Introduction: "PFIC Night At The Movies" - The "Oh My God Moment" - What could possibly be wrong with using "non-U.S. mutual funds" to save for retirement? Well, nothing unless you are American!
Enacted in 1986, and unknown until 2009, the PFIC rules lay waiting to confiscate the retirement assets of Americans abroad.
Well, would you invest in products that could result in the confiscation of your investment?
Certainly, no "U.S. Person Abroad" could/would know about PFICs on their own. To learn about PFIC, they would need the "help" of a "tax professional"
The "tax professionals" became the "friends" of the IRS - educating Australian residents about how the U.S. tax system applies to some Australians.
You thought you were simply being a responsible person investing for retirement! Wrong, wrong, wrong! Your Australian mutual fund is nothing but a "sacred instrument of tax deferral" for which you MUST BE PUNISHED! Notice the IRC specifically describes this as an "interest charge" and NOT as a tax! It is very very confiscatory!
How can this be? How the "tax professionals" connected the normal mutual fund to PFICs (sacred instruments of "tax deferral")
Well, maybe "Not All non-U.S. mutual funds are the same" - these are the regs that differentiate between "good mutual funds" and "bad mutual funds"
"Non-U.S. mutual funds": The Good, The Bad and The Ugly!
To be a PFIC or not to be a PFIC, whether tis better ...
Moving from the theoretical BS of the Internal Revenue Code as interpreted (or not) by the tax professionals to some practical thoughts