What is a PFIC and how does it affect U.S. persons investing in foreign companies?
I'm a U.S. citizen and I hold shares in a foreign investment fund that a friend recommended. I just learned about something called PFIC — Passive Foreign Investment Company — and the penalties for not reporting it sound terrifying. Can you explain what a PFIC is, how the punitive tax regime works, and what elections I can make to reduce the tax impact? I don't even know how to tell if my fund is a PFIC.
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