Not an update in that the rules didn’t change, just an update in my reasoning. After reading the private ruling letter #200752029, my opinions tilts even towards the idea that Canadian mutual funds are not corporations and as such the PFIC rules shouldn’t apply to such investments.
Following the logic presented in the private ruling, absent an election made by the fund, it would be a partnership for US tax purposes.

For the full story, I have updated my post Passive Foreign Investment Companies (PFIC) and Canadian mutual funds. Thank you

The IRS has issued a private ruling letter (200752029) in the context of PFIC. It ruled that the mutual fund was an eligible entity. Well, for check the box classification – in this case, the fund elected to be treated as a corporation on form 8832. Absent such an election, the eligible entity (with several members) would be treated as a partnership, hence it would be a pass-through entity and the PFIC rules wouldn’t apply.

– Private Letter Ruling 200752029: http://www.irs.gov/pub/irs-wd/0752029.pdf :
“The Fund is not a trust under Treas. Reg. § 301.7701-4(a) because it is not simply an arrangement to protect or conserve property for the beneficiaries. The Fund is a device to carry on a profit-making business.
[…]
Because the Fund is a business entity that is not classified as a corporation under Treas. Reg. § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8), it is an eligible entity. As an eligible entity, the Fund can elect its classification for federal tax purposes under Treas. Reg. § 301.7701-3.
[…]
On Date 1, the Fund filed a Form 8832, Entity Classification Election, indicating that is was a foreign eligible entity electing to be classified as an association taxable as a corporation for U.S. income tax purposes.”

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