How to calculate Form 8621 Part V – line 15

Take the average of the distributions for the last 3 years and multiply by 125%- this is the amount that is a non-excess distribution in the current year- right? WRONG! It’s not that easy, it’s never that easy in the world of PFICs.

Infamous and often ignored line 15b on Form 8621 is a bit more complicated that it appears on the face.

Form 8621 Line 15b.

“Enter the total distributions (reduced by the portions of such distributions that were excess distributions but not included in income under section 1291(a)(1)(B)) made by the fund with respect to the applicable stock for each of the 3 years preceding the current tax year (or if shorter, the portion of the shareholder’s holding period before the current tax year)”

If you read paying special attention to the verbiage in parenthesis you will realize that the amounts of distributions used on line 15b have to be adjusted down for any amounts that were considered excess distributions in the prior 3 years but not included as ordinary income because it was the basis for the 1291 tax calculation.

If the PFIC is owned for less than 3 years you can use the average of the shorter holding period multiplied by 125% to get the amount of non-excess distribution in the current year.

For a detailed explanation of the line 15b adjustment including both excess distributions and return of capital check out our recorded webinar and annotated guide to the webinar. PFIC expert Mary Beth Lougen EA USTCP takes you through the line step-by-step and equation-by-equation to arrive at the correct amount of prior year distributions.

Watch for more webinars and training videos on more PFIC topics. Our live training schedule is on our Calendar of events- come see Mary Beth in person and attend a PFIC Workshop!