§367 — Foreign corporations
46 cases·9 followed·13 distinguished·1 criticized·1 overruled·22 cited—20% support
Statute Text — 26 U.S.C. §367
If, 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.
Except 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.
Except 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.
Paragraph (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.
Paragraph (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.
In 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.
The 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—
the circumstances under which—
gain shall be recognized currently, or amounts included in gross income currently as a dividend, or both, or
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
the extent to which adjustments shall be made to earnings and profits, basis of stock or securities, and basis of assets.
For purposes of this section, any distribution described in section 355 (or so much of section 356 as relates to section 355) shall be treated as an exchange whether or not it is an exchange.
For purposes of this chapter, any transfer of property to a foreign corporation as a contribution to the capital of such corporation by one or more persons who, immediately after the transfer, own (within the meaning of section 318) stock possessing at least 80 percent of the total combined voting power of all classes of stock of such corporation entitled to vote shall be treated as an exchange of such property for stock of the foreign corporation equal in value to the fair market value of the property transferred.
Except as provided in regulations prescribed by the Secretary, if a United States person transfers any intangible property to a foreign corporation in an exchange described in section 351 or 361—
subsection (a) shall not apply to the transfer of such property, and
the provisions of this subsection shall apply to such transfer.
If paragraph (1) applies to any transfer, the United States person transferring such property shall be treated as—
having sold such property in exchange for payments which are contingent upon the productivity, use, or disposition of such property, and
receiving amounts which reasonably reflect the amounts which would have been received—
annually in the form of such payments over the useful life of such property, or
in the case of a disposition following such transfer (whether direct or indirect), at the time of the disposition.
The amounts taken into account under clause (ii) shall be commensurate with the income attributable to the intangible.
For purposes of this chapter, the earnings and profits of a foreign corporation to which the intangible property was transferred shall be reduced by the amount required to be included in the income of the transferor of the intangible property under subparagraph (A)(ii).
For purposes of this chapter, any amount included in gross income by reason of this subsection shall be treated as ordinary income. For purposes of applying section 904(d), any such amount shall be treated in the same manner as if such amount were a royalty.
For purposes of the last sentence of subparagraph (A), the Secretary shall require—
the valuation of transfers of intangible property, including intangible property transferred with other property or services, on an aggregate basis, or
the valuation of such a transfer on the basis of the realistic alternatives to such a transfer,
if the Secretary determines that such basis is the most reliable means of valuation of such transfers.
The Secretary may provide by regulations that the rules of paragraph (2) also apply to the transfer of intangible property by a United States person to a partnership in circumstances consistent with the purposes of this subsection.
For purposes of this subsection, the term “intangible property” means any—
patent, invention, formula, process, design, pattern, or know-how,
copyright, literary, musical, or artistic composition,
trademark, trade name, or brand name,
franchise, license, or contract,
method, program, system, procedure, campaign, survey, study, forecast, estimate, customer list, or technical data,
goodwill, going concern value, or workforce in place (including its composition and terms and conditions (contractual or otherwise) of its employment), or
other item the value or potential value of which is not attributable to tangible property or the services of any individual.
In the case of any distribution described in section 355 (or so much of section 356 as relates to section 355) by a domestic corporation to a person who is not a United States person, to the extent provided in regulations, gain shall be recognized under principles similar to the principles of this section.
In the case of any liquidation to which section 332 applies, except as provided in regulations, subsections (a) and (b)(1) of section 337 shall not apply where the 80-percent distributee (as defined in section 337(c)) is a foreign corporation.
To the extent provided in regulations, if a United States person transfers property to a foreign corporation as paid-in surplus or as a contribution to capital (in a transaction not otherwise described in this section), such transfer shall be treated as a sale or exchange for an amount equal to the fair market value of the property transferred, and the transferor shall recognize as gain the excess of—
the fair market value of the property so transferred, over
the adjusted basis (for purposes of determining gain) of such property in the hands of the transferor.
46 Citing Cases
As explained below, we disagree with petitioner on all three points.
Ifwe sustain respondent's determination to cancel APA I and APA II for tax years 2005 and 2006, respectively, and we hold for respondent on the section 482 adjustments, we will need to consider whether petitioner is liable for penalties pursuant to section 6662(e) and (h).
The primary issue for decision is whether petitioner, pursuant to section 367(a), recognized gain relating to the swap transaction.
367(d)(4) (2018)). The 2018 amendment had retroactive effect only to the extent the 2018 version of section 482 would result in the same tax liability as the pre-2018 version, i.e., only if the 2018 amendment would have no effect. Consolidated Appropriations Act, 2018, div. U, sec. 401(e), 132 Stat. at 1212-1213. In summary, the 2017 amendments to section 482 and section 936(h)(3)(B) added a third sentence to section 482 and altered the section 936(h)(3)(B) definition of intangible property. The
The preamble to the 1990 amendments did not limit their purpose to preventing the avoidance of section 367(a). We can think of no reason why concerns about tax avoidance in outbound F reorganizations would be limited to those involving tangible property. Moreover, as respondent observes, petitioner’s argument suggests that its transfer of intangible property was governed by a construct different from that applicable to its transfer of other property. Petitioner offers no explanation for why and
(cid:16)042 Upon termination of a corporation's election under section 953(d), the corporation is treated for purposes ofsection 367 as a.domestic corporation which transfers all ofits assets'to a foreign corporation in an exchange to which section 354 applies.
Cloyd therefore realized gain on the sale of Cal-Almond's assets - 21 - under section 367, and must recognize that gain in 1995 under section 1001 .
We also note that the legislative history accompanying amendments to section 367 provides that section 367(a)’s “aim is to prevent the removal of appreciated assets or inventory from U.S.
(cid:16)042 Upon termination of a corporation's election under section 953(d), the corporation is treated for purposes ofsection 367 as a.domestic corporation which transfers all ofits assets'to a foreign corporation in an exchange to which section 354 applies.
Klaas on the gain from the sale of Silver-Spur that are based on section 367, relating to the denial of nonrecognition treatment for transfers from a domestic to a foreign corporation, and on section 269, relating to the disallowance rules for tax-motivated corporate transactions .
Similar language appears in committee reports describing section 7428 (declaratory judgments relating to section 501(c)(3) status) and former section 7477 (declaratory judgments relating to section 367 transfers).
Similar language appears in committee reports describing section 7428 (declaratory judgments relating to section 501(c)(3) status) and former section 7477 (declaratory judgments relating to section 367 transfers).
Third, for purposes of section 367, the Secretary prescribed in section 1.367(a)-2T(b), Temporary Income Tax Regs., 51 Fed.
Third, for purposes of section 367, the Secretary prescribed in section 1.367(a)-2T(b), Temporary Income Tax Regs., 51 Fed.
Finley Kumble believed that the arrangement was subject to attack by the Commissioner under section 367 or 482, or by arguing doctrines such as: (1) Substance over form, (2) sham transaction, (3) assignment of income, or (4) deductibility of compensation.