Form 926 Compliance: Domestic Corporate Transfers to Foreign Subsidiaries and Related Corporations

Section 6038 requires U.S. persons, corporations and partnerships to file an information report to the IRS when making certain transfers of property to non-U.S. corporations in certain “non-recognition” transactions, as specified in Section 367.

While the Code Section and regulatory guidance is intended to prevent taxpayers from avoiding tax by shifting appreciated property to foreign jurisdictions, the reporting requirements apply whether or not the transferred asset has appreciated in value.

There are a number of transactions specific to domestic corporations that fall under the Form 926 reporting requirements. Transfers arising from liquidations (governed by Sections 332 and 336), reorganizations (under Sections 354 and 361), and distributions of controlled corporation stock (Section 355) fall under the Section 6038 filing duties and can trigger recognition as taxable events.

The information required on Form 926 is extensive and the penalties for noncompliance are harsh, up to 10% of the market value of the asset transferred. Additionally, the IRS is utilizing Form 926 to verify consistency with other foreign reporting requirements, so a failure to file a complete and accurate Form 926 can result in other tax consequences—such as FATCA and transfer pricing penalties—as the IRS cross-checks information, as well as extending the statute of limitation until the reporting is complete.

Listen as our experienced panel provides a thorough and practical guide to completing Form 926 to report property contributions to foreign corporations.

1. Transactions requiring Form 926 reporting
2. What must be reported on Form 926
3. Special issues related to partnerships and hedge funds
4. Penalties for noncompliance

The panel will discuss these and other important issues:

• What are the thresholds for Form 926 reporting?
• What are the Form 926 reporting requirements when a U.S. domestic corporation transfers property to a controlled or related foreign corporation?
• What are the special rules applicable to corporations under the terms of Section 367?
• What is a “gain recognition agreement” and how does it impact reporting requirements?
• What are the challenges of completing Part III, Information Regarding Transfer of Property, and how does Part III intersect with Form 5471 and FinCEN Form 114?
• What are the calculations required to complete Part IV, Additional Information Regarding Transfer of Property?

Learning Objectives

After completing this course, you will be able to:

• Recognize the thresholds for both value and control in determining whether a taxpayer must file Form 926
• Discern the exceptions to filing requirements and gain/loss recognition on transfers to foreign corporations
• Identify critical calculations that must be reported in Part IV of Form 926
• Demonstrate the interrelation between amounts reported on Form 926 and other foreign information reporting requirements such as FBAR/FinCEN Form 114
• Determine information that must be included in Part III of Form 926

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, supervising other attorneys or accountants. Specific knowledge and understanding of foreign asset and contribution information reporting requirements; familiarity with IRS standards for foreign tax reporting, familiarity with FATCA and related reporting penalties.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).