Most non-US mutual funds, ETFs, and pooled investments are PFICs to a US person. Default tax treatment (§1291) is brutal — the excess-distribution regime plus an interest charge can push effective tax above 50%. Two elections rescue the position: MTM (§1296) and QEF (§1295). Run your numbers; see which regime delivers the lowest tax.
The Passive Foreign Investment Company regime catches any non-US corporation where ≥75% of gross income is passive OR ≥50% of assets produce (or are held to produce) passive income. Result: most non-US mutual funds, ETFs, and pooled funds qualify. The default tax treatment under §1291 spreads gain pro-rata across the holding period at top ordinary rates, plus an interest charge from the first year of accrual. Effective rate frequently exceeds 50%.
Two elections rescue the position. Mark-to-market (§1296) is available for marketable PFICs and produces annual ordinary-income inclusion on the year's appreciation. QEF (§1295) requires the fund to issue a PFIC Annual Information Statement and produces pass-through-like treatment (the fund's ordinary income flows as ordinary; capital gain flows as capital gain). Both elections must be timely — for QEF, by the due date of the return for the first year of QEF treatment.
A non-US corporation where 75%+ of gross income is passive OR 50%+ of assets produce passive income. Most non-US mutual funds, ETFs, hedge funds, and PE funds satisfy. UK ISAs, European UCITS, Cayman funds, Irish ETFs — all PFICs.
MTM if marketable; QEF if the fund provides the AIS. Otherwise, the default §1291 regime applies, and the longer you hold the worse it gets. Purging election (deemed sale or deemed dividend) cleans up prior-year §1291 exposure before electing MTM or QEF.
The PFIC chapter is the strongest in the guide. The §1291 / §1296 / §1293 trade-off explained with practitioner-level clarity. Plus a purging-election playbook for prior-year PFIC holds and an Excel comparator workbook. Get the chapter and the launch notice.
International Tax — Pick the level that fits
Same practitioner voice at every tier — from the free cross-border hub to the flagship reference.
Related free tools & references
Every one of these is a working calculator or reference — no signup, no gate.
Global Intangible Low-Taxed Income mechanics with §962 overlay.
Passive foreign investment company rules — MTM vs QEF decision.
Act 60 export-services + individual-investor rules and residency tests.
Section 877A covered-expatriate rules and exit-tax mechanics.
Foreign-asset reporting comparison — thresholds, penalties, overlap.
Side-by-side jurisdictions on residency, tax, and treaty terms.
Practitioner-grade reference for the US expat filing stack.
Interactive GILTI inclusion with the §962 corporate-rate election.
PFIC regime decision tool — mark-to-market or QEF election.
Reporting-threshold checker for foreign accounts and specified assets.
Covered-expatriate mark-to-market exit tax with deferral election.
State-by-state 529 deduction reference for cross-border families.