If you have heard of the "PFIC" rules, you are probably already familiar with the saying, "Once a PFIC, always a PFIC." However, there are two elections that PFIC shareholders can make to avoid the PFIC tax treatment. They are the Qualified Electing Fund (QEF) and the "Mark-to-Market" elections. Once the PFIC shareholder makes the QEF election, the taxpayer will be required to annually include in their gross income as ordinary income its pro rata share of the ordinary earnings of the QEF and as long-term capital gain its pro rata shares of the net capital gain of the QEF regardless of whether they receive such distributions during that taxable year.

Some PFIC shareholders can also make the mark-to-market election. Once you make this election, you are required to include in your ordinary income an amount equal to the excess, if any, of the fair market value of the PFIC stock as of the close of the tax year over the PFIC shareholder’s adjusted basis in such stock. The shareholder is allowed a deduction if there is a loss during the taxable year. However, such a deduction is limited by the lesser of: