Which ETFs or listed bullion trusts allow a QEF election and how does Form 8621 change tax outcomes?
Executive summary
A small number of listed bullion trusts explicitly support a U.S. shareholder making a QEF election — Sprott’s physical bullion trusts are a confirmed example that provides the PFIC annual statements needed to elect [1]. Making a QEF election requires filing IRS Form 8621 each year and, if done correctly, shifts a taxpayer out of the punitive §1291 “excess distribution” regime into annual inclusion rules that change timing, rates, and basis treatment [2] [3] [4].
1. Which ETFs, funds and bullion trusts even qualify for a QEF election: not everything, but many foreign funds and some bullion trusts
Any foreign mutual fund, ETF, hedge fund or similar vehicle that meets the PFIC definition can potentially be a QEF if it supplies the required PFIC Annual Information Statement that lets U.S. shareholders report their pro rata share of ordinary earnings and net capital gains; Sprott’s physical bullion trusts explicitly state they are PFICs and that U.S. non‑corporate holders may make a timely QEF election by filing Form 8621 [3] [5] [1].
2. The mechanics: how to make the QEF election and the central role of Form 8621
A U.S. person makes the QEF election on Form 8621 and must complete the QEF lines and attach any PFIC statements for the fund; Form 8621 is required whenever reporting a QEF or a §1296 mark‑to‑market election and is the vehicle for the election, the annual inclusions, and certain deemed‑sale or extension elections [2] [6] [5].
3. How tax outcomes change when a QEF election is in place
Default PFIC taxation under §1291 treats “excess distributions” and dispositions with retroactive allocation of income taxed at ordinary top rates plus interest, producing a punitive, often surprising bill, whereas a timely QEF election requires annual inclusion of the fund’s ordinary earnings and net capital gains on Form 8621 and generally eliminates the §1291 interest and allocation regime going forward [3] [4] [5].
4. Nuances: pedigreed vs unpedigreed QEFs, basis adjustments and the “deemed sale” purge
If prior PFIC years exist before the QEF election (an “unpedigreed” QEF), those earlier years can remain subject to §1291 unless the taxpayer makes a deemed sale (a purge) election on Form 8621 to recognize gain at the election’s start; annual QEF inclusions increase stock basis for income included and distributions reduce basis, so ongoing basis tracking is essential [5] [6] [4].
5. Practical realities and limits: issuers, statements and recordkeeping
A QEF election is only possible when the issuer provides the required PFIC Annual Information Statement; many foreign ETFs or trusts do not give that statement or explicitly classify themselves in ways that make QEF election impractical, so investors must confirm issuer disclosures rather than assume eligibility, and they must file Form 8621 every year for each PFIC or risk the consequences of missed reporting [5] [2] [7].
6. Alternatives and tradeoffs: mark‑to‑market and the cost of annual reporting
The mark‑to‑market (§1296) election is an alternative to QEF for some PFICs and may be preferable if a fund’s character makes annual ordinary income inclusions worse than mark‑to‑market treatment, but both QEF and MTM carry sticky, long‑term consequences and require annual Form 8621 filings and careful bookkeeping [3] [4].
7. Bottom line for investors in listed bullion trusts and foreign ETFs
Sprott’s public tax guidance is a concrete example of a listed bullion trust that supports the QEF route for U.S. holders, but there is no single public registry: each foreign ETF or bullion trust must be checked for PFIC status and availability of the PFIC Annual Information Statement before a QEF can be made, and once chosen the taxpayer must use Form 8621 annually to report inclusions, purge prior PFIC years if desired, and preserve the election’s tax benefits [1] [5] [2].