Tag Archive for Transfer Property to Corporation

Transfer of Property or Cash To A Foreign Corporation? Filing of Form 926

Correcting Amendments to the FATCA Regulations will be Released TodayJust 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

Requirements For Nonrecognition Of Gain Or Loss On Transfer Of Property To A Corporation IRC 351

If property is transferred to a corporation by one or more people solely in exchange for stock in the corporation and immediately after the exchange the person or people engaged in the exchange are in control of the corporation then generally speaking subject of course to certain thresholds no gain (or loss) is recognized for tax purposes. This is often referred to as a nonrecognition or 351 transaction which is a reference to the tax code number governing the transaction. The following four requirements must be met for a transaction to qualify as a Code Sec. 351 transaction:

1. The transaction must involve a corporation and a person (or people).

A person may be an individual, trust, estate, partnership, association, company, or corporation under IRC 7701(a)(1)

A corporation generally is an organization that is incorporated under state law. However, a corporation can also include an associations, joint-stock company, or insurance company.

2. The people involved must transfer property to the corporation.

The IRC does not specifically define property in these regards however the courts and the Internal Revenue Service have attempted to do just that, define property relevant to 351.

Generally it seems in my opinion the courts define property broadly and have a limited view of what can be excluded Read more