Part III. Income — Instruction 8621

For any tax year in which the foreign corporation is not treated as a QEF because it is not a PFIC under section 1297(a), the shareholder is not required to complete Part III. However, the section 1295 election is not terminated. If the foreign corporation is treated as a PFIC in any subsequent tax year, the original election continues to apply and the shareholder must include in Part III its pro rata share of ordinary earnings and net capital gain and must also comply with the section 1295 annual reporting requirements.

All QEF shareholders complete lines 6a through 7c. If you are making Election B, also complete lines 8a through 9c.

Lines 6 and 7

Lines 6a and 7a. Enter on lines 6a and 7a, respectively, your pro rata share of the ordinary earnings and net capital gain of the QEF. The PFIC should provide these amounts or information that will help you determine your pro rata share. See Annual Election Requirements of the PFIC or Intermediary , earlier.

Lines 6b and 7b. Your share of the ordinary earnings and net capital gain of the QEF is reduced by the amounts you include in income under section 951 for the tax year with respect to the QEF. Your share of these amounts may also be reduced as provided in section 1293(g).

Line 6c. This amount is treated as ordinary income on your tax return.

For a noncorporate taxpayer, include this amount as “other income” on Schedule 1 (Form 1040), line 8z, or on the comparable line of other noncorporate tax returns. For a corporate taxpayer, include this amount as “other income” on line 10 of Form 1120, or on the comparable line of other corporate tax returns.

Line 7c. See the instructions for the Schedule D used for your tax return. Portions of the net capital gain may have to be reported on different lines of Schedule D, depending upon the information provided by the QEF concerning the section 1(h) categories of net capital gains and amounts thereof, derived by the QEF. See Regulations section 1.1293-1(a)(2) for three options a QEF may use to report and calculate capital gain.

Line 8 If you receive a distribution from the QEF during the current tax year, the distribution is first treated as a distribution out of the earnings and profits of the QEF accumulated during the year. If the total amount

The tax year in which the amount was previously included in income.

12 Instructions for Form 8621 (Rev. 12-2025)

distributed (line 8b) exceeds the amount included in income (line 8a), the excess is treated as distributed out of the most recently accumulated earnings and profits. This amount is not taxable to you if you can satisfactorily demonstrate that the excess was previously included in your income or the income of another U.S. person. This is demonstrated by attaching a statement to Form 8621 that includes the information listed under Attachments for Election E, earlier. If the excess has not been previously included in your income or the income of another U.S. person, then the excess is subject to tax according to the rules of section 301(c).

Line 9

Line 9a. Enter the total tax on your total taxable income (including your share of undistributed earnings of the QEF) for the tax year (for example, from Form 1120, Schedule J, line 11; or Form 1040, line 24).

For this purpose, “undistributed earnings” is the excess, if any, of the amount included in gross income under section 1293(a) over the sum of the amount of any distribution and the portion of the amount attributable to stock in the QEF that you transferred or otherwise disposed of before the end of the QEF's tax year.

Line 9b. Calculate your total tax as if your total taxable income did not include your share of the undistributed earnings of the QEF (line 8e). Enter this amount on line 9b.

Line 9c. For corporations, enter this deferred tax on Form 1120, Schedule J, in brackets to the left of the entry space for line 11. Subtract this deferred tax amount from the sum of lines 7, 8, and 10, and enter the difference on line 11.

For individuals, enter this deferred tax on Form 1040 in brackets to the left of the entry space for line 24. Subtract this deferred tax amount from the sum of lines 22 and 23, and enter the difference on line 24.