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****** Scenario 1: Passive Foreign Investment Company (PFIC) US taxpayer...

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Accounting

******
Scenario 1: Passive Foreign Investment Company (PFIC)
US taxpayer owns shares in a foreign mutual fund that qualifies as a PFIC.
Fund does not offer QTIP or Mark-to-Market elections.
The taxpayer has held the shares for 5 years and made no distributions.
FMV of shares: $200,000 with a basis of $80,000.
Estimated "excess distributions" from the fund: $50,000
Wages: $120,000
Interest and Dividend Income (US-based): $3,000
Itemized Deductions: $24,000
Allowable deduction for self-employment tax: None
Calculate:
The potential tax liability upon the sale of the PFIC shares.
Analyze the different tax treatment options available for PFIC holdings.

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