Instructions for Form 926 (Rev. October 1998) Return by a U.S. Transferor of Property to a Foreign Corporation Section references are to the Internal Revenue Code unless otherwise noted. Department of the Treasury Internal Revenue Service Changes To Note l  The information now requested on Form 926 only applies to certain transfers of tangible or intangible property to foreign corporations. Do not report the information relating to foreign estates and trusts and foreign partnerships on Form 926. Use Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, to report transfers to foreign trust and estates. At the time Form 926 went to print, new Form 8865, Information Return of U.S.   Persons With Respect to Certain Foreign Partnerships, was being developed to report certain transfers to foreign partnerships.   Check the Internal Revenue Service web site at www.irs.ustreas.gov for the availability of this form. As a result of changes made by the Taxpayer Relief Act of 1997: l   The excise tax under section 1491 was repealed with respect to transfers after August 4, 1997. l  The penalty for failure to file was modified. See Penalties for Failure To File below. General Instructions Purpose of Form Use Form 926 to report certain transfers of tangible or intangible property to a foreign corporation when required by section 6038B. Who Must File Generally, a U.S. citizen or resident, a domestic corporation, or an estate or trust (other than a foreign estate or trust) must file Form 926 to report a transfer of property (even if such property is not appreciated property) to a foreign corporation described in sections 6038B(a)(1)(A) or 367(d). Special Rules l  Transfers by a partnership. If the transferor is a partnership (domestic or foreign), the partners of the partnership, not the partnership itself, are required to comply with section 6038B and file Form 926. l  Transfers by a husband and wife. A husband and wife may file Form 926 jointly but only if they file a joint income tax return. l  Transfers subject to section 367(e)(1). See Temporary Regulations section 1.6038B-1T(e). Exceptions to filing for transfers after July 19, 1998. l  Transfers of cash. When this form was published, transfers of cash were not currently required to be reported. This may change. Check the regulations under section 6038B to determine whether transfers of cash are required to be reported at the time of your transfer. l  Transfers by a tax-exempt entity.   A transferor that is a tax-exempt entity need not report the transfer unless the income was unrelated business income. l  Transfers of stock or securities. Transfers of stock or securities need not be reported on Form 926. Certain transferors (5% shareholders) may be required, however, to file a gain recognition agreement to qualify for nonrecognition treatment on the transfer but other transferors may be taxable on their transfers.   See Regulations sections 1.367(a)-3 and 1.367-8. Penalties under section 6038B may apply if the transferor fails to file a gain recognition agreement or report the gain from the transfer. Exceptions to filing for transfers before July 20, 1998. l  Transfers of cash. No reporting required. l  Transfers by a tax-exempt entity. No reporting required. l  Transfers of stock or securities. No reporting is required if either (1) the transferor owned less than 5 percent of both the total voting power and the total value of the transferee foreign corporation immediately after the transfer (taking into account the attribution rules under section 318 as modified by section 958(b)), and the U.S. transferor qualified for nonrecognition treatment with respect to the transfer, or (2) the transfer was taxable to the U.S. transferor and such person properly reported the income on its timely filed return. See Regulations section 1.6038-1(b)(2). When and How To File Form 926 (and the additional information required under Regulations section 1.6038B-1(c) and Temporary Regulations sections 1.6038B-1T(c) and 1.6038B-1T(d)) must be filed with the U.S. transferor's annual tax return for the tax year that includes the date of the transfer. Other Forms That May Be Required Persons filing this form may be required to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. A U.S. transferor that is required to enter into a gain recognition agreement under section 367 to qualify for nonrecognition treatment must file Form 8838, Consent To Extend the Time To Assess Tax Under Section 367-Gain Recognition Agreement (or a similar statement) to extend the statute of limitations with respect to the gain realized but not recognized on the transfer. Who Must Sign Form 926 must be signed and dated by the transferor. If the transferor is a partnership, each partner is treated as a transferor of its proportionate share of the property.   If the transferor is a corporation, the president, vice president, treasurer, assistant treasurer, chief accounting officer, or other authorized officer (such as a tax officer) must sign. However, if the transferor is a corporation that is a member of an affiliated group (under section 1504(a)(1)) that files a consolidated Federal income tax return, but the transferor is not the common parent corporation, an authorized officer of the common parent corporation must sign. If the transferor is a fiduciary, the fiduciary or officer representing the fiduciary must sign. Anyone who is paid to prepare the return must sign it and fill in the Paid Preparer's Use Only area. However, anyone who prepares Form 926 but does not charge the transferor should not sign. The paid preparer must complete the required preparer information and: l  Sign the return, by hand, in the space provided for the preparer's signature (signature stamps and labels are not acceptable). l  Provide a social security number (or, if permitted by regulations, an alternative preparer identification number). l  Give a copy of the return to the transferor. Penalties for Failure To File If a taxpayer fails to comply with section 6038B for a transfer occurring after August 5, 1997, the penalty equals 10% of the fair market value of the property at the time of the transfer. The Cat. No. 27037X