I have a client in California with a PFIC investment. I have completed Form 8621 but how do I handle the state return?
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Mary Beth Lougen EA USTCP
California does not recognize IRC sections 1291-1298 that outline the federal taxation of the very specialized foreign investments. Instead refer to the Voluntary Compliance Initiative FAQs and you will find their position is that a foreign corporation is treated as a regular corporation. Income will not be recognized, nor taxes imposed, until a distribution is received or a disposition has occurred. Be careful to properly adjust the income and track basis for California purposes.
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425 weeks ago