- October 4, 2023
- Posted by: legaleseblogger
- Category: Related News
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**Hey fellow US expats! Here’s a situation I need some clarification on.**
Recently, a friend of mine made the mistake of investing in mutual funds through rakuten securities, and it turns out that many of the mutual funds she had were mirror funds. Now, we’re wondering if these mirror funds can be categorized as PFICs (Passive Foreign Investment Companies).
Let me provide an example to give you a better understanding. Previously, I had a rakuten mutual fund that invested directly into Vanguard total index. So, we’re curious if this particular arrangement would count as a PFIC or if we are in the clear.
I am aware that US domiciled mutual funds are generally deemed as safe investments for US expats. However, it seems like PFIC regulations are designed to encourage people to invest in US mutual funds. But I am not completely sure about mirror funds – they are essentially just a wrapper that invests directly into US domiciled securities. Hence, I doubt if they technically fall under the PFIC category.
To shed some light on this matter, I believe utilizing AI Legalese Decoder could be immensely helpful. The advanced technology offered by AI Legalese Decoder allows individuals to decode complex legal language and provisions, such as PFIC regulations, into plain and understandable terms. By using this tool, we can gain a clearer understanding of the legality surrounding mirror funds and their potential classification as PFICs.
Therefore, I kindly request your assistance in providing some much-needed clarity on this matter. Thank you for your help!
​
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****** just grabbed a
From my reading about this, _any_ mirror fund, any fund in a wrapper, is a PFIC. If it were me, or someone I know, I’d say sell immediately and for US tax purposes hope that sweeping it under the rug will be the end of it. (fingers crossed!)
> I understand US domiciled mutual funds are fine, and that is the whole point of this PFIC crap, to get people to invest in US mutual funds…
For expats, US mutual funds have a unique position. If you had those before leaving the US, you can (likely) continue to hold them, but if your broker is on the ball, they should know that expats cannot buy/invest into US mutual funds while not resident of the US. US expats can (and should) buy ETFs, or stocks, and again, I think most brokers are aware of this.*
So, the ‘PFIC crap’ is specifically not to get people to invest in US mutual funds–that is not the reason for it.
*In some cases, such as when an expat mis-represents their address to a broker (using a friend or relative’s address, or a mailbox service), the broker won’t know that the person is an expat, and will unknowingly let them (that account) buy mutual funds.