Who must file Form 926, and what transfers trigger it?

Form 926 is an information return — it reports a transfer of property by a US person to a foreign corporation. Like the other international information returns, it computes no tax of its own. But two different kinds of exposure ride on it, and they are easy to run together. The first is the reporting penalty: a missing or incomplete Form 926 carries a penalty of 10% of the fair market value of the property transferred under §6038B(c), capped at $100,000 unless the failure was a deliberate disregard of the rules — and under §6501(c)(8) the assessment statute of limitations stays open until the information is furnished. The second, usually larger, is the tax on the transfer itself: a separate regime, §367, generally treats the outbound transfer as a taxable event even though the same transaction done entirely inside the US would be tax-free.

This guide is about the threshold question that precedes the form's parts and schedules: is this person a US transferor, did they transfer property to a foreign corporation in a transaction §6038B reaches (or cross the special cash threshold), and does an exception switch the filing off? Form 926 has no filer-category system — nothing here resembles the five categories of Form 5471 or the four of Form 8865. The structure is a US transferor, a reportable transfer, and the §367 tax overlay that sits on top of it. We work the reporting question first, then the tax.

In plain terms Form 926 answers two separate questions that should never be merged. Reporting: did a US person hand property — cash, equipment, stock, a patent, an entire business — to a foreign corporation in the kind of contribution or reorganization that, done at home, would be tax-free? If so, the transfer goes on Form 926. Tax: the §367 rules then decide whether that transfer is taxed anyway. A Form 926 can be required even when §367 lets the gain be deferred, and the tax can be due even where an exception excuses the form. PILOT determines whether the Form 926 reporting obligation exists; the §367 amount is the engagement tax professional's computation.

The building blocks

Three things define a Form 926 obligation: a US transferor, a transfer of property to a foreign corporation in a transaction §6038B reaches, and the §367 overlay that decides the tax. Pin down the first two and the filing question resolves; the third is a separate — and often larger — inquiry that the form does not itself answer.

"US person" — who is the transferor (the filer)

Form 926 is filed by the US person that makes the transfer. The instructions put it plainly: a US citizen or resident, a domestic corporation, or a domestic estate or trust "must complete and file Form 926 to report certain transfers of property to a foreign corporation that are described in section 6038B(a)(1)(A), 367(d), or 367(e)."

One mechanical point separates Form 926 from its partnership sibling and catches preparers off guard: a partnership does not file Form 926 at the entity level. When a partnership (domestic or foreign) transfers property to a foreign corporation, the rule looks through it — the partnership's domestic partners, not the partnership, are the transferors:

If the transferor is a partnership (domestic or foreign), the domestic partners of the partnership, not the partnership itself, are required to comply with section 6038B and file Form 926. Each domestic partner is treated as a transferor of its proportionate share of the property.

— Instructions for Form 926 (Rev. November 2018), "Transfers by a partnership"

This is the mirror image of Form 8865. When a domestic partnership contributes property to a foreign partnership, the partnership itself is the §6038B filer (on Schedule O); when it contributes to a foreign corporation, its US partners each file Form 926 on their proportionate share. Same statute, opposite filer. (Spouses get a narrower convenience: they may file a single Form 926 jointly, but only if they file a joint income tax return.)

What transfers are covered

The core filing trigger is §6038B(a)(1)(A) — a transfer of property to a foreign corporation in one of a listed set of otherwise-tax-free exchanges:

Each United States person who— (1) transfers property to— (A) a foreign corporation in an exchange described in section 332, 351, 354, 355, 356, or 361 … shall furnish to the Secretary … such information … as the Secretary may require …

— IRC §6038B(a)(1)(A)

Those cross-references are the everyday corporate transactions in which property moves into corporate solution without current tax: a §351 contribution to a corporation in exchange for its stock; a §332 subsidiary liquidation; and the §354 / §355 / §356 / §361 exchanges and distributions that make up tax-free reorganizations and spin-offs. A §368 reorganization is reached through the §354/§356/§361 exchange it produces — §368 itself is not on the list. The Form 926 instructions add two further triggers beyond the (a)(1)(A) exchanges: an outbound transfer of intangible property under §367(d), and certain outbound §367(e) distributions.

Why single out these specific transactions? Each is a provision that, domestically, lets property move into a corporation tax-free. Send the property across the border into a foreign corporation and Congress wants both a report (§6038B / Form 926) and, through §367, a second look at whether the tax-free treatment should survive.

Property is read broadly — cash, tangible assets, stock and securities, and intangibles all count. The only category with its own escape hatch is cash, which has a de-minimis rule of its own (below). Appreciated tangible assets, stock, and intangibles are generally reportable whatever their value.

Example 1 — the classic incorporation. USP A, a US corporation, contributes the appreciated assets of a new product line to FC B, a newly formed foreign subsidiary, in exchange for FC B's stock — a textbook §351 exchange. The transfer is described in §6038B(a)(1)(A), so USP A files Form 926 reporting the contributed assets, and pairs it with a §351 disclosure on the return (Reg §1.351-3). Because the assets are appreciated and the transferee is foreign, §367(a) also turns off nonrecognition and A generally recognizes gain — the tax overlay below. Reporting and tax both apply, to the one transfer.

Reporting versus tax — the distinction that matters most

The single most important thing to keep straight is that Form 926 is a reporting obligation and §367 is a tax, and they do not rise and fall together.

• §6038B / Form 926 is the report — it tells the IRS a transfer happened. The penalty for getting it wrong is the §6038B(c) penalty (a percentage of value), not the tax on the transfer.
• §367 is the substantive tax — it decides whether the otherwise-tax-free exchange produces gain now (or, for intangibles, a stream of deemed income over time).

A Form 926 can be required even where §367 produces no current gain — most clearly when a transferor of stock signs a gain-recognition agreement to defer the gain but must still file (below). Conversely, the §367 tax can apply on a transfer that an exception relieves from the form. Treat them as two questions, always.

In plain terms "do I file Form 926?" and "do I owe tax on this transfer?" are different questions, with different answers and different penalties. The form is the paperwork that reports the transfer; §367 is the rule that may tax it. You can owe the form without owing current tax, and you should never let "there's no gain" talk you out of filing. PILOT settles the first question — whether the Form 926 is required, and for whom.

A determination framework

Worked in this order, the Form 926 question resolves cleanly:

1. Is the transferor a US person? A US citizen or resident individual, a domestic corporation, or a domestic estate or trust — and, for a transfer through a partnership, the domestic partners (each on its proportionate share), not the partnership.
2. Was property transferred to a foreign corporation in a covered transaction? A §332 / §351 / §354 / §355 / §356 / §361 exchange under §6038B(a)(1)(A), an outbound §367(d) intangible transfer, or a §367(e) distribution. If the transferee is a foreign partnership instead, this is a Form 8865 question, not Form 926 (below).
3. If the only property was cash, does the cash special rule trigger reporting? Cash is reportable only if the transferor ends up holding at least 10% of the foreign corporation or more than $100,000 of cash moved in the trailing 12 months (counting related persons). Otherwise the cash transfer is exempt.
4. Does an exception switch the filing off? The recapitalization and asset-reorganization exceptions for §354/§356 exchanges; the domestic-corporation §355 exception; and the §367(a) stock-or-securities exceptions (the under-5% rule and the gain-recognition-agreement rule).
5. Apply the §367 overlay to price the transfer — gain under §367(a), a deemed royalty under §367(d), or deferral under a gain-recognition agreement. This is the tax, computed in the engagement's workpapers, not on Form 926.

The first four steps decide the filing; the fifth is the tax.

The §367 overlay — reporting versus tax cost

§367 is the reason an outbound transfer is rarely "free." It rests on a deceptively simple switch: for the listed exchanges, a foreign corporation is not treated as a corporation — which is exactly the status the nonrecognition rules depend on.

§367(a) — gain on appreciated property (the "toll charge")

If, in connection with any exchange described in section 332, 351, 354, 356, or 361, a United States person transfers property to a foreign corporation, such foreign corporation shall not, for purposes of determining the extent to which gain shall be recognized on such transfer, be considered to be a corporation.

— IRC §367(a)(1)

By denying the transferee its "corporation" status for gain purposes, §367(a)(1) turns off the nonrecognition that §351, §361, and the rest would otherwise supply, and the built-in gain on the transferred property is recognized — the outbound toll charge. (Note the list in §367(a)(1) — 332, 351, 354, 356, 361 — does not include §355; outbound §355 distributions are handled under §367(e), and they remain on the §6038B(a)(1)(A) reporting list. The reporting list and the gain list are deliberately not identical.)

§367(d) — intangibles and the deemed royalty

Intangibles are carved out of §367(a) and into their own regime. An outbound transfer of intangible property in a §351 or §361 exchange is treated as if the transferor sold it for a stream of contingent payments:

… the United States person transferring such property shall be treated as— (i) having sold such property in exchange for payments which are contingent upon the productivity, use, or disposition of such property … The amounts taken into account … shall be commensurate with the income attributable to the intangible.

— IRC §367(d)(2)(A)

In practice the transferor reports the transfer on Form 926 in the year it happens, and then includes an annual deemed royalty over the intangible's useful life — income that tracks what the intangible actually earns ("commensurate with the income"). TCJA broadened the definition of the intangibles caught here (now codified at §367(d)(4)) to include goodwill, going-concern value, and workforce in place, ending the prior treatment under which foreign goodwill and going-concern value often escaped the regime.

Example 3 — intangibles and the deemed royalty. USP A transfers a patent and the related know-how to FC B in a §351 exchange. The transfer is reported on Form 926 in the year of transfer (Part III's intangibles section). Under §367(d), A is then treated as selling the IP for contingent payments and includes an annual deemed royalty over the patent's useful life, commensurate with the income the IP produces. The form reports the transfer; the deemed-royalty inclusions are computed in the workpapers, year by year.

The repealed active-trade-or-business exception

Before 2018, §367(a)(3) carried a major escape hatch: property transferred for use in the active conduct of a trade or business outside the US was generally spared the toll charge. The Tax Cuts and Jobs Act repealed that exception for transfers after December 31, 2017. The Form 926 instructions state it directly:

For transfers after 2017, section 14102(e) of the TCJA repealed the active trade or business exception under section 367. Transfers of tangible property (other than certain stock transfers) are subject to full gain recognition under the general rule of section 367(a)(1).

— Instructions for Form 926 (Rev. November 2018), "What's New"

Do not describe the active-trade-or-business exception as available — it is gone for any current-year transfer. (Where the assets are those of a foreign branch, TCJA also added §91, which can require the transferor to include a "transferred loss amount" in income on the branch's outbound transfer.)

Example 5 — the escape hatch that closed. USP A transfers the operating assets of its foreign branch to FC B, incorporating the branch as a foreign subsidiary. Before 2018, much of this could have qualified for the §367(a)(3) active-trade-or-business exception and avoided the toll charge. For a transfer after December 31, 2017, that exception is repealed: the appreciated branch assets are subject to full §367(a)(1) gain, and §91 may require A to recapture a "transferred loss amount" on top. Form 926 is required, and the transfer is now a taxable event it would not have been a decade ago.

Stock and securities — gain-recognition agreements

Transfers of stock or securities have their own §367(a) regime (Reg §1.367(a)-3). A US person who transfers stock to a foreign corporation can often defer the §367(a) gain by entering a gain-recognition agreement (GRA) under Reg §1.367(a)-8 — an undertaking to recognize the gain later if the transferred stock is disposed of within the GRA period. The crucial reporting point: the GRA defers the tax, but the Form 926 is still filed. The regulation and instructions treat the transferor as satisfying §6038B by completing Parts I and II and reporting the stock transfer on Form 926 with the GRA attached — reporting is required precisely because the gain is being deferred rather than paid.

Example 4 — stock contribution with a gain-recognition agreement. USP A contributes appreciated stock it holds in another company to FC B in a §351 exchange. The transfer is reportable on Form 926. Left alone, §367(a) would tax A's built-in gain on the contributed stock; instead A enters a gain-recognition agreement under Reg §1.367(a)-8 and defers the gain. A still files Form 926 (Parts I and II, with the stock transfer and the GRA reported) — the GRA is the very reason the form must be filed. Deferring the tax does not relieve the report.

The cash-transfer rule

Cash is the one kind of property with a built-in de-minimis rule. A transfer of cash to a foreign corporation is reportable on Form 926 only if one of two tests is met (Reg §1.6038B-1(b)(3)):

A U.S. person that transfers cash to a foreign corporation in a transfer described in section 6038B(a)(1)(A) must report the transfer if— (i) Immediately after the transfer such person holds directly, indirectly, or by attribution … at least 10 percent of the total voting power or the total value of the foreign corporation; or (ii) The amount of cash transferred by such person or any related person … during the 12-month period ending on the date of the transfer exceeds $100,000.

— Treas. Reg. §1.6038B-1(b)(3)

So a cash transfer escapes Form 926 only when both prongs miss — the transferor holds less than 10% immediately afterward and the cash it (plus related persons) moved to that corporation over the trailing 12 months is $100,000 or less. Cross either line — 10% ownership, or more than $100,000 of related-party cash in a year — and the cash transfer is reportable.

Two cautions. First, this de-minimis rule is cash-only. Transfers of stock, securities, equipment, and intangibles are generally reportable regardless of amount; there is no parallel small-dollar escape for non-cash property. Second, the $100,000 test is an aggregate across related persons over twelve months, not a per-wire figure — several smaller contributions, or contributions by related parties, are added together.

Example 2 — the cash gate, both ways. USP A wires $80,000 to FC B and, immediately afterward, holds 6% of FC B. Both prongs miss — under 10%, and at or below $100,000 in the trailing 12 months — so no Form 926 is due for the cash. Now change one fact at a time. If A instead wired $150,000 (over the $100,000 line), Form 926 is required, even at 6% ownership. Or if A wired the same $80,000 but came away holding 12% of FC B (over the 10% line), Form 926 is required, even though the cash was under $100,000. Either line, crossed on its own, brings the cash transfer back in.

In plain terms money put into a foreign corporation is the one transfer with a free pass — but a narrow one. If your client ends up owning 10% or more of the company, or has moved more than $100,000 into it (counting family and related companies) over the past year, the pass is gone and the cash transfer is reportable. Anything other than cash — equipment, shares, intellectual property — generally has no small-dollar exemption at all. PILOT asks this as a plain threshold — at least 10% after, or more than $100,000 in twelve months — never for the exact figure.

Exceptions to filing

Even a transfer that fits §6038B(a)(1)(A) can be excused from Form 926 in a defined set of cases (Reg §1.6038B-1(b)(2); Instructions for Form 926, "Exceptions to Filing"):

• Recapitalizations and certain asset reorganizations. For a §354 or §356 exchange, no Form 926 is required if it is a recapitalization of the foreign corporation's stock under §368(a)(1)(E), or an asset reorganization under §368(a)(1) that is not treated as an indirect stock transfer under Reg §1.367(a)-3(d).
• Domestic-corporation §355 distributions of domestic stock. A domestic corporation distributing stock or securities of a domestic corporation under §355 generally does not file — but the exception flips back to required if the distribution is of stock of a foreign controlled corporation to a distributee who is not a US citizen, resident, or domestic corporation.
• Stock or securities under §367(a), under 5%. A transferor that owned less than 5% of both the vote and the value of the foreign corporation immediately after a §367(a) stock transfer is excepted, provided it qualified for nonrecognition (or properly reported any taxable gain on a timely return, or is a tax-exempt transferor without unrelated business income, or the transfer falls under the §1.83-6(d)(1) rule for property of $100,000 or less).
• Stock or securities under §367(a), 5% or more, with a GRA. A transferor at 5% or more is treated as satisfying §6038B by filing a timely gain-recognition agreement and completing Parts I and II of Form 926 — i.e., the form is still filed, in the limited GRA form (above).
• Cash below the threshold. The cash de-minimis rule — both prongs missed — discussed above.

A common thread runs through the stock-transfer items: several of these "exceptions" are really rules about how to file (Parts I and II plus a GRA), not a complete pass. Read them as "report this way," not "ignore it."

Penalties for getting it wrong

The cost of a missed Form 926 is value-based, which sets it apart from the flat-dollar penalties on the §6038 forms:

If any United States person fails to furnish the information described in subsection (a) at the time and in the manner required by regulations, such person shall pay a penalty equal to 10 percent of the fair market value of the property at the time of the exchange …

— IRC §6038B(c)(1)

• 10% of fair market value. The penalty is 10% of the FMV of the transferred property — so on a large transfer it dwarfs the $10,000 flat penalty on Forms 5471 / 8858 / 8865 and the $25,000 on Form 5472. A $4 million transfer carries a $400,000 exposure before the cap.
• A $100,000 cap — unless the failure was deliberate. The penalty "shall not exceed $100,000 unless the failure … was due to intentional disregard" (§6038B(c)(3)). Intentional disregard removes the cap entirely.
• Reasonable cause. No penalty if the failure "is due to reasonable cause and not to willful neglect" (§6038B(c)(2)).
• The statute of limitations stays open. Under §6501(c)(8), the assessment period for tax on the transfer is extended until 3 years after the required information is furnished — an unfiled Form 926 can hold the year open. (A §6662(j) 40% accuracy penalty can also reach an underpayment tied to an undisclosed foreign asset.)

Two precision points. First, the value-based penalty is unique to §6038B — do not carry the $10,000 (§6038: Forms 5471/8858/8865) or $25,000 (§6038A: Form 5472) figures across to Form 926. Second, the §6038B(c) penalty is the reporting penalty; it is not the §367 tax. For a transfer to a foreign corporation, the gain-recognition consequence that §6038B(c)(1) attaches to a foreign partnership contribution does not apply — the gain on a corporate transfer comes from §367, not from the failure to file.

In plain terms the Form 926 penalty is a slice of the deal, not a flat fee — ten percent of what you moved, capped at $100,000 unless the IRS finds the miss was deliberate, in which case the cap comes off. That is a different, and often far larger, number than the $10,000 or $25,000 penalties on the other international forms, so do not assume they are the same. And the clock the IRS runs on the transfer does not even start until the form is filed.

What recent law changed (and what it did not)

The currency story for Form 926 is a TCJA story, not an OBBBA one.

• TCJA repealed the §367(a)(3) active-trade-or-business exception for transfers after December 31, 2017 — the single biggest change, turning many branch-incorporation and asset transfers that used to be tax-free into taxable toll-charge events. TCJA also added §91 (foreign-branch transferred-loss recapture) and broadened the §367(d) intangible definition (now §367(d)(4)) to capture goodwill, going-concern value, and workforce in place. These are the live currency points, and they make pre-2018 guidance unreliable.
• OBBBA did not change the Form 926 filing trigger. The 2025 reconciliation act (OBBBA, Pub. L. 119-21) §70353 restored §958(b)(4) for foreign-corporation tax years beginning after December 31, 2025 — but that provision governs the downward attribution that decides controlled-foreign-corporation and PFIC status (the subject of the Form 5471 and Form 8621 guides). It does not touch §6038B's transfer-reporting trigger or §367's outbound-transfer rules. Whether a transfer of property to a foreign corporation is reportable on Form 926 is unchanged.
• One nuance, correctly placed. The §367(d) deemed royalty is eligible for the §250 deduction, and OBBBA renamed and retuned §250 (the FDII regime became "foreign-derived deduction eligible income"). That changes the tax on the deemed-royalty inclusion — a workpaper computation — not whether Form 926 is filed. The filing trigger stays put.

In short: re-read any pre-2018 §367 analysis with care, but a post-OBBBA structure files Form 926 on the same test it did before.

Relationships to other regimes and forms

Form 926 rarely travels alone — and the entity on the other side of the transfer decides which form applies.

• The partnership sibling — same statute, different subparagraph. A contribution of property to a foreign partnership is reported on Form 8865, Schedule O under §6038B(a)(1)(B) — the exact parallel of Form 926's §6038B(a)(1)(A) for foreign corporations. One property transfer for foreign equity is a Form 926 or a Form 8865 question depending only on whether the recipient is a corporation or a partnership. Classify the transferee first.
• The trust cousin — a different statute entirely. A transfer to a foreign trust is not a Form 926 event at all: it is reported on Form 3520 under §6048, a separate regime with its own percentage-based (§6677) penalty rather than the §6038B value penalty. Form 926 is for a transfer to a foreign corporation — classify the transferee (corporation, partnership, or trust) and the form follows.
• The companion Form 5471. When the transfer is a §351 or §368 exchange in which the US person receives stock and comes away holding 10% or more of the foreign corporation, the same event is also a Form 5471 Category 3 acquisition (§6046) — Form 926 reports the transfer, Form 5471 Category 3 reports the resulting stock acquisition. They are companion filings for one transaction, and a §351 transfer typically also carries a §351 disclosure (Reg §1.351-3) on the return.
• Disregarded entities, the inbound mirror, and PFICs. A transfer to a foreign disregarded entity is generally treated as a transfer to its owner, which can route the structure to Form 8858 for the entity while §367 still tests any deemed transfer to a foreign corporation up the chain; where the foreign corporation that received the property is itself a passive foreign investment company, the transferor's continuing interest can raise a Form 8621 question. The inbound mirror — a foreign person's dealings with a US company — is Form 5472, the opposite direction from Form 926's outbound transfer.
• The tax is out of scope here. The §367 gain, the §367(d) deemed royalty, any §91 recapture, and the §250 / GILTI consequences are computational questions that build on the facts Form 926 captures — separate, downstream work.

Example 6 — corporation or partnership decides the form. USP A contributes the same appreciated equipment for an equity interest. If the recipient is FC B, a foreign corporation, A files Form 926 under §6038B(a)(1)(A). If instead the recipient is FP B, a foreign partnership, A reports on Form 8865, Schedule O under §6038B(a)(1)(B) — not Form 926. Identical property, identical statute, different subparagraph, different form; the only variable is whether the transferee is a corporation or a partnership.

In plain terms the same contribution of property for foreign equity can be a Form 926 (to a corporation) or a Form 8865 (to a partnership); and when it is to a corporation and the client comes away owning 10% or more, it is usually a Form 926 and a Form 5471 for the one transaction. Sort out what the recipient is, and who ends up owning what, before deciding which forms are due. PILOT runs that determination across a whole structure — which of these forms each US person must file, and why.

What Form 926 is not

Form 926 reports — it does not compute your client's tax. The §367(a) toll charge, the §367(d) deemed royalty, any §91 branch-loss recapture, and the basis and earnings-and-profits consequences of the transfer are separate, downstream work that builds on the facts the form captures. The first question — and the one this guide answers — is simply whether a Form 926 obligation exists: for which US transferor, for which transfer, and whether an exception switches it off.