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PFIC income and asset test arithmetic

Enter income and asset amounts to see the two percentages that the passive foreign investment company tests compare, next to the figures that define the test thresholds.

How it works

A foreign corporation is a passive foreign investment company if it meets either of two tests: one based on the share of gross income that is passive and one based on the share of assets that produce or are held to produce passive income.

The IRS instructions set thresholds of at least 75 percent for passive gross income and at least 50 percent for passive assets, with measurement rules for each. The tool performs arithmetic only and does not determine classification, because a percentage alone does not resolve the other conditions, and a look-through rule can change the inputs.

Worked example

Entering 40 of 100 for passive income and 60 of 100 for assets returns 40.00 percent and 60.00 percent.

What this tool does not do

The tool calculates percentages from the income and asset amounts entered. It does not determine classification, apply look through ownership rules, measure average asset values or apply elections or exceptions.

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In more detail

A foreign corporation can meet either test during a taxable year. Meeting either the income test or the asset test is sufficient for PFIC classification.[4]

Key points

The income test uses gross income as its base. The income test is met when passive income constitutes at least 75 percent of the corporation's gross income for its tax year.[5]

The asset test uses average assets. The asset test is met when that average percentage is at least 50 percent.[5]

Cash, including marketable securities, is treated as a passive asset for the asset test, so a company holding mostly cash can meet the test even before it earns passive income.[6]

Related reading

Related tools: IRS form finder, which locates form reference pages, and Foreign trust reporting role finder, which covers the roles discussed in IRS and FinCEN instructions. For trust taxation and U.S. reporting in specific jurisdictions, see Guernsey trusts and U.S. reporting rules and Cook Islands trust tax and reporting rules.

Questions and answers

Why does the tool not give a result?

Classification depends on look-through rules, how assets are measured and other conditions in the law. The tool only shows the percentages the tests compare.

Where do the figures come from?

The income test threshold is at least 75 percent, and the asset test threshold is at least 50 percent.

Related glossary terms

  • Specified foreign financial asset: The Form 8938 instructions use specified foreign financial asset for certain foreign accounts and investment holdings. The term identifies assets for reporting.
  • Reporting threshold for Form 8938: The Form 8938 instructions set asset value thresholds for specified individuals based on marital status, filing status, and qualifying residence abroad.
  • FATCA: FATCA requires certain U.S. taxpayers to report foreign assets and financial institutions to report accounts to the IRS. Form 8938 may apply at thresholds.

Related articles and guides

Tools and official documents

  • Form 3520 and 3520-A due-date calculator: Enter the filer's year end and the trust's year end to see the due dates in IRS instructions for Forms 3520 and 3520-A, adjusted for weekends but not holidays.
  • Foreign trust reporting role finder: Tick the roles that describe a connection to a foreign trust or foreign account to see the forms the IRS and FinCEN instructions discuss. Roles can overlap.

Talk to Richard

Sources and data notes
  1. RSM US, PFIC traps for the unwary. https://rsmus.com/insights/services/business-tax/pfic-traps-for-the-unwary-during-the-pandemic-and-purging-the-ta.html. Retrieved . States the income and asset figures.
  2. Withum, New exception to PFIC reporting for mark-to-market taxpayers. https://www.withum.com/resources/new-exception-to-pfic-reporting-for-mark-to-market-taxpayers/. Retrieved . States the income and asset figures with the Code section.
  3. Florida Bar Journal, Five tax traps for resident noncitizens and their attorneys. https://www.floridabar.org/the-florida-bar-journal/five-tax-traps-for-resident-noncitizens-and-their-attorneys/. Retrieved . States the figures and the look-through rule.
  4. irs.gov, Instructions for Form 8621-A (12/2024) | Internal Revenue Service. https://www.irs.gov/instructions/i8621a. Retrieved .
  5. irs.gov, Instructions for Form 8621 (12/2025) | Internal Revenue Service. https://www.irs.gov/instructions/i8621. Retrieved .
  6. withersworldwide.com, Startup Investments and the Long Reach of the PFIC Rules | Withers. https://www.withersworldwide.com/en-gb/insight/read/startup-investments-and-the-long-reach-of-the-pfic-rules. Retrieved .

Dates in this block record when each source was read for this page.