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Form 926: transfers of property to a foreign corporation

Form 926 reports transfers of property by a U.S. transferor to a foreign corporation, and its instructions cover scope, definitions and required information.

What Form 926 reports

The IRS describes Form 926 as a return for reporting certain transfers of tangible or intangible property to a foreign corporation under section 6038B.[2]

The general filing rule covers U.S. citizens and residents, domestic corporations, and domestic estates or trusts when transfers fall within sections 6038B(a)(1)(A), 367(d), or 367(e).[1]

Who the special filing rules cover

For a partnership transfer, the instructions place the reporting obligation on domestic partners, with each treated as transferring a proportionate share of the property. This rule covers both domestic and foreign partnerships.[2]

Spouses can submit Form 926 together only when their income tax return is joint.[2]

For cash transfers by a U.S. person, the instructions give two alternative reporting tests.[2]

  • Immediately following the transfer, direct or indirect holdings reach at least 10% of the foreign corporation's total voting power or total value.[2]
  • Cash transferred by that person to the corporation exceeds $100,000 during the 12-month period ending with the transfer.[2]

The instructions also contain filing exceptions. For exchanges within section 354 or 356, one exception covers exchanging foreign corporation stock in a recapitalization described in section 368(a)(1)(E).[2]

Definitions used in the instructions

The instructions define a specified 10%-owned foreign corporation by reference to a domestic corporation's status as a U.S. shareholder in that foreign corporation.[2]

Their controlled foreign corporation definition uses ownership by U.S. shareholders exceeding 50% of voting power or stock value on any day in the corporation's tax year. It includes ownership determined under section 958(a) and attributed ownership under section 958(b).[2]

For property entries, the transfer date is the earliest date when title, possession, or rights to use the property pass for U.S. income tax purposes.[2]

Identifying the transferor and corporation

An individual transferor is identified by a Social Security number, while other transferors use an employer identification number.[2]

For the foreign corporation, line 5b requires a reference ID when line 5a has no EIN; entering both identifiers is permitted. The transferor establishes or arranges this reference ID to identify the corporation across tax years.[2]

The reference ID permits letters and numbers, excludes spaces and special characters, and has a 50-character limit. The same identifier continues for the same corporation across tax years.[2]

Property information and attachments

Part III gathers property information, with Section A addressing cash and Section C addressing intangible property subject to section 367(d). If cash is the sole property transferred, the instructions direct the filer from line 10 to Part IV.[2]

Section B entries include the transfer date, property description, fair market value, adjusted basis and recognized gain for each property. Stock and securities descriptions identify the class or type and issuing corporation.[2]

Intangible property entries include separate descriptions, useful life, an arm's length price, adjusted basis and the transfer-year income inclusion. The descriptions extend to goodwill, going concern value and workforce in place.[2]

Supplemental reporting describes the transfer, any wider transaction, its chronology and other parties to the extent known. It also describes the consideration received and its total fair market value.[2]

Reporting uses English and U.S. dollars. When space runs out, the instructions require completion of the form's entry spaces before remaining information goes on additional sheets matching the relevant IRS section.[2]

Other forms and filing timing

Form 926 accompanies the transferor's income tax return, or applicable exempt organization return, for the tax year containing the transfer. The submission also includes the additional regulatory information specified in the filing instructions.[2]

The instructions identify FinCEN Form 114, the FBAR, as another return that a Form 926 filer may need to submit.[2]

They also require Form 8838 when a U.S. transferor needs a gain recognition agreement under section 367 to qualify for nonrecognition treatment. Form 8838 extends the assessment period for gain realized on the transfer that is not recognized.[2]

Questions and answers

Does Form 926 cover intangible property?

The stated reporting purpose includes certain intangible property transfers. Section C addresses intangibles subject to section 367(d), with a separate description for each identified intangible.[2]

Can my spouse and I report jointly?

The instructions permit spouses to file a joint Form 926. That permission depends on filing a joint income tax return.[2]

Does an entity classification election appear in the instructions?

Line 19 addresses deemed transfers resulting from entity classification changes on Form 8832. The instructions distinguish those transfers from actual property transfers to foreign corporations.[2]

How are additional intangible property calculations reported?

Supplemental information explains the determination of each intangible's arm's length price. When the reported income inclusion exceeds zero, the instructions also request an explanation and calculation of the annual deemed payment.[2]

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Sources and data notes
  1. Internal Revenue Service, About Form 926. https://www.irs.gov/forms-pubs/about-form-926. Retrieved .
  2. Internal Revenue Service, Instructions for Form 926. https://www.irs.gov/instructions/i926. Retrieved .

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