[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 197-202]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.6038B-1T  Reporting of certain transactions to foreign 
corporations (temporary).

    (a) [Reserved]. For further guidance, see Sec.  1.6038B-1(a).
    (b) Time and manner of reporting--(1) In general--(i) Reporting 
procedure. Except for stock or securities qualifying under the special 
reporting rule of Sec.  1.6038B-1(b)(2) , and certain exchanges 
described in section 354 (listed below), any U.S. person that makes a 
transfer described in section 6038B(a)(1)(A), 367(d) or (e), is required 
to report pursuant to section 6038B and the rules of Sec.  1.6038B-1 and 
this section and must attach the required information to Form 926, 
``Return by a U.S. Transferor of Property to a Foreign Corporation.'' 
For special rules regarding cash transfers made in tax years beginning 
after February 5, 1999, see Sec.  1.6038B-1(b)(3) and (g) . For purposes 
of determining a U.S. transferor that is subject to section 6038B, the 
rules of Sec.  1.367(a)-1T(c) and Sec.  1.367(a)-3(d) shall apply with 
respect to a transfer described in section 367(a), and the rules of 
Sec.  1.367(a)-1T(c) shall apply with respect to a transfer described in 
section 367(d). Additionally, if in an exchange described in section 
354, a U.S. person exchanges stock of a foreign corporation in a 
reorganization described in section 368(a)(1)(E), or a U.S. person 
exchanges stock of a domestic or foreign corporation for stock of a 
foreign corporation pursuant to an asset reorganization described in 
section 368(a)(1)(C), (D), or (F), that is not treated as an indirect 
stock transfer under section 367(a), then the U.S. person exchanging 
stock is not required to report under section 6038B. Notwithstanding any 
statement to the contrary on Form 926, the form and attachments must be 
attached to, and filed by the due date (including extensions) of the 
transferor's income tax

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return for the taxable year that includes the date of the transfer (as 
defined in Sec.  1.6038B-1T(b)(4)). For taxable years beginning before 
January 1, 2003, any attachment to Form 926 required under the rules of 
this section is filed subject to the transferor's declaration under 
penalties of perjury on Form 926 that the information submitted is true, 
correct and complete to the best of the transferor's knowledge and 
belief. For taxable years beginning after December 31, 2002, Form 926 
and any attachments shall be verified by signing the income tax return 
with which the form and attachments are filed.
    (ii) Reporting by corporate transferor. For transfers by 
corporations in taxable years beginning before January 1, 2003, Form 926 
must be signed by an authorized officer of the corporation if the 
transferor is not a member of an affiliated group under section 
1504(a)(1) that files a consolidated Federal income tax return and by an 
authorized officer of the common parent corporation if the transferor is 
a member of such an affiliated group. For transfers by corporations in 
taxable years beginning after December 31, 2002, Form 926 shall be 
verified by signing the income tax return to which the form is attached.
    (b)(2) through (b)(3) [Reserved]. For further guidance, see Sec.  
1.6038B-1(b)(2) through (b)(3).
    (4) Date of transfer--(i) In general. For purposes of this section, 
the date of a transfer described in section 367 is the first date on 
which title to, possession of, or rights to the use of stock, 
securities, or other property passes pursuant to the plan for purposes 
of subtitle A of the Internal Revenue Code. A transfer will not be 
considered to begin with a decision of a board of directors or similar 
action unless the transaction otherwise takes effect for purposes of 
subtitle A of the Internal Revenue Code on that date.
    (ii) Termination of section 1504(d) election. A transfer deemed to 
occur as a result of the termination of an election under section 
1504(d) will be considered to occur on the date the contiguous country 
corporation first fails to continue to qualify for the election under 
section 1504(d). The rule of this paragraph (b)(3)(ii) is illustrated by 
the following example.
    Example. Domestic corporation W previously made a valid election 
under section 1504(d) to have its Mexican subsidiary S treated as a 
domestic corporation. On August 1, 1986, W disposes of its right, title, 
and interest in 10 percent of the stock of S by selling such stock to an 
unrelated United States person who is not a director of S. S first fails 
to continue to qualify for the election under section 1504(d) on August 
1, 1986, since on such date it ceases to be directly or indirectly 
wholly owned or controlled by W. The constructive transfer of assets 
from ``domestic'' corporation S to Mexican corporation S is considered 
to occur on that date.
    (iii) Change in classification. A transfer deemed to occur as a 
result of a change in classification of an entity caused by a change in 
the governing documents, articles, or agreements of the entity (as 
described in Sec.  1.367(a)-1T(c)(6)) will be considered to occur on the 
date that such changes take effect for purposes of subtitle A of the 
Internal Revenue Code.
    (iv) U.S. resident under section 6013 (g) or (h). A transfer made by 
an alien individual who is considered to be a U.S. resident by reason of 
a timely election under section 6013 (g) or (h) will be considered to 
occur, for purposes of this section (but not for purposes of section 
367), on the later of--
    (A) The date on which the election under section 6013 (g) or (h) is 
made; or
    (B) The date on which the transfer would otherwise be considered to 
occur under the rules of this paragraph (b)(3).

The rule of this paragraph (b)(3)(iv) is illustrated by the following 
example.
    Example. D is a nonresident alien individual who is married to a 
United States citizen. On March 1, 1986, D transfers property to a 
foreign corporation in an exchange described in section 351. On April 
15, 1987, D and the spouse timely file with their tax return for the 
taxable year ended December 31, 1986, an election under section 6013(g) 
for D to be treated as a United States resident. The election is 
effective on January 1, 1986. For purposes of section 6038 B, the 
transfer described in section 367(a) made by D in connection with the 
section 351 exchange is considered to occur on April 15, 1987, the date 
on which the timely election was made under section 6013(g).

    (c) Introductory text [Reserved]. For further guidance, see Sec.  
1.6038B-1(c).

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    (1) Transferor. Provide the name, U.S. taxpayer identification 
number, and address of the U.S. person making the transfer.
    (2) Transfer. Provide the following information concerning the 
transfer:
    (i) Name, U.S. taxpayer identification number (if any), address, and 
country of incorporation of transferee foreign corporation;
    (ii) A general description of the transfer, and any wider 
transaction of which it forms a part, including a chronology of the 
transfers involved and an identification of the other parties to the 
transaction to the extent known.
    (3) Consideration received. Provide a description of the 
consideration received by the U.S. person making the transfer, including 
its estimated fair market value and, in the case of stock or securities, 
the class or type, amount, and characteristics of the interest received.
    (4) Property transferred. Provide a description of the property 
transferred. The description must be divided into the following 
categories, and must include the estimated fair market value and 
adjusted basis of the property, as well as any additional information 
specified below.
    (i) Active business property. Describe any transferred property 
(other than stock or securities) to be used in the active conduct of a 
trade or business outisde of the United States. Provide here a general 
description of the business conducted (or to be conducted) by the 
transferee, including the location of the business, the number of its 
employees, the nature of the business, and copies of the most recently 
prepared balance sheet and profit and loss statement. Property listed 
within this category may be identified by general type. For example, 
upon the transfer of the assets of a manufacturing operation, a 
reasonable description of the property to be used in the business might 
include the categories of office equipment and supplies, computers and 
related equipment, motor vehicles, and several major categories of 
manufacturing equipment. However, any property that is includible both 
in this subdivision (i) and in subdivision (iii) of this paragraph 
(c)(4) (property subject to depreciation recapture under Sec.  1.367(a)-
4T (b)) must be identified in the manner required in subdivision (iii). 
If property is considered to be transferred for use in the active 
conduct of a trade or business under a special rule in Sec.  1.367(a)-
4T, specify the applicable rule and provide information supporting the 
application of the rule. If property is subject to section 367(a)(1) 
regardless of its use in a trade or business under the rules of Sec.  
1.367(a)-4T or Sec.  1.367(a)-5T, list the property only in response to 
subdivision (vii) of this paragraph (c)(4).
    (ii) Stock or securities. Describe any transferred stock or 
securities, including the class or type, amount, and characteristics of 
the transferred stock or securities, as well as the name, address, place 
of incorporation, and general description of the corporation issuing the 
stock. In addition, provide the following information if applicable:
    (A) Active trade or business stock. If the stock or securities are 
considered to be transferred for use in the active conduct of a trade or 
business outside of the United States under the rules of Sec.  1.367(a)-
3T(d)(2), provide information supporting the application of the rule.
    (B) Application of special rules. If any provision of Sec.  
1.367(a)-3T applies to except the transfer of stock or securities from 
the rule of section 367(a)(1), provide information supporting the 
claimed application of such provision (including information supporting 
the nonapplicability of either anti-abuse rule under Sec.  1.367(a)-
3T(h)). If the transferor is entering into an agreement to recognize 
gain upon a later disposition of the transferred stock by the transferee 
foreign corporation under Sec.  1.367(a)-3T(g), attach the agreement and 
waiver as required by the rules of that paragraph.
    (iii) Depreciated property. Describe any property that is subject to 
depreciation recapture under the rules of Sec.  1.367(a)-4T(b). Property 
within this category must be separately identified to the same extent as 
was required for purposes of the previously claimed depreciation 
deduction. Specify with respect to each such asset the relevant 
recapture provision, the number of months in which such property was in 
use within the United States, the total number of months the property 
was in

[[Page 200]]

use, the fair market value of the property, a schedule of the 
depreciation deduction taken with respect to the property, and a 
calculation of the amount of depreciation required to be recaptured.
    (iv) Property to be leased. Describe any property to be leased to 
other persons by the transferee foreign corporation (unless such 
property is considered to be transferred for use in the active conduct 
of a trade or business and was thus listed under subdivision (i) of this 
paragraph (c)(4)). If the rules of Sec.  1.367(a)-4T(c)(2) apply to 
except the transfer from the rule of section 367(a)(1), provide 
information supporting the claimed application of such provision.
    (v) Property to be sold. Describe any transferred property that is 
to be sold or otherwise disposed of by the transferee foreign 
corporation, as described in Sec.  1.367(a)-4T(d).
    (vi) Transfers to FSCs. Describe any property that is subject to the 
special rule of Sec.  1.367(a)-4T(g) for transfers to FSCs. Provide 
information supporting the claimed application of that rule.
    (vii) Tainted property. Describe any property that is subject to 
Sec.  1.367(a)-5T (concerning property that is subject to the rule of 
section 367(a)(1) regardless of whether it is transferred for use in the 
active conduct of a trade or business outside of the United States). 
Such description must be divided into the relevant categories, as 
follows:
    (A) Inventory, etc. Property described in Sec.  1.367(a)-5T(b);
    (B) Installment obligations, etc. Property described in Sec.  
1.367(a)-5T(c);
    (C) Foreign currency, etc. Property described in Sec.  1.367(a)-
5T(d);
    (D) Intangible property. Property described in Sec.  1.367(a)-5T(e); 
and
    (E) Leased property. Property described in Sec.  1.367(a)-4T(f).

If any exception provided in Sec.  1.367(a)-5T applies to the 
transferred property (making section 367(a)(1) not applicable to the 
transfer), provide information supporting the claimed application of 
such exception.
    (viii) Foreign loss branch. Provide the information specified in 
paragraph (c)(5) of this section.
    (ix) Other intangibles. Describe an intangible property sold or 
licensed by the transferor to the transferee foreign corporation, and 
set forth the general terms of each sale or license.
    (5) Transfer of foreign branch with previously deducted losses. If 
the property transferred is property of a foreign branch with previously 
deducted losses subject to the rules of Sec.  1.367(a)-6T, provide the 
following information:
    (i) Branch operation. Describe the foreign branch the property of 
which is transferred, in accordance with the definition of Sec.  
1.367(a)-6T(g).
    (ii) Branch property. Describe the property of the foreign branch, 
including its adjusted basis and fair market value. For this purpose 
property must be identified with reasonable particularity, but may be 
identified by category rather than listing every asset separately. 
Substantially similar property may be listed together for this purpose, 
and property of minor value may be grouped into functional categories. 
For example, a reasonable description of the property of a business 
office might include the following categories: Word processing or data 
processing equipment, other office equipment and furniture, and office 
supplies.
    (iii) Previously deducted losses. Set forth a detailed calculation 
of the sum of the losses incurred by the foreign branch before the 
transfer, and a detailed calculation of any reduction of such losses, in 
accordance with Sec.  1.367(a)-6T (d) and (e).
    (iv) Character of gain. Set forth a statement of the character of 
the gain required to be recognized, in accordance with Sec.  1.367(a)-
6T(c)(1).
    (6) [Reserved]. For further guidance, see Sec.  1.6038B-1(c)(6).
    (d) Transfers subject to section 367(d)--(1) Initial transfer. A 
U.S. person that transfers inntangible property to a foreign corporation 
in an exchange described in section 351 or 361 must provide the 
following information in paragraphs labelled to correspond with the 
number or letter set forth below. If a particular item is not applicable 
to the subject transfer, list its heading and state that it is not 
applicable. The information required by subdivisions (i) through (iii) 
need only be provided if such information was not otherwise provided 
under paragraph (c) of this section. (Note that the U.S. transferor

[[Page 201]]

may subsequently be required to file another return under paragraph 
(d)(2) of this section.)
    (i) Transferor. Provide the name, U.S. taxpayer identification 
number, and address of the U.S. person making the transfer.
    (ii) Transfer. Provide information concerning the transfer, 
including:
    (A) Name, U.S. taxpayer identification number (if any), address, and 
country of incorporation of the transferee foreign corporation;
    (B) A general description of the transfer, and any wider transaction 
of which it forms a part, including a chronology of the transfers 
involved and an identification of the other parties to the transaction 
to the extent known.
    (iii) Consideration received. Provide a description of the 
consideration received by the U.S. person making the transfer, including 
its estimated fair market value and, in the case of stock or securities, 
the class or type, amount, and characteristics of the interest received.
    (iv) Intangible property transferred. Provide a description of the 
intangible property transferred, including its adjusted basis. 
Generally, each intangible asset must be separately identified. 
Operating intangibles and foreign goodwill or going concern value, as 
defined in Sec.  1.367(a)-1T(d)(5) (ii) and (iii), should be so 
identified and classified.
    (v) Annual payment. Provide and explain the calculation of the 
annual deemed payment for the use of the intangible property required to 
be recognized by the transferor under the rules of section 367(d).
    (vi) Election to treat as sale. List any intangible with respect to 
which an election is being made under Sec.  1.367(d)-1T(g)(2) to treat 
the transfer as a sale. Include the fair market value of the intangible 
on the date of the transfer and a calculation of the gain required to be 
recognized in the year of the transfer by reason of the election.
    (vii) Coordination with loss rules. List any intangible property 
subject to section 367(d) the transfer of which also gives rise to the 
recognition of gain under section 904(f)(3) or Sec.  1.367(a)-6T. 
Provide a calculation of the gain required to be recognized with respect 
to such property, in accordance with the provisions of Sec.  1.367(d)-
1T(g)(4).
    (viii) Other intangibles. Describe any intangible property sold or 
licensed by the transferor to the transferee foreign corporation, and 
set forth the general terms of each sale or license.
    (2) Subsequent transfers. If a U.S. person transfers intangible 
property to a foreign corporation in an exchange described in section 
351 or 361, and at any time thereafter (within the useful life of the 
intangible property) either that U.S. person disposes of the stock of 
the transferee foreign corporation or the transferee foreign corporation 
disposes of the transferred intangible, then the U.S. person must 
provide the following information in paragraphs labelled to correspond 
with the number or letter set forth below. The information required by 
subdivisions (i) and (ii) need only be provided if such information was 
not otherwise provided in the same return, pursuant to paragraph (c) or 
(d)(1) of this section. For purposes of determining the date on which a 
return under this subparagraph (2) is required to be filed, the date of 
transfer is the date of the subsequent transfer of stock or intangible 
property.
    (i) Transferor. Provide the name, U.S. taxpayer identification 
number, and address of the U.S. person making the transfer.
    (ii) Initial transfer. Provide the following information concerning 
the initial transfer:
    (A) The date of the transfer;
    (B) The name, U.S. taxpayer identification number (if any), address, 
and country of incorporation of the transferee foreign corporation; and
    (C) A general description of the transfer and any wider transaction 
of which it formed a part.
    (iii) Subsequent transfer. Provide the following information 
concerning the subsequent transfer:
    (A) A general description of the subsequent transfer and any wider 
transaction of which it forms a part;
    (B) A calculation of any gain required to be recognized by the U.S. 
person under the rules of Sec.  1.367(d)-1T (d) through (f); and
    (C) The name, address, and identifying number of each person that 
under the rules of Sec.  1.367(d)-1T (e) or (f) will be

[[Page 202]]

considered to receive contingent annual payments for the use of the 
intangible property.
    (e) [Reserved]. For further guidance, see Sec.  1.6038B-1(e).
    (f) [Reserved]. For further guidance, see Sec.  1.6038B-1(f).
    (g) Effective date. This section applies to transfers occurring 
after December 31, 1984. See Sec.  1.6038B-1T(a) through (b)(2), (c) 
introductory text, and (f) (26 CFR part 1, revised April 1, 1998) for 
transfers occurring prior to July 20, 1998. See Sec.  1.6038B-1 for 
transfers occurring on or after July 20, 1998.

[T.D. 8087, 51 FR 17957, May 16, 1986, as amended by T.D. 8682, 61 FR 
42177, Aug. 14, 1996; T.D. 8770, 63 FR 33570, June 19, 1998; T.D. 8834, 
64 FR 43083, Aug. 9, 1999; T.D. 9100, 68 FR 70708, Dec. 19, 2003; 69 FR 
5017, Feb. 3, 2004]