26 U.S.C. § 367: Foreign corporations

Amended 1976

1976 Pub. L. 94-455 Pub. L. 94–455, among other changes, inserted provisions permitting nonrecognition of gain if a request for a ruling that tax avoidance is not present is filed within 183 days after beginning of an exchange, relating to an organization, reorganization, and liquidation of a foreign corporation, in the case of outbound transfers, however, for all other transfers, regulations are to provide the extent that earnings are to be taken into account as dividends and provisions relating to Tax Court review of the tax avoidance rulings.

Cases: Abegg v. Commissioner, 429 F.2d 1209 (2d Cir. 1970); Hospital Corp. of America v. Commissioner, 81 T.C. 520 (1983); American Mfg. Co. v. Commissioner, 55 T.C. 204 (1970)

Forms: Form 8838; Form 5471; Form 926

Final rules 35

(a) Transfers of property from the United States

§ 1.367(a)-0 Table of contents.§ 1.367(a)-1 Transfers to foreign corporations subject to section 367(a): In general.§ 1.367(a)-1T Transfers to foreign corporations subject to section 367(a): In general (temporary).§ 1.367(a)-2 Exceptions for transfers of property for use in the active conduct of a trade or business.§ 1.367(a)-3 Treatment of transfers of stock or securities to foreign corporations.§ 1.367(a)-4 Special rule applicable to U.S. depreciated property.§ 1.367(a)-6 Transfer of foreign branch with previously deducted losses.§ 1.367(a)-6T Transfer of foreign branch with previously deducted losses (temporary).§ 1.367(a)-7 Outbound transfers of property described in section 361(a) or (b).§ 1.367(a)-8 Gain recognition agreement requirements.§ 1.367(a)-9T Treatment of deemed section 351 exchanges pursuant to section 304(a)(1) (temporary).Prop. § 1.367(a)-9 Proposed 1995 · Transfers by U.S. persons of stock or securities of domestic corporations to foreign corporations.Prop. § 1.367(a)-1T Proposed 2008 · Transfers to foreign corporations subject to section 367(a): In general (temporary).Prop. § 1.367(a)-9 Proposed 2009 · Treatment of deemed section 351 exchanges pursuant to section 304(a)(1).Prop. § 1.367(a)-7 Proposed 2013 · Outbound transfers of property described in section 361(a) or (b).Prop. § 1.367(a)-3 Proposed 2020 · Treatment of transfers of stock or securities to foreign corporations.

Amended 1971, 1984, 1988, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 14102(e)(1), redesignated pars. (5) and (6) as (4) and (5), respectively.
1988 Pub. L. 100-647 Pub. L. 100–647 added par. (5) and redesignated former par. (5) as (6).
1984 Pub. L. 98-369 Pub. L. 98–369, § 131(a), amended subsec. (a) generally, revising provisions of pars. (1) and (2), and adding pars. (3) to (5).
1971 Pub. L. 91-681 Pub. L. 91–681 designated existing provisions as subsec. (a), and, as so designated, inserted provisions relating to instances of an exchange, described in subsec. (b). Provisions relating to distributions described in section 355 (or so much of section 356 as relates to section 355) were stricken and were transferred to subsec. (c).

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(1) General rule 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.

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1810(g)(4)(A), struck out “355,” after “354,”.

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(2) Exception for certain stock or securities Except to the extent provided in regulations, paragraph (1) shall not apply to the transfer of stock or securities of a foreign corporation which is a party to the exchange or a party to the reorganization.

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(3) Special rule for transfer of partnership interests Except as provided in regulations prescribed by the Secretary, a transfer by a United States person of an interest in a partnership to a foreign corporation in an exchange described in paragraph (1) shall, for purposes of this subsection, be treated as a transfer to such corporation of such person’s pro rata share of the assets of the partnership.

Amended 1999, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 14102(e)(1), redesignated par. (4) as (3) and struck out former par. (3) which related to exception for transfers of certain property used in the active conduct of a trade or business.
1999 Pub. L. 106-170 Pub. L. 106–170 substituted “section 1221(a)” for “section 1221”.

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(4) Paragraph (2) not to apply to certain section 361 transactions Paragraph (2) shall not apply in the case of an exchange described in subsection (a) or (b) of section 361. Subject to such basis adjustments and such other conditions as shall be provided in regulations, the preceding sentence shall not apply if the transferor corporation is controlled (within the meaning of section 368(c)) by 5 or fewer domestic corporations. For purposes of the preceding sentence, all members of the same affiliated group (within the meaning of section 1504) shall be treated as 1 corporation.

Amended 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 14102(e)(1), (2), redesignated par. (5) as (4) and substituted “Paragraph (2)” for “Paragraphs (2) and (3)” in heading and text. Former par. (4) redesignated (3).

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(5) Secretary may exempt certain transactions from application of this subsection Paragraph (1) shall not apply to the transfer of any property which the Secretary, in order to carry out the purposes of this subsection, designates by regulation.

Amended 1988, 1990, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 14102(e)(1), redesignated pars. (5) and (6) as (4) and (5), respectively.
1990 Pub. L. 101-508 Pub. L. 101–508 substituted “subsection (a) or (b) of section 361” for “section 361”.
1988 Pub. L. 100-647 Pub. L. 100–647 added par. (5) and redesignated former par. (5) as (6).

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(b) Other transfers

§ 1.367(b)-0 Table of contents.§ 1.367(b)-1 Other transfers.§ 1.367(b)-2 Definitions and special rules.§ 1.367(b)-3 Repatriation of foreign corporate assets in certain nonrecognition transactions.§ 1.367(b)-3T Repatriation of foreign corporate assets in certain nonrecognition transactions (temporary).§ 1.367(b)-4 Acquisition of foreign corporate stock or assets by a foreign corporation in certain nonrecognition transactions.§ 1.367(b)-5 Distributions of stock described in section 355.§ 1.367(b)-6 Effective/applicability dates and coordination rules.§ 1.367(b)-7 Carryover of earnings and profits and foreign income taxes in certain foreign-to-foreign nonrecognition transactions.§ 1.367(b)-8 Allocation of earnings and profits and foreign income taxes in certain foreign corporate separations. [Reserved]§ 1.367(b)-9 Special rule for F reorganizations and similar transactions.§ 1.367(b)-10 Acquisition of parent stock or securities for property in triangular reorganizations.§ 1.367(b)-12 Subsequent treatment of amounts attributed or included in income.§ 1.367(b)-13 Special rules for determining basis and holding period.Prop. § 1.367(b)-5 Proposed 2000 · Distributions of stock described in section 355.Prop. § 1.367(b)-3 Proposed 2005 · Repatriation of foreign corporate assets in certain nonrecognition transactions.Prop. § 1.367(b)-14 Proposed 2008 · Acquisition of parent stock for property in triangular reorganizations.Prop. § 1.367(b)-3 Proposed 2026 · Repatriation of foreign corporate assets in certain nonrecognition transactions.

Amended 1971

1971 Pub. L. 91-681 Pub. L. 91–681 added subsec. (b).

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(1) Effect of section to be determined under regulations In the case of any exchange described in section 332, 351, 354, 355, 356, or 361 in connection with which there is no transfer of property described in subsection (a)(1), a foreign corporation shall be considered to be a corporation except to the extent provided in regulations prescribed by the Secretary which are necessary or appropriate to prevent the avoidance of Federal income taxes.

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(2) Regulations relating to sale or exchange of stock in foreign corporations The regulations prescribed pursuant to paragraph (1) shall include (but shall not be limited to) regulations dealing with the sale or exchange of stock or securities in a foreign corporation by a United States person, including regulations providing—

(A) the circumstances under which—

(i) gain shall be recognized currently, or amounts included in gross income currently as a dividend, or both, or

(ii) gain or other amounts may be deferred for inclusion in the gross income of a shareholder (or his successor in interest) at a later date, and

(B) the extent to which adjustments shall be made to earnings and profits, basis of stock or securities, and basis of assets.

Amended 1971

1971 Pub. L. 91-681 Pub. L. 91–681 designated as subsec. (c) provisions relating to distribution described in section 355 (or so much of section 356 as relates to section 355).

(1) Section 355 distribution For purposes of this section, any distribution described in section 355 (or so much of section 356 as relates to section 355) shall be treated as an exchange whether or not it is an exchange.

(2) Contribution of capital to controlled corporations For purposes of this chapter, any transfer of property to a foreign corporation as a contribution to the capital of such corporation by one or more persons who, immediately after the transfer, own (within the meaning of section 318) stock possessing at least 80 percent of the total combined voting power of all classes of stock of such corporation entitled to vote shall be treated as an exchange of such property for stock of the foreign corporation equal in value to the fair market value of the property transferred.

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(d) Special rules relating to transfers of intangibles

§ 1.367(d)-1 Transfers of intangible property to foreign corporations.§ 1.367(d)-1T Transfers of intangible property to foreign corporations (temporary).

Amended 1971, 1982, 1984

1984 Pub. L. 98-369 Pub. L. 98–369, § 131(b), amended subsec. (d) generally, substituting provision providing special rules relating to transfers of intangibles for provision providing special rules relating to transfers of intangibles by possession corporation.
1982 Pub. L. 97-248 Pub. L. 97–248 added subsec. (d) and redesignated former subsec. (d) as (e).
1971 Pub. L. 91-681 Pub. L. 91–681 added subsec. (d).

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(1) In general Except as provided in regulations prescribed by the Secretary, if a United States person transfers any intangible property to a foreign corporation in an exchange described in section 351 or 361—

Amended 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(d)(1)(D)(viii)(II), struck out “(within the meaning of section 936(h)(3)(B))” after “intangible property” in introductory provisions.

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(A) subsection (a) shall not apply to the transfer of such property, and

(B) the provisions of this subsection shall apply to such transfer.

(2) Transfer of intangibles treated as transfer pursuant to sale of contingent payments

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(A) In general If paragraph (1) applies to any transfer, the United States person transferring such property shall be treated as—

Amended 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 1231(e)(2), inserted at end “The amounts taken into account under clause (ii) shall be commensurate with the income attributable to the intangible.”

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(i) having sold such property in exchange for payments which are contingent upon the productivity, use, or disposition of such property, and

(ii) receiving amounts which reasonably reflect the amounts which would have been received—

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(I) annually in the form of such payments over the useful life of such property, or

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(II) in the case of a disposition following such transfer (whether direct or indirect), at the time of the disposition.

The amounts taken into account under clause (ii) shall be commensurate with the income attributable to the intangible.

(B) Effect on earnings and profits For purposes of this chapter, the earnings and profits of a foreign corporation to which the intangible property was transferred shall be reduced by the amount required to be included in the income of the transferor of the intangible property under subparagraph (A)(ii).

(C) Amounts received treated as ordinary income For purposes of this chapter, any amount included in gross income by reason of this subsection shall be treated as ordinary income. For purposes of applying section 904(d), any such amount shall be treated in the same manner as if such amount were a royalty.

Amended 1997, 2004

2004 Pub. L. 108-357 Pub. L. 108–357 inserted at end “For purposes of applying section 904(d), any such amount shall be treated in the same manner as if such amount were a royalty.”
1997 Pub. L. 105-34 Pub. L. 105–34, § 1131(b)(4), amended heading and text of subpar. (C) generally. Prior to amendment, text read as follows: “For purposes of this chapter, any amount included in gross income by reason of this subsection shall be treated as ordinary income from sources within the United States.”

(D) Regulatory authority For purposes of the last sentence of subparagraph (A), the Secretary shall require—

Amended 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 14221(b)(1), added subpar. (D).

(i) the valuation of transfers of intangible property, including intangible property transferred with other property or services, on an aggregate basis, or

(ii) the valuation of such a transfer on the basis of the realistic alternatives to such a transfer,

if the Secretary determines that such basis is the most reliable means of valuation of such transfers.

(3) Regulations relating to transfers of intangibles to partnerships The Secretary may provide by regulations that the rules of paragraph (2) also apply to the transfer of intangible property by a United States person to a partnership in circumstances consistent with the purposes of this subsection.

Amended 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 1131(b)(5)(A), added par. (3).

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(4) Intangible property For purposes of this subsection, the term “intangible property” means any—

Amended 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(d)(1)(D)(viii)(I), added par. (4).

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(A) patent, invention, formula, process, design, pattern, or know-how,

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(B) copyright, literary, musical, or artistic composition,

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(D) franchise, license, or contract,

(E) method, program, system, procedure, campaign, survey, study, forecast, estimate, customer list, or technical data,

(F) goodwill, going concern value, or workforce in place (including its composition and terms and conditions (contractual or otherwise) of its employment), or

(G) other item the value or potential value of which is not attributable to tangible property or the services of any individual.

(e) Treatment of distributions described in section 355 or liquidations under section 332

§ 1.367(e)-0 Outline of §§ 1.367(e)-1 and 1.367(e)-2.

Amended 1982, 1984, 1986

1986 Pub. L. 99-514 Pub. L. 99–514, § 631(d)(1), amended subsec. (e) generally. Prior to amendment, subsec. (e), treatment of distributions described in section 336 or 355, read as follows: “In the case of any distribution described in section 336 or 355 (or so much of section 356 as relates to section 355) by a domestic corporation which is made to a person who is not a United States person, to the extent provided in regulations, gain shall be recognized under principles similar to the principles of this section.”
1984 Pub. L. 98-369 Pub. L. 98–369, § 131(c), added subsec. (e) and redesignated former subsec. (e) as (f).
1982 Pub. L. 97-248 Pub. L. 97–248 added subsec. (d) and redesignated former subsec. (d) as (e).

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(1) Distributions described in section 355 In the case of any distribution described in section 355 (or so much of section 356 as relates to section 355) by a domestic corporation to a person who is not a United States person, to the extent provided in regulations, gain shall be recognized under principles similar to the principles of this section.

§ 1.367(e)-1 Distributions described in section 367(e)(1).Prop. § 1.367(e)-1 Proposed 2000 · Distributions described in section 367(e)(1).

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(2) Liquidations under section 332 In the case of any liquidation to which section 332 applies, except as provided in regulations, subsections (a) and (b)(1) of section 337 shall not apply where the 80-percent distributee (as defined in section 337(c)) is a foreign corporation.

§ 1.367(e)-2 Distributions described in section 367(e)(2).

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(f) Other transfers To the extent provided in regulations, if a United States person transfers property to a foreign corporation as paid-in surplus or as a contribution to capital (in a transaction not otherwise described in this section), such transfer shall be treated as a sale or exchange for an amount equal to the fair market value of the property transferred, and the transferor shall recognize as gain the excess of—

Amended 1984, 1986, 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 1131(b)(2), added subsec. (f).
1986 Pub. L. 99-514 Pub. L. 99–514, § 1810(g)(1), struck out subsec. (f) which related to transitional rules in the case of any exchanges beginning before Jan. 1, 1978.
1986 Pub. L. 99-514 Pub. L. 99–514, § 1810(g)(4)(B), in heading substituted “distributions described in section 336 or 355” for “liquidations under section 336”, and in text inserted “or 355 (or so much of section 356 as relates to section 355)”.
1984 Pub. L. 98-369 Pub. L. 98–369, § 131(c), added subsec. (e) and redesignated former subsec. (e) as (f).

(1) the fair market value of the property so transferred, over

(2) the adjusted basis (for purposes of determining gain) of such property in the hands of the transferor.