I am looking at an investment in a foreign gas pipeline. The company distributes money much as a master limited partnership (MLP) gas pipeline in the US does. Is there any way to treat such a foreign investment like an MLP for tax purposes? Specifically I want to be able to pay tax based on actual earnings, and the surplus over that paid in each distribution I want to take as a reduction of cost basis on the investment.
I realize there is the PFIC rule with the QEF election that allows you to do something very similar, but the problem with the PFIC rules is they require the foreign company to make "passive" income. A gas pipeline has active income from its assets.
Not applying PFIC rules to foreign corporations that make "active" income seems pretty strange to me since I thought the intent of PFIC rules was to penalize companies for domiciling in low tax environments. If you invested in a company whose income was not "passive" in a low tax environment, wouldn't you get the benefit of their low-tax retained earnings compounding each year? Maybe there is an analog to the PFIC rules for foreign companies that make active income?