Part IV. Gain — Instruction 8621 — Instructions for Form

A shareholder that has made a mark-to-market election under section 1296 with respect to PFIC stock completes lines 10a through 12 with respect to PFIC stock that the shareholder holds at the close of its tax year, and lines 13a through 14c, with respect to PFIC stock that it sold or disposed of during its tax year.

As discussed earlier in Mark-to-Market Election , a shareholder may be required to complete Part V, rather than Part IV, in the first year in which a mark-to-market election is made. See section 1296(j) and Regulations sections 1.1291-1(c)(4) and 1.1296-1(i).

Lines 10a Through 12 If the fair market value of the PFIC stock as of the close of the tax year is more than the U.S. person's adjusted basis in the stock, the excess is treated as ordinary income.

If the adjusted basis of the stock is more than the fair market value as of the close of the tax year, the excess is allowed as a deduction, but only to the extent of, the lesser of:

The amount of the excess (line 10c), or
The Unreversed inclusions (defined below) with respect to such stock (line 11).

This amount is treated as an ordinary loss and as a deduction allowable in computing adjusted gross income.

Unreversed inclusions. Unreversed inclusions are the excess of the amounts that were included in income under the section 1296 mark-to-market rules for prior tax years over the amounts allowed as a deduction under the section 1296 mark-to-market rules for prior tax years. See section 1296(d) and Regulations section 1.1296-1(a)(3).

Lines 10c and 12. Corporations and individuals should include the gain or (loss) on the “other income” line of their tax returns. Other entities should include this amount on the comparable line of their tax return. However, RICs, for purposes of section 851(b), should treat amounts included in income as a dividend.

If a CFC makes a section 1296 mark-to-market election with respect to a PFIC in which it owns stock, any line 10c gain is treated as foreign personal holding company income and any line 12 loss is treated as a deduction that is allocable to foreign personal holding company income.

Lines 13 Through 14c Complete lines 13 through 14c if you sold or otherwise disposed of any section 1296 stock during the tax year. For purposes of lines 13 through 14c, “section 1296 stock” is any stock for which the taxpayer has made a mark-to-market election pursuant to section 1296(a), which is in effect for the tax year and for which the coordination rule of Regulations section 1.1296-1(i) does not apply.

Line 13c. If the fair market value of the stock on the date of sale or disposition (line 13a) is more than the U.S. person's adjusted basis in the stock on the date of sale or disposition (line 13b), the line 13c excess is a gain and is treated as ordinary income. Corporations and individuals should include the gain on the “other income” line of their tax returns. Other entities should include this amount on the comparable line of their tax return. However, RICs, for purposes of section 851(b), should treat this amount as a dividend.

If the adjusted basis of the stock (line 13b) is more than its fair market value (line 13a), the excess is a loss and is entered on line 13c as such. Furthermore, the filer must complete lines 14a and 14b, and, if applicable, line 14c.

Line 14a. Enter any Unreversed inclusions with respect to the stock (see definition, earlier).

Line 14b. Enter the loss from line 13c, but only to the extent of unreversed inclusions on line 14a. This loss is treated as ordinary loss. Corporations and individuals should include the loss on the “other income” line of their tax returns. Other entities should include this amount on the comparable line of their tax return.

Line 14c. Enter the amount by which the loss on line 13c is more than the unreversed inclusions. This amount is subject to the rules generally applicable to losses provided elsewhere in the Code and regulations thereunder. See Regulations section 1.1296-1(c)(4)(ii).

Instructions for Form 8621 (Rev. 12-2025) 13

Multiple dispositions. In the case of multiple dispositions, attach a statement for each disposition using the same format shown on lines 13 through 14c. Then:

Enter “multiple” on lines 13a, 13b, and 14a.
Enter your net ordinary gains on line 13c (do not enter any net losses on line 13c).
Enter your net ordinary losses on line 14b.
Enter your net “other” losses on line 14c.

For more information relating to mark-to-market elections under section 1296, see Regulations sections 1.1296-1 and 1.1296-2.