Form 926 is the IRS return a U.S. person files to report certain transfers of cash or property to a foreign corporation. It applies to founders funding or forming a foreign subsidiary, and to foreign founders whose U.S. entities send capital or assets to a company abroad.
This guide covers who must file, the reporting thresholds, how to complete each part of the form, and what happens if you miss it.
Key Takeaways
- Form 926 reports certain transfers of cash or property by a U.S. person to a foreign corporation.
- Cash is generally reportable when it exceeds $100,000 in 12 months, or the transferor holds at least 10% after the transfer.
- The form is attached to your income tax return, and the penalty for not filing is generally 10% of the property’s value, capped at $100,000.
What Form 926 Is and Why It Matters
Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, is the information return required under Internal Revenue Code Section 6038B. It tells the IRS when cash or assets move from a U.S. taxpayer into a foreign company.
Two terms come up throughout the form. The transferor is the U.S. person sending the cash or property. The transferee foreign corporation is the foreign company receiving it.
The form matters because these transfers can carry U.S. tax consequences. Under IRC Section 367(a), certain transfers of property to foreign corporations may trigger gain recognition, depending on the transaction’s nature and applicable exceptions, and transfers of intangibles can create income inclusions for years.
Form 926 gives the IRS the details it needs to check that those consequences were reported.
Who Must File Form 926
Generally, a U.S. citizen or resident, a domestic corporation, or a domestic estate or trust must file Form 926 when it makes a reportable transfer to a foreign corporation. Partnerships follow a different rule, covered below.
U.S. Individuals, Corporations, Estates and Trusts
U.S. individuals file Form 926 with their personal return and use their Social Security number as the identifying number. Spouses may file one Form 926 jointly, but only if they also file a joint income tax return.
Domestic corporations file Form 926 with their corporate return and use their EIN. This is the most common scenario for startups: a U.S. C Corp sets up or funds a subsidiary abroad.
If you need help with the underlying return, see our C Corp tax returns service. A corporation that belongs to a consolidated group files Form 926 with the parent’s consolidated return.
Domestic estates and trusts follow the same rules and attach the form to their fiduciary return.
How Partnerships and Their Partners Report Transfers
Generally, a partnership’s reportable transfers are attributed to its partners, who must determine their individual Form 926 filing obligations under the applicable rules. Instead, each domestic partner is treated as transferring its proportionate share of the property and files Form 926 with its own return if that share is reportable.
Pro Tip 💡: Funding a new foreign subsidiary often triggers more than one international form. A U.S. company that owns 10% or more of a foreign corporation may also need to file Form 5471. Cleer Tax supports tax preparation and filing for U.S. companies with foreign subsidiaries, including Form 926, through our Foreign Subsidiary tax package.
Form 926 Filing Requirements and Thresholds
Whether you must file depends on what you transferred. Cash has its own reporting threshold, while most other property is reportable whenever it moves in a covered exchange.
Cash Transfers: The $100,000 and 10% Ownership Tests
A U.S. person must report a cash transfer to a foreign corporation if either test is met:
- The $100,000 test: the total cash you transferred to that foreign corporation during the 12 months ending on the date of the transfer is more than $100,000.
- The 10% ownership test: immediately after the transfer, you hold, directly or indirectly, at least 10% of the corporation’s total voting power or total value.
The 12-month window is rolling, not a calendar year. For example, if you send $60,000 in March and $50,000 in August, the August transfer pushes your 12-month total to $110,000 and becomes reportable.
The ownership test catches small amounts too. A U.S. company that wires $1,000 to capitalize a wholly owned foreign subsidiary holds 100% afterward, so that transfer is reportable even though it is far below $100,000.
Transfers of Non-Cash Property
Transfers of property other than cash are generally reportable when they happen in an exchange covered by Section 6038B, regardless of value. Common examples include contributing equipment or IP to a foreign corporation in exchange for its stock (a Section 351 exchange), reorganizations under Sections 354, 356, and 361, and certain liquidations under Section 332.
Transfers of intangible property subject to Section 367(d) and certain distributions covered by Section 367(e) are also reportable.
Common Exceptions
The IRS instructions list a few exceptions, mostly for transfers of stock in reorganizations. At a high level, you generally do not have to file Form 926 if:
- You exchange stock of a foreign corporation in a recapitalization, or exchange stock for foreign corporation stock in certain asset reorganizations.
- A domestic corporation distributes stock of another domestic corporation under Section 355, with some exceptions for foreign distributees.
- You transfer stock or securities under Section 367(a), own less than 5% of the foreign corporation afterward, and qualify for nonrecognition treatment or properly reported the gain.
Each exception has conditions, so check the IRS Instructions for Form 926 before relying on one.
Property Covered by Form 926
Form 926 covers both tangible and intangible property. Reportable property generally includes:
- Cash, subject to the $100,000 and 10% tests above.
- Stock and securities, including shares of other corporations.
- Tangible property, such as equipment, inventory, and real property.
- Section 367(d) intangibles, such as patents, know-how, copyrights, trademarks, customer lists, goodwill, going-concern value, and workforce in place.
If the property came from a foreign branch of a U.S. business, the form asks additional questions about the branch and any previously deducted branch losses.
When and Where to File Form 926
Form 926 has no separate deadline and is filed with the transferor’s income tax return for the year of the transfer. If you extend your return, the Form 926 deadline moves with it.
| Filer type | Return Form 926 is attached to | Calendar-year due date | Extended due date |
| C Corp | Form 1120 | April 15 | October 15 |
| S Corp | Form 1120-S | March 15 | September 15 |
| Individual | Form 1040 | April 15 | October 15 |
| Estate or trust | Form 1041 | April 15 | September 30 |
| Partner in a partnership | Partner’s own return | Per that return | Per that return |
Fiscal-year filers generally file by the 15th day of the 4th month after year-end (3rd month for S Corps). When a deadline falls on a weekend or legal holiday, it moves to the next business day.
Form 926 goes wherever your return goes, whether you e-file or mail it. All information must be in English and all amounts in U.S. dollars.
How to Fill Out Form 926
Form 926 has four parts: who sent the property, who received it, what was transferred, and how the transfer was structured. The steps below follow the current form (Rev. November 2018).
Part I: U.S. Transferor Information
- Enter the transferor’s name and identifying number: an SSN for individuals, an EIN for everyone else.
- Line 1: check “Yes” only if the foreign corporation is a specified 10%-owned foreign corporation that is not a controlled foreign corporation (CFC). If it is a CFC, check “No” here and “Yes” on line 9.
- Lines 2a to 2d (corporate transferors only): answer the questions on control, whether the transferor remained in existence, consolidated group membership, and basis adjustments. A consolidated group member lists its parent’s name and EIN.
- Lines 3a to 3d (partners only): if the transfer was made by a partnership, list the partnership’s name and EIN and answer the questions about your share.
Part II: Transferee Foreign Corporation Information
- Line 4: enter the foreign corporation’s name.
- Line 5a or 5b: enter its EIN if it has one. If not, assign a reference ID number of up to 50 letters and numbers, with no spaces or special characters, and use it consistently every year.
- Line 6: enter the address in this order: city, province or state, and country. Don’t abbreviate the country name.
- Line 7: enter the two-letter IRS country code for the country of incorporation.
- Line 8: enter how the entity is classified under foreign law, such as a corporation.
- Line 9: indicate whether the foreign corporation is a CFC immediately after the transfer.
Part III: Information Regarding Transfer of Property
- Section A, Cash: enter the date of transfer and the amount. If cash was the only property transferred, answer “Yes” on line 10 and skip to Part IV.
- Section B, Other Property: for stock and securities, inventory, other property, and property with built-in loss, enter the date of transfer, description, fair market value, cost or other basis, and gain recognized. Line 11 asks about gain recognition agreements, and lines 12a to 12d cover foreign branch assets.
- Section C, Section 367(d) Intangibles: for each intangible, enter the date of transfer, description, useful life, arm’s length price, cost or other basis, and income inclusion for the year. Lines 14a to 15 cover long-lived intangibles and platform contributions.
- Supplemental information: describe the transfer, the wider transaction and the consideration received. Label each entry with the section, line and column it relates to.
Part IV: Additional Information Regarding Transfer of Property
- Line 16: enter your percentage interest in the foreign corporation before and after the transfer.
- Line 17: enter the type of nonrecognition transaction, such as Section 351, 332, 354, 356, or 361.
- Lines 18a to 18d: indicate whether any transfer triggers gain recognition or recapture under the listed sections, and attach a statement if so.
- Line 19: check “Yes” if the transfer resulted from an entity classification change, such as a Form 8832 election.
- Lines 20a to 21: complete these only for certain distributions by a domestic corporation, such as a liquidation into a foreign parent or a Section 355 spin-off.
Example: Funding a Foreign Subsidiary
Example Inc., a U.S. C Corp, forms Foreign Example Ltd. and buys all 1,000 of its common shares for $1,000 in cash. Here is how Example Inc. would approach Form 926:
- Check whether filing is required. The $1,000 is well under $100,000, but Example Inc. owns 100% afterward. The 10% ownership test is met, so the transfer is reportable.
- Complete Part I. Enter Example Inc.’s name and EIN. Foreign Example Ltd. is wholly owned by a U.S. corporation, which makes it a CFC, so check “No” on line 1. Answer lines 2a to 2d and skip line 3.
- Complete Part II. Enter Foreign Example Ltd.’s name, EIN or reference ID, address, country code, and foreign law classification. Check “Yes” on line 9.
- Complete Part III, Section A. Enter the transfer date and $1,000 in cash. Check “Yes” on line 10 and skip Sections B and C.
- Complete Part IV. Enter 0% before and 100% after on line 16, and Section 351 on line 17. Answer “No” on lines 18 to 21 if none apply.
- Attach and file. Attach Form 926 to Example Inc.’s Form 1120 for the year of the transfer.
Form 926 Penalties for Failure to File
If you don’t comply with Section 6038B, the IRS can assess a penalty and keep the tax year open longer. For a broader overview of how filing penalties work, see Failing to File: What are the Penalties?
The 10% Penalty and $100,000 Cap
The penalty equals 10% of the fair market value of the property at the time of the transfer. It is generally capped at $100,000.
When the Cap Doesn’t Apply
The $100,000 cap does not apply if the failure to comply was due to intentional disregard. In that case, the full 10% of the property’s value can be assessed.
Extended Statute of Limitations
Failing to file also affects how long the IRS can assess tax on the transfer. The assessment period is extended to three years after the date you provide the required information.
Reasonable Cause Relief
The penalty does not apply if the failure was due to reasonable cause and not willful neglect. Relief depends on your facts, so document why the form was missed and how you corrected it.
How Cleer Tax Can Help With Form 926
If a U.S. person sends cash or property to a foreign corporation, Form 926 is likely part of that year’s return, and the 10% ownership test means even small transfers to a new subsidiary can count. Filing it correctly and on time avoids penalties and keeps the statute of limitations from staying open.
Cleer Tax supports tax preparation and filing for U.S. companies with foreign subsidiaries, including Form 926. Our Tax Preparation for Foreign Subsidiary package covers Form 926 alongside Form 5471, so your international reporting is prepared together with your corporate return.
Clients remain responsible for providing accurate and timely information and making required tax payments.
Frequently Asked Questions (FAQ)
What is Form 926 used for?
Form 926 reports certain transfers of cash or property by a U.S. person to a foreign corporation, as required by Section 6038B. It helps the IRS track assets moving out of the U.S. tax system.
Do I need to file Form 926 for cash transfers under $100,000?
Sometimes. Cash under $100,000 in a 12-month period is still reportable if you hold at least 10% of the foreign corporation’s voting power or value immediately after the transfer.
When is Form 926 required?
It is required when a U.S. person makes a reportable transfer to a foreign corporation, such as cash above the $100,000 or 10% thresholds, or property contributed in a Section 351 exchange or reorganization.
Is Form 926 filed separately or with my tax return?
Form 926 is attached to your income tax return for the year of the transfer, such as Form 1120, 1120-S, 1040, or 1041. It has no separate deadline and follows your return’s due date, including extensions.
Can a company help me file Form 926?
Yes. Cleer Tax supports tax preparation and filing for U.S. companies with foreign subsidiaries, including Form 926. Learn more about our Foreign Subsidiary package.
Disclaimer: This article is for general informational purposes only and does not constitute tax, legal, or accounting advice. Tax rules change, and their application depends on your specific facts. Consult a qualified tax professional before acting on any information in this article.
