Just about everyone reading this blog is aware that the Internal Revenue Service has made international tax enforcement a top priority and that it is attempting to flush out taxpayers hiding assets offshore or earning unreported foreign income. One of the weapons available to the IRS is Form 926 “Return by a U.S. Transferor of Property to a Foreign Corporation”. In the wake of the UBS banking scandal, the IRS made significant changes to Form 926, requiring a greater amount of information than ever before. This is further discussed below.
What is Form 926? When is it Required?
US persons (e.g., US citizens, US green card holders) must make an information report to the IRS when making certain transfers to foreign (non-US) corporations. Specifically, when a US person transfers (or is treated under the tax rules as having transferred) property to a foreign corporation in certain “non-recognition” transactions (e.g., a contribution of capital to the company) a Form 926 must be filed and attached to that year’s income tax return. This is so, whether or not the property has appreciated in value. If cash is transferred to the corporation instead of property, the Form 926 must be filed when the cash transfers exceed US$100,000 over a 12-month period; or, regardless of amount, if immediately after the cash transfer, the transferor holds more than 10% of the total voting power or total value of the foreign corporation. Read more