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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

1.367(a)-3(d).

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

Required

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

6038B.

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

corporation.

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

transfer.

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

information.

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

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

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