Instructions For Form 926 - Return By A U.s. Transferor Of Property To A Foreign Corporation - Internal Revenue Service


Instructions for Form 926
Department of the Treasury
Internal Revenue Service
(Rev. December 2011)
Return by a U.S. Transferor of Property to a Foreign Corporation
Section references are to the Internal
the foreign corporation or (b) the amount
The transferor (or one or more
of cash transferred by the person to the
successors) properly entered into a gain
Revenue Code unless otherwise noted.
foreign corporation during the 12-month
recognition agreement, or
period ending on the date of the transfer
The U.S. transferor is a tax-exempt
What’s New
exceeds $100,000. See Regulations
entity and the income was not unrelated
section 1.6038B-1(b)(3).
business income, or
T.D. 9525, 2011-23 I.R.B. 837, finalizes
The transfer was taxable to the U.S.
regulations that affect U.S. persons that
Exceptions to Filing
transferor and such person properly
transfer property subject to lease of
reported the income from the transfer on
1. For exchanges described in section
aircraft or vessels in foreign commerce to
its timely filed return, or
354 or 356, a U.S. person does not have
a foreign corporation. Such transfers are
The transfer is considered to be to a
to file Form 926 if:
reported on the “property to be leased”
foreign corporation solely by reason of
line of Form 926, Part III. Furthermore,
Regulations section 1.83-6(d)(1) and the
a. The U.S. person exchanges stock
fair market value of the property
such U.S. persons would also be required
of a foreign corporation in a
transferred did not exceed $100,000.
to complete Form 926, Part IV, line 13.
recapitalization described in section
Section 512 of the Hiring Incentives to
368(a)(1)(E) or
Restore Employment Act of 2010
When and How To File
b. The U.S. person exchanges stock
provided a new penalty for
of a domestic or foreign corporation for
Form 926 (and the additional information
underpayments attributable to
stock of a foreign corporation under an
required under Regulations section
undisclosed foreign financial asset
asset reorganization described in section
1.6038B-1(c) and Temporary Regulations
understatements. For more information,
368(a)(1) that is not treated as an indirect
sections 1.6038B-1T(c)(1) through (5)
see Section 6662(j) Penalty below.
stock transfer under Regulations section
and 1.6038B-1T(d)) must be filed with the
U.S. transferor’s income tax return (or, if
General Instructions
2. Generally, a domestic corporation
applicable, exempt organization return)
that distributes stock or securities of a
for the tax year that includes the date of
domestic corporation under section 355 is
Purpose of Form
the transfer.
not required to file Form 926. However,
Other Forms That May Be
Use Form 926 to report certain transfers
this exception does not apply if the
of tangible or intangible property to a
distribution is of stock or securities of a
foreign corporation required by section
foreign controlled corporation to a
Persons filing this form may be required
distributee shareholder who is not a U.S.
to file Form TD F 90-22.1, Report of
citizen or resident or a domestic
Foreign Bank and Financial Accounts.
Who Must File
A U.S. transferor that is required to
Generally, a U.S. citizen or resident, a
3. A U.S. person that transfers stock
enter into a gain recognition agreement
domestic corporation, or a domestic
or securities under section 367(a) does
under section 367 to qualify for
not have to file Form 926 if either a or b
estate or trust must complete and file
nonrecognition treatment must file Form
Form 926 to report certain transfers of
below applies.
8838, Consent To Extend the Time To
property to a foreign corporation that are
a. The U.S. transferor owned less
Assess Tax Under Section 367 — Gain
described in section 6038B(a)(1)(A),
than 5% of both the total voting power
Recognition Agreement, or a similar
367(d), or 367(e). See section 6038B,
and the total value of the transferee
statement, to extend the statute of
and Regulations sections 1.6038B-1 and
foreign corporation immediately after the
limitations with respect to the gain
1.6038B-1T for more information.
transfer and:
realized but not recognized on the
The U.S. transferor qualified for
Special Rules
nonrecognition treatment with respect to
Penalties for Failure to File
the transfer, or
Transfers by a partnership. If the
If a taxpayer fails to comply with section
The U.S. transferor is a tax-exempt
transferor is a partnership (domestic or
6038B, the penalty equals 10% of the fair
entity and the income was not unrelated
foreign), the domestic partners of the
market value of the property at the time of
business income, or
partnership, not the partnership itself, are
the transfer. The penalty will not apply if
The transfer was taxable to the U.S.
required to comply with section 6038B
the failure to comply is due to reasonable
transferor under Regulations section
and file Form 926. Each domestic partner
cause and not to willful neglect. The
1.367(a)-3(c) and such person properly
is treated as a transferor of its
penalty is limited to $100,000 unless the
reported the income from the transferor
proportionate share of the property. See
failure to comply was due to intentional
on its timely filed return (including
the instructions for line 2 for additional
disregard. Moreover, the period of
extensions) for the tax year that includes
limitations for assessment of tax upon the
the date of transfer; or
Transfers by a husband and wife. A
transfer of that property is extended to the
The transfer is considered to be to a
husband and wife may file Form 926
date that is 3 years after the date on
foreign corporation solely by reason of
jointly, but only if they file a joint income
which the information required to be
Regulations section 1.83-6(d)(1) and the
tax return.
reported is provided.
fair market value of the property
Transfers of cash. A U.S. person that
Section 6662(j) Penalty
transferred did not exceed $100,000.
transfers cash to a foreign corporation
must report the transfer on Form 926 if (a)
b. The U.S. transferor owned 5% or
For tax years beginning after March 18,
immediately after the transfer the person
more of the total voting power or the total
2010, a 40% penalty may be imposed on
holds directly or indirectly at least 10% of
value of the transferee foreign corporation
any underpayment resulting from an
the total voting power or the total value of
immediately after the transfer and:
undisclosed foreign financial asset
Dec 27, 2011
Cat. No. 27037X


00 votes

Related Articles

Related forms

Related Categories

Parent category: Financial
Page of 3