Need help with PFIC, pedigreed QEF, and form 8621 - completely lost!

You're definitely in a complicated tax situation, but I think you're on the right track with your approach. When a regular investment turns into a PFIC due to a corporate action, it creates some headaches. The deemed sale election with a QEF election is generally the right approach in your situation. Since you didn't know about the PFIC status in 2022 and didn't file Form 8621 then, you're now trying to properly account for it in 2023. What you're looking to do is essentially reset the clock by making a deemed sale (marking the investment to market value as of January 1, 2023) and then electing QEF treatment going forward. This creates what's called a "pedigreed QEF" - meaning it's been a QEF for its entire holding period in your hands (after the deemed sale). The main requirement for making this election is that you need to have the PFIC's annual information statement, which should provide the ordinary earnings and net capital gain that you'll need to report. Have you been able to get that information from the company?

After struggling with PFIC reporting for multiple investments, I found an incredible tool that saved me so much time and frustration. I was in a similar situation with a foreign ETF that turned into a PFIC, and I couldn't get any accountant to help without charging me thousands. I discovered https://taxr.ai which literally saved my sanity. Their system specifically handles PFICs and Form 8621 preparation. I uploaded my investment statements and their AI guided me through the whole process, including helping me determine if my deemed sale election was valid and calculating all the amounts needed for the form. The best part was that it explained every step in plain English (unlike the IRS instructions). It even flagged that I needed to make sure my foreign fund qualified for QEF treatment and helped me locate the right annual information statement by providing specific language to request from my investment company.

Just wanted to follow up about my experience with taxr.ai. After asking about it here, I decided to give it a try for my PFIC nightmare. I had 4 different PFICs and was completely lost with the excess distribution calculations. The tool was surprisingly good! It walked me through each PFIC separately, helped me determine which election methods were available for each one, and then calculated everything - including the interest charge which was the part I was most confused about. It even showed me exactly where each number should go on Form 8621. What really helped was that it explained the "once a PFIC, always a PFIC" rule that applied to one of my investments and caught a mistake I was about to make with the dates. Saved me from what would have been a costly error. For anyone dealing with Form 8621 and pedigreed QEF elections, definitely check it out!

I see you mentioned calling 12 different CPAs with no luck. I had the exact same problem last year with my PFIC reporting. After weeks of frustration trying to reach someone at the IRS for clarification (endless busy signals and holds), I found https://claimyr.com which literally connected me with an actual IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with was surprisingly helpful about Form 8621 and walked me through the specific requirements for making a valid deemed sale election with QEF. She clarified that I needed to attach a specific statement to my return explaining the deemed sale and that the annual information statement had to contain particular information. This saved me from making some serious mistakes since the official instructions are so confusing. They got me through to the right department that actually deals with international tax issues.

I need to follow up on my skeptical comment about Claimyr. I was wrong and I apologize. After my PFIC situation became desperate (facing penalties if I didn't file correctly), I decided to try the service despite my doubts. To my absolute shock, I was connected to an IRS agent in about an hour. I asked for the international tax department and got transferred to someone who actually knew about Form 8621. She clarified that I couldn't make a QEF election without the annual information statement, which I suspected but wasn't 100% sure about. She also explained how to properly document my reasonable cause statement for not filing the form in previous years (since I didn't know about the PFIC status). This was incredibly valuable info that I couldn't find anywhere else. So yeah, I was completely wrong in my skepticism. The service works exactly as advertised and saved me from making some serious errors on my return.

I went through this exact same PFIC nightmare last year. One thing that nobody has mentioned yet is that you need to file a separate Form 8621 for EACH PFIC you own. And you need to attach them all to your tax return. Also, if you're going the deemed sale + QEF route, make sure you clearly label your deemed sale election statement and attach it to your return. I didn't label mine properly last year and got a notice from the IRS asking for clarification. For the annual information statement requirement - not all PFICs provide these. If yours doesn't, you might be stuck with the excess distribution method, which is WAY more complicated and generally results in higher taxes. Have you checked if your company provides the PFIC annual information statement?

One thing nobody mentioned yet - if you didn't file Form 8621 for 2022 when the PFIC status started, you might need to file amended returns. The IRS requires Form 8621 to be filed for each year you hold a PFIC, even if there are no transactions or elections being made. Missing this form can potentially suspend the statute of limitations on your entire tax return, meaning the IRS could audit that year indefinitely. You might want to file Form 8621 for 2022 with a "reasonable cause" statement explaining that you weren't aware of the PFIC status at that time. This could help avoid penalties.

I've been following this thread closely since I dealt with a similar PFIC situation last year. Based on your description, you're definitely on the right track with the deemed sale + QEF election approach, but there are a few critical details you need to nail down. First, regarding your 2022 situation - since MTNF became a PFIC on August 15, 2022, you technically should have filed Form 8621 for that partial year, even though you received a K1. The PFIC rules override the partnership tax treatment once the entity qualifies as a PFIC. As others mentioned, you should consider filing an amended 2022 return with Form 8621 and a reasonable cause statement explaining you weren't aware of the PFIC status change. For your 2023 deemed sale election, the key requirement is that you must be able to demonstrate that making a QEF election is "in the best interests of the taxpayer." This usually means you need to show that QEF treatment will result in lower taxes than the excess distribution method. The IRS looks at factors like your expected holding period and the fund's expected income profile. One thing to double-check: make sure your investment actually qualifies for deemed sale treatment. Some corporate reorganizations can complicate this, especially if there were multiple steps in the merger process. You might want to review the exact structure of that August 2022 transaction to confirm your basis calculations are correct. Have you been able to get any response from the company's investor relations team about the annual information statement yet?