Entire PFIC stock gain counts toward the 25% omission calculation

Number

201247015

Outcome

Advice

Document type

Chief Counsel Advice

IRS subject

Omission of Income (25% Rule), Exception to Period of Limitations

Topics

Procedure, penalties, and administration

Code sections

§ 61, § 6501, § 8621, § 1291

Ruling dated

September 12, 2012

Publicly released

November 23, 2012

Source

View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2012, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.

About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.

View official IRS release (PDF)

Plain-English summary

Chief Counsel advised that the entire net gain on the disposition of PFIC stock is included in gross income when calculating the 25% omission threshold under IRC § 6501(e). The gain must be reported on Form 8621, with the ordinary-income portion reported as taxable income and the remainder subject to the deferred-tax and interest computation under the PFIC rules. The advice treated gross income for this purpose as having the general meaning in IRC § 61(a).

Ruling snapshot

Question: Does the entire net gain on PFIC stock count as gross income for the 25% omission calculation under IRC § 6501(e)?
Outcome: Advice given
Key authorities: IRC §§ 61(a), 6501(e), 8621, and 1291

Full text (IRS public release)

ID: CCA_2012091209180266 Number: 201247015
Release Date: 11/23/2012
Office: --------------
UILC: 6501.07-00

From: --------------------------
Sent: Wednesday, September 12, 2012 9:18:08 AM
To: ---------------------
Cc:
Subject: FW: 25% Omission for 6 Year Statute

We have looked into your question that deals with the 25% omission calculation under section 6501(e) with respect to the taxpayer's unreported PFIC income under section 1291. ----------------- previously responded to you and noted that the net gain on the PFIC stock is required to be shown on Form 8621 (specifically, line 10f) which must be attached to the taxpayer's return. Line 11b of Form 8621 reflects the amount of the gain that is treated as ordinary income and ultimately reported as taxable income while the remainder is subject to the deferred tax and interest computation. Accordingly, ----------------- ultimately concluded that the entire net gain is required to be included in the return.

In this context, the term "gross income" for purposes of section 6501(e) has the same meaning as the general definition under section 61(a). Based on the advice from -----------------, "gross income" for purposes of determining the 25% omission under section 6501(e), includes the entire net gain on the disposition of the stock, as defined by section 61, that is required to be shown on the return.

We hope this adequately addresses your question. If you need further assistance, please do not hesitate to contact me.

Thanks,

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