 24. See Temporary Regulations section 1.1294-1T and the Form 8621 instructions for additional information.