Deemed sale or deemed dividend election by a U.S. person that is a shareholder of a former PFIC., 26 CFR 1.1298-3
Summary
In general. A shareholder (as defined in § 1.1291-9(j)(3)) of a foreign corporation that is a former PFIC, (as defined in § 1.1291-9(j)(2)(iv)) with respect to such shareholder, shall be treated for tax purposes as holding stock in a PFIC and therefore continues to be subject to taxation under section 1291 [26 USCS § 1291] unless the shareholder makes a purging election under section 1298(b)(1) [26 USCS § 1298(b)(1)]. A purging election under section 1298(b)(1) [26 USCS § 1298(b)(1)] is made under rules similar to the rules of section 1291(d)(2) [26 USCS § 1291(d)(2)]. Section 1291(d)(2) [26 USCS § 1291(d)(2)] allows a shareholder to purge the continuing PFIC taint by making either a deemed sale election or a deemed dividend election.