Basics on the Form 926
The IRS Form 926 (Transfer of Property to Foreign Corporation) is used by U.S. persons (including individuals, partnerships, trusts, and corporations) to report certain property transfers, including cash, to a foreign corporation in exchange for stock in the foreign corporation.
This sample video tutorial walks through a sample Form 926 filed by a U.S. citizen that transfers $1,000,000 of cash to a Cayman Islands corporation in exchange for 100% of the corporate stock.
When to Use Form 926
Every U.S. person must file Form 926 if you transfer cash or other property which is reportable under IRC Section 6038B.1
There are slightly different rules for transfers to foreign corporations versus foreign partnerships.
Generally, a transfer to a foreign corporation is reportable by the U.S. person if it qualifies as an exchange under IRC Sections 332, 351, 354, 355, 356, or 361.2
One of the most common transfers is a nonrecognition transfer under Section 351, where the U.S. person transfers property to a foreign corporation in exchange for stock, and the U.S. person controls the corporation after the exchange.
Exceptions for Transfers to Foreign Partnerships
A transfer of property by a U.S. person to a foreign partnership is only reportable if:
- The U.S. person holds (immediately after the transfer) directly or indirectly at least 10 percent interest in the partnership; or
- The value of property transferred to the foreign partnership by the U.S. person exceeds $100,000 during the 12-month period.
Specific Instructions for Cash Transfers
In Part III (Information Regarding Transfer of Property), for cash transfers, you generally need to report the amount of cash transferred, the date of transfer, and confirm whether or not cash was the only property transferred.
In Part IV (Additional Information Regarding Transfer of Property), the U.S. person must also answer the remaining yes or no questions, disclose the type of nonrecognition transfer (if applicable), and disclose the U.S. person’s interest in the foreign corporation before and after the transfer.