Company: MMTIF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0001062993-25-003888
Chunk: 49

Company: MICROMEM TECHNOLOGIES INC
Filing Date: 2025-02-28
Form: 20-F
Item: Item 10
Chunk 49
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 Subsidiary PFIC on the sale or disposition of our common shares.

Default PFIC Rules Under Section 1291 of the Code

If we are a PFIC, the U. S. federal income tax consequences to a U. S. Holder of the purchase of common shares and the acquisition, ownership, and disposition of our common shares will depend on whether such U. S. Holder makes an election to treat us as a "qualified electing fund" or "QEF" under Section 1295 of the Code (a "QEF Election") or makes a mark-to-market election under Section 1296 of the Code (a "Mark-to-Market Election") with respect to our common shares. A U. S. Holder that does not make either a QEF Election or a Mark-to-Market Election (a "Non-Electing U. S. Holder") will be subject to tax as described below.

A Non-Electing U. S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of our common shares and (b) any excess distribution received on our common shares. A distribution generally will be an "excess distribution" to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U. S. Holder's holding period for our common shares, if shorter).

Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of our common shares of a PFIC (including an indirect disposition of shares of a Subsidiary PFIC), and any excess distribution received on such common shares (or a distribution by a Subsidiary PFIC to its shareholder that is deemed to be received by a U. S. Holder) must be ratably allocated to each day in a Non-Electing U. S. Holder's holding period for our common shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain preferential tax rates, as discussed below). The amounts allocated to any other tax year would be subject to U. S. federal income tax at the highest tax rate applicable to ordinary income in each such year, and