PFIC method · IRC §1296
PFIC Mark-to-Market Election: When §1296 Is Available
How annual mark-to-market treatment works for marketable PFIC stock, the limits on ordinary loss, and why eligibility and election timing must be established first.
By Danilson Ramos · Founder, Atamatax
Updated August 2026
Check it for your own holding
Could this investment be a PFIC?
Two questions and, if you have it, the ticker or ISIN. The read is immediate, nothing you enter leaves this page, and it names what would settle the rest.
Free, no account, nothing you answer leaves this page. Open the full portfolio scanner
Screened against the fund registry on this page. It is never sent anywhere.
A screen. Whether a fund is a PFIC turns on its own annual income and asset facts under §1297; the read above says how far your answers go and what would settle the rest.
A mark-to-market election under §1296 generally recognizes the yearly change in eligible PFIC stock's fair market value rather than waiting for a sale under §1291. It can be useful only when the stock is marketable under the statutory rules and the election is properly made.
Marketable stock is a legal eligibility test
Public quotation or a broker valuation does not by itself settle eligibility. The PFIC stock must satisfy the applicable regular-trading or other marketable-stock requirements. Atamatax asks for the security and market facts rather than offering mark-to-market for every foreign fund.
Annual income, loss limits, and basis
The annual fair-market-value increase is generally ordinary income. A decrease can produce ordinary loss only to the extent of unreversed prior mark-to-market inclusions; additional loss follows different treatment. Basis is adjusted for recognized income and loss, which affects a later disposition.
What a late election does not fix automatically
If the stock was held before the election, prior non-electing PFIC years can continue to matter. A complete workflow needs the acquisition date, earlier Forms 8621, election year, annual values and transactions.
Check the holding before selecting mark-to-market
Run the security through the PFIC workflow, establish marketability and add annual values. Unsupported eligibility or earlier-year questions are surfaced for review.
From one fund to the whole case
What does your PFIC situation actually require?
Four questions — how many funds, for how long, whether Forms 8621 were ever filed, whether the returns are current — and a route into the preparation that fits, with what it costs. Nothing you answer leaves this page.
Free, no account, nothing you answer leaves this page. Open the full portfolio scanner
A routing read, not a determination. Whether a fund is a PFIC, whether an exception applies and what a prior year needs are established when the holdings are screened; the route above says where that happens and what it costs.
Authorities cited
- IRC §1296 — IRC §1296 — Mark-to-market election for marketable PFIC stock
- IRC §1297 — IRC §1297 — Definition of a passive foreign investment company
- IRS Form 8621 — About Form 8621 — Information Return by a Shareholder of a PFIC or QEF
Primary sources (Cornell Legal Information Institute for the US Code and CFR; IRS.gov for forms, procedures, and treaty documents). This page is general information, not individualized tax or legal advice.
Atamatax provides tax preparation support and educational resources. This website does not constitute legal or tax advice.