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Scenario $1$: Passive Foreign Investment Company $($PFIC$)$

US taxpayer owns shares in a foreign mutual fund that qualifies as a PFIC.

Fund does not offer QTIP or Mark$-$to$-$Market elections.

The taxpayer has held the shares for $5$ years and made no distributions.

FMV of shares: $$200,000$ with a basis of $$80,000.$

Estimated "excess distributions" from the fund: $$50,000$

Wages: $$120,000$

Interest and Dividend Income $($US$-$based$)$: $$3,000$

Itemized Deductions: $$24,000$

Allowable deduction for self$-$employment tax: None

Calculate:

The potential tax liability upon the sale of the PFIC shares.

Analyze the different tax treatment options available for PFIC holdings.