Eligibility
Applies to transfers of stock or securities of a foreign corporation which is a party to the exchange or reorganization under sections 332, 351, 354, 356, or 361.
Frequently Asked Questions
Who is eligible for the Foreign Stock Transfer Deferral?
Applies to transfers of stock or securities of a foreign corporation which is a party to the exchange or reorganization under sections 332, 351, 354, 356, or 361.
How does the Foreign Stock Transfer Deferral work?
Provides exceptions to the general rule of gain recognition when transferring stock or securities of a foreign corporation to another foreign corporation in certain exchanges.
What law authorizes the Foreign Stock Transfer Deferral?
The Foreign Stock Transfer Deferral is authorized under IRC §367 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §367
Source: Internal Revenue Code, Title 26, United States Code
§ 367. Foreign corporations(a) Transfers of property from the United States(1) General ruleIf, 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.
(2) Exception for certain stock or securitiesExcept 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.
(3) Special rule for transfer of partnership interestsExcept 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.
(4) Paragraph (2) not to apply to certain section 361 transactionsParagraph (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.
(5) Secretary may exempt certain transactions from application of this subsectionParagraph (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.
(b) Other transfers(1) Effect of section to be determined under regulationsIn 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.
(2) Regulations relating to sale or exchange of stock in foreign corporationsThe 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
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