Is a Form 926 required if I transfer cash or property to a foreign corporation?

Yes, if you transfer cash or property to a Controlled Foreign Corporation (CFC), you generally need to file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation.

When is Form 926 Required?

Form 926 is required when a U.S. person (individual, partnership, corporation, etc.) transfers property (including cash) to a foreign corporation if the transfer meets certain criteria:

Controlled Foreign Corporation (CFC): If you are transferring property to a foreign corporation and, as a result of the transfer, the U.S. transferor owns (directly or indirectly) 10% or more of the foreign corporation’s stock, that foreign corporation is considered a CFC.

Transfer of Property: The form is required when you transfer property (this includes tangible and intangible assets, such as cash, real estate, stock, etc.) to the foreign corporation. The form also applies to certain transfers involving stock or securities.

Reporting Requirements: You must report the transfer on Form 926 if you are making a transfer to a foreign corporation where the CFC threshold is met. This includes providing details of the property transferred, the fair market value of the property, and the amount of stock you own or control in the CFC.

Filing Deadline: Form 926 must be filed by the due date (including extensions) of the U.S. person’s tax return for the year in which the transfer occurred.

Exceptions: There are some exceptions to the filing requirement, such as certain transfers that qualify for deferral under the Internal Revenue Code (IRC) provisions related to 351 exchanges (where no gain is recognized on transfers of property to a corporation in exchange for stock).

Penalties for Non-Filing:

Failure to file Form 926 when required can result in significant penalties, so it’s important to understand whether your transfer qualifies for reporting.

In Summary:

If you transfer property (including cash) to a foreign corporation and the transfer results in you owning 10% or more of the corporation, or if the foreign corporation becomes a CFC, you must file Form 926.