I work in the US. Towards the end of 2016 I started investing in Indian Mutual Funds through an investment management acquaintance of mine. This has been with my income that is already taxed in the US.
The amounts were small and I assumed they won't be taxed here in the US unless I bring the money back some day. I was given to understand by my tax preparer that that is not the case and I will be taxed because those funds are treated as PFIC.
So I looked up different ways to 'untaint' the funds from tax perspective, but no matter which one I'll have to pay tax and penalty and some interest on the investment until FY 2018. Then, going forward they could be Mark-To-Market or QEF.
The part I am not understanding, because my tax preparer also seems unsure is would I get taxed on the net money I owe or would I be taxed only on the gains/losses?
For ex, say I invested $100 every month for a year ending 31st Dec 2018 and as on that date the total investment value is $1250 then would I be taxed on $50 or the whole $1250? The latter seems like a heavy double-tax.
(As for why this is coming up now, in the last 3 years I did my taxes through Credit Karma. Somehow I missed this because I assumed they weren't sold and so just like stocks here, holding isn't taxed. Plenty headache now, of course.)