Chaya Kundra, Tax Attorney and Principal at Kundra & Associates, quotes, "For the recent resident, it is often best to elect mark-to-market upon the filing of the first year of their return for the most favorable tax treatment."

Option 2: Election to Treat as QEF (Qualified Electing Fund)

A QEF is taxed similar to that of a partnership, where all investors are thought to have a certain percentage in the total profit of the deal. A person can exercise this option only if the foreign MF says yes to sharing data with the investor regarding its profits.

Navani adds, "This option is commonly used in case of investments by US residents and citizens in offshore private equity funds."