US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 367

Foreign corporations

(a)

Transfers of property from the United States

(1)

General rule

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.

(2)

Exception for certain stock or securities

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.

(3)

Special rule for transfer of partnership interests

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.

(4)

Paragraph (2) not to apply to certain section 361 transactions

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.

(5)

Secretary may exempt certain transactions from application of this subsection

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.

(b)

Other transfers

(1)

Effect of section to be determined under regulations

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.

(2)

Regulations relating to sale or exchange of stock in foreign corporations

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—
(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
(B)
the extent to which adjustments shall be made to earnings and profits, basis of stock or securities, and basis of assets.
(c)

Transactions to be treated as exchanges

(1)

Section 355 distribution

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.

(2)

Contribution of capital to controlled corporations

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.

(d)

Special rules relating to transfers of intangibles

(1)

In general

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—
(A)
subsection (a) shall not apply to the transfer of such property, and
(B)
the provisions of this subsection shall apply to such transfer.
(2)

Transfer of intangibles treated as transfer pursuant to sale of contingent payments

(A)

In general

If paragraph (1) applies to any transfer, the United States person transferring such property shall be treated as—
(i)
having sold such property in exchange for payments which are contingent upon the productivity, use, or disposition of such property, and
(ii)
receiving amounts which reasonably reflect the amounts which would have been received—
(I)
annually in the form of such payments over the useful life of such property, or
(II)
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.
(B)

Effect on earnings and profits

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).

(C)

Amounts received treated as ordinary income

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.

(D)

Regulatory authority

For purposes of the last sentence of subparagraph (A), the Secretary shall require—
(i)
the valuation of transfers of intangible property, including intangible property transferred with other property or services, on an aggregate basis, or
(ii)
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.
(3)

Regulations relating to transfers of intangibles to partnerships

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.

(4)

Intangible property

For purposes of this subsection, the term “intangible property” means any—
(A)
patent, invention, formula, process, design, pattern, or know-how,
(B)
copyright, literary, musical, or artistic composition,
(C)
trademark, trade name, or brand name,
(D)
franchise, license, or contract,
(E)
method, program, system, procedure, campaign, survey, study, forecast, estimate, customer list, or technical data,
(F)
goodwill, going concern value, or workforce in place (including its composition and terms and conditions (contractual or otherwise) of its employment), or
(G)
other item the value or potential value of which is not attributable to tangible property or the services of any individual.
(e)

Treatment of distributions described in section 355 or liquidations under section 332

(1)

Distributions described in section 355

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.

(2)

Liquidations under section 332

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.

(f)

Other transfers

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—
(1)
the fair market value of the property so transferred, over
(2)
the adjusted basis (for purposes of determining gain) of such property in the hands of the transferor.

Aug. 16, 1954, ch. 73668A Stat. 119Pub. L. 91–681, § 1(a)84 Stat. 2065Pub. L. 94–455, title X, § 1042(a)90 Stat. 1634Pub. L. 97–248, title II, § 213(d)96 Stat. 465Pub. L. 98–369, div. A, title I, § 131(a)98 Stat. 662–664Pub. L. 99–514, title VI, § 631(d)(1)100 Stat. 2272Pub. L. 100–647, title I, § 1006(e)(13)(A)102 Stat. 3402Pub. L. 101–508, title XI, § 11702(a)(1)104 Stat. 1388–514Pub. L. 105–34, title XI, § 1131(b)(2)111 Stat. 979Pub. L. 106–170, title V, § 532(c)(1)(C)113 Stat. 1930Pub. L. 108–357, title IV, § 406(a)118 Stat. 1498Pub. L. 115–97, title I131 Stat. 2194Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(viii)(I)132 Stat. 1207(, ; , , ; , , ; , , ; –(c), , ; , title XII, § 1231(e)(2), title XVIII, § 1810(g)(1), (4), , , 2563, 2828, 2829; , , ; , , ; , (4), (5)(A), , , 980; , , ; , , ; , §§ 14102(e)(1), (2), 14221(b)(1), , , 2218; , (II), , .)

Editorial Notes

Codification

section 1131(b) of Pub. L. 105–34section 684 of this titleAnother enacted .

Amendments

Pub. L. 115–141, § 401(d)(1)(D)(viii)(II)2018—Subsec. (d)(1). , struck out “(within the meaning of section 936(h)(3)(B))” after “intangible property” in introductory provisions.

Pub. L. 115–141, § 401(d)(1)(D)(viii)(I)Subsec. (d)(4). , added par. (4).

Pub. L. 115–97, § 14102(e)(1)2017—Subsec. (a)(3). , redesignated par. (4) as (3) and struck out former par. (3) which related to exception for transfers of certain property used in the active conduct of a trade or business.

Pub. L. 115–97, § 14102(e)(1)Subsec. (a)(4). , (2), redesignated par. (5) as (4) and substituted “Paragraph (2)” for “Paragraphs (2) and (3)” in heading and text. Former par. (4) redesignated (3).

Pub. L. 115–97, § 14102(e)(1)Subsec. (a)(5), (6). , redesignated pars. (5) and (6) as (4) and (5), respectively.

Pub. L. 115–97, § 14221(b)(1)Subsec. (d)(2)(D). , added subpar. (D).

Pub. L. 108–3572004—Subsec. (d)(2)(C). inserted at end “For purposes of applying section 904(d), any such amount shall be treated in the same manner as if such amount were a royalty.”

Pub. L. 106–1701999—Subsec. (a)(3)(B)(i). substituted “section 1221(a)” for “section 1221”.

Pub. L. 105–34, § 1131(b)(4)1997—Subsec. (d)(2)(C). , amended heading and text of subpar. (C) generally. Prior to amendment, text read as follows: “For purposes of this chapter, any amount included in gross income by reason of this subsection shall be treated as ordinary income from sources within the United States.”

Pub. L. 105–34, § 1131(b)(5)(A)Subsec. (d)(3). , added par. (3).

Pub. L. 105–34, § 1131(b)(2)Subsec. (f). , added subsec. (f).

Pub. L. 101–5081990—Subsec. (a)(5). substituted “subsection (a) or (b) of section 361” for “section 361”.

Pub. L. 100–6471988—Subsec. (a)(5), (6). added par. (5) and redesignated former par. (5) as (6).

Pub. L. 99–514, § 1810(g)(4)(A)1986—Subsec. (a)(1). , struck out “355,” after “354,”.

Pub. L. 99–514, § 1231(e)(2)Subsec. (d)(2)(A). , inserted at end “The amounts taken into account under clause (ii) shall be commensurate with the income attributable to the intangible.”

Pub. L. 99–514, § 631(d)(1)Subsec. (e). , amended subsec. (e) generally. Prior to amendment, subsec. (e), treatment of distributions described in section 336 or 355, read as follows: “In the case of any distribution described in section 336 or 355 (or so much of section 356 as relates to section 355) by a domestic corporation which is made 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.”

Pub. L. 99–514, § 1810(g)(1)Subsec. (f). , struck out subsec. (f) which related to transitional rules in the case of any exchanges beginning before .

Pub. L. 99–514, § 1810(g)(4)(B), in heading substituted “distributions described in section 336 or 355” for “liquidations under section 336”, and in text inserted “or 355 (or so much of section 356 as relates to section 355)”.

Pub. L. 98–369, § 131(a)1984—Subsec. (a). , amended subsec. (a) generally, revising provisions of pars. (1) and (2), and adding pars. (3) to (5).

Pub. L. 98–369, § 131(b)Subsec. (d). , amended subsec. (d) generally, substituting provision providing special rules relating to transfers of intangibles for provision providing special rules relating to transfers of intangibles by possession corporation.

Pub. L. 98–369, § 131(c)Subsecs. (e), (f). , added subsec. (e) and redesignated former subsec. (e) as (f).

Pub. L. 97–2481982—Subsecs. (d), (e). added subsec. (d) and redesignated former subsec. (d) as (e).

Pub. L. 94–4551976—, among other changes, inserted provisions permitting nonrecognition of gain if a request for a ruling that tax avoidance is not present is filed within 183 days after beginning of an exchange, relating to an organization, reorganization, and liquidation of a foreign corporation, in the case of outbound transfers, however, for all other transfers, regulations are to provide the extent that earnings are to be taken into account as dividends and provisions relating to Tax Court review of the tax avoidance rulings.

Pub. L. 91–6811971—Subsec. (a). designated existing provisions as subsec. (a), and, as so designated, inserted provisions relating to instances of an exchange, described in subsec. (b). Provisions relating to distributions described in section 355 (or so much of section 356 as relates to section 355) were stricken and were transferred to subsec. (c).

Pub. L. 91–681Subsec. (b). added subsec. (b).

Pub. L. 91–681Subsec. (c). designated as subsec. (c) provisions relating to distribution described in section 355 (or so much of section 356 as relates to section 355).

Pub. L. 91–681Subsec. (d). added subsec. (d).

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, § 14102(e)(3)131 Stat. 2195

“The amendments made by this subsection [amending this section] shall apply to transfers after .”
, , , provided that:

Pub. L. 115–97, title I, § 14221(c)(1)131 Stat. 2219

“The amendments made by this section [amending this section and sections 482 and 936 of this title] shall apply to transfers in taxable years beginning after .”
, , , provided that:

Effective Date of 2004 Amendment

Pub. L. 108–357, title IV, § 406(b)118 Stat. 1498

“The amendment made by this section [amending this section] shall apply to amounts treated as received pursuant to section 367(d)(2) of the Internal Revenue Code of 1986 on or after .”
, , , provided that:

Effective Date of 1999 Amendment

Pub. L. 106–170section 532(d) of Pub. L. 106–170section 170 of this titleAmendment by applicable to any instrument held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or after , see , set out as a note under .

Effective Date of 1997 Amendment

Pub. L. 105–34, title XI, § 1131(d)111 Stat. 980

section 684 of this title“The amendments made by this section [enacting , amending this section and sections 721, 814, 1035, and 6422 of this title, and repealing sections 1057, 1491, 1492, and 1494 of this title] shall take effect on the date of the enactment of this Act [].”
, , , provided that:

Effective Date of 1990 Amendment

Pub. L. 101–508Pub. L. 100–647section 11702(j) of Pub. L. 101–508section 59 of this titleAmendment by effective as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, , to which such amendment relates, see , set out as a note under .

Effective Date of 1988 Amendment

Pub. L. 100–647, title I, § 1006(e)(13)(B)102 Stat. 3402

“The amendment made by subparagraph (A) [amending this section] shall apply to exchanges on or after , except that such amendment shall not apply to any exchange pursuant to any reorganization for which a plan of reorganization was adopted before .”
, , , provided that:

Effective Date of 1986 Amendment

section 631(d)(1) of Pub. L. 99–514section 338 of this titlesection 633 of Pub. L. 99–514section 336 of this titleAmendment by applicable to any distribution in complete liquidation, and any sale or exchange, made by a corporation after , unless such corporation is completely liquidated before , any transaction described in for which the acquisition date occurs after , and any distribution, not in complete liquidation, made after , with exceptions and special and transitional rules, see , set out as an Effective Date note under .

Pub. L. 99–514, title XII, § 1231(g)100 Stat. 2563Pub. L. 100–647, title I, § 1012(n)(1)102 Stat. 3514

“(1)

In general .—

Except as provided in paragraphs (2) and (3), the amendments made by this section [amending this section and sections 482 and 936 of this title] shall apply to taxable years beginning after .
“(2)

Special rule for transfer of intangibles.—

“(A)

In general .—

section 482 of this titleThe amendments made by subsection (e) [amending this section and ] shall apply to taxable years beginning after , but only with respect to transfers after , or licenses granted after such date (or before such date with respect to property not in existence or owned by the taxpayer on such date). In the case of any transfer (or license) which is not to a foreign person, the preceding sentence shall be applied by substituting ‘’ for ‘’.
“(B)

Special rule for [former] section 936 .—

For purposes of [former] section 936(h)(5)(C) of the Internal Revenue Code of 1986 the amendments made by subsection (e) shall apply to taxable years beginning after , without regard to when the transfer (or license), if any, was made.
“(3)

Subsection (f).—

section 936 of this titleThe amendment made by subsection (f) [amending ] shall apply to taxable years beginning after .
“(4)

Transitional rule .—

In the case of a corporation—
“(A)
with respect to which an election under [former] section 936 of the Internal Revenue Code of 1986 (relating to possessions tax credit) is in effect,
“(B)
which produced an end-product form in Puerto Rico on or before ,
“(C)
which began manufacturing a component of such product in Puerto Rico in its taxable year beginning in 1983, and
“(D)
with respect to which a Puerto Rican tax exemption was granted on ,
such corporation shall treat such component as a separate product for such taxable year for purposes of determining whether such corporation had a significant business presence in Puerto Rico with respect to such product and its income with respect to such product.
“(5)

Transitional rule for increase in gross income test.—

“(A)

In general .—

If—
“(i)
a corporation fails to meet the requirements of subparagraph (B) of [former] section 936(a)(2) of the Internal Revenue Code of 1986 (as amended by subsection (d)(1)) for any taxable year beginning in 1987 or 1988,
“(ii)
such corporation would have met the requirements of such subparagraph (B) if such subparagraph had been applied without regard to the amendment made by subsection (d)(1), and
“(iii)
75 percent or more of the gross income of such corporation for such taxable year (or, in the case of a taxable year beginning in 1988, for the period consisting of such taxable year and the preceding taxable year) was derived from the active conduct of a trade or business within a possession of the United States, such corporation shall nevertheless be treated as meeting the requirements of such subparagraph (B) for such taxable year if it elects to reduce the amount of the qualified possession source investment income for the taxable year by the amount of the shortfall determined under subparagraph (B) of this paragraph.
“(B)

Determination of shortfall .—

The shortfall determined under this subparagraph for any taxable year is an amount equal to the excess of—
“(i)
75 percent of the gross income of the corporation for the 3-year period (or part thereof) referred to in [former] section 936(a)(2)(A) of such Code, over
“(ii)
the amount of the gross income of such corporation for such period (or part thereof) which was derived from the active conduct of a trade or business within a possession of the United States.
“(C)

Special rule .—

Any income attributable to the investment of the amount not treated as qualified possession source investment income under subparagraph (A) shall not be treated as qualified possession source investment income for any taxable year.”
, , , as amended by –(3), , , provided that:

Pub. L. 99–514Pub. L. 98–369, div. Asection 1881 of Pub. L. 99–514section 48 of this titleAmendment by section 1810(g)(1), (4) of effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, , to which such amendment relates, see , set out as a note under .

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title I, § 131(g)98 Stat. 665Pub. L. 99–514, § 2100 Stat. 2095

“(1)

In general .—

section 6038B of this titlesection 7477 of this titleThe amendments made by this section [enacting , amending this section and sections 1492, 1494, 6501, and 7482 of this title, and repealing ] shall apply to transfers or exchanges after , in taxable years ending after such date.
“(2)

Special rule for certain transfers of intangibles.—

“(A)

In general .—

If, after , and before , a United States person transfers any intangible property (within the meaning of [former] section 936(h)(3)(B) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) to a foreign corporation or in a transfer described in section 1491, such transfer shall be treated for purposes of sections 367(a), 1492(2), and 1494(b) of such Code as pursuant to a plan having as 1 of its principal purposes the avoidance of Federal income tax.
“(B)

Waiver .—

Subject to such terms and conditions as the Secretary of the Treasury or his delegate may prescribe, the Secretary may waive the application of subparagraph (A) with respect to any transfer.
“(3)

Ruling request before .—

The amendments made by this section (and the provisions of paragraph (2) of this subsection) shall not apply to any transfer or exchange of property described in a request filed before , under section 367(a), 1492(2), or 1494(b) of the Internal Revenue Code of 1986 (as in effect before such amendments).”
, , , as amended by , , , provided that:

Effective Date of 1982 Amendment

Pub. L. 97–248section 213(e)(3) of Pub. L. 97–248section 246 of this titleAmendment by applicable to taxable years ending after , see , set out as a note under .

Effective Date of 1976 Amendment

Pub. L. 94–455, title X, § 1042(e)90 Stat. 1639Pub. L. 99–514, § 2100 Stat. 2095

“(1)
section 7477 of this title The amendments made by this section (other than by subsection (d)) [amending this section and sections 751 and 1248 of this title] shall apply to transfers beginning after , and to sales, exchanges, and distributions taking place after such date. The amendments made by subsection (d) [enacting and amending sections 7476 and 7482 of this title] shall apply with respect to pleadings filed with the Tax Court after the date of the enactment of this Act [] but only with respect to transfers beginning after .
“(2)
In the case of any exchange described in section 367 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as in effect on ) in any taxable year beginning after , and before the date of the enactment of this Act [], which does not involve the transfer of property to or from a United States person, a taxpayer shall have for purposes of such section until 183 days after the date of the enactment of this Act [] to file a request with the Secretary of the Treasury or his delegate seeking to establish to the satisfaction of the Secretary of the Treasury or his delegate that such exchange was not in pursuance of a plan having as one of its principal purposes the avoidance of Federal income taxes and that for purposes of such section a foreign corporation is to be treated as a foreign corporation.”
, , , as amended by , , , provided that:

Effective Date of 1971 Amendment

Pub. L. 91–681, § 1(c)84 Stat. 2066Pub. L. 99–514, § 2100 Stat. 2095

section 1492 of this title“The amendments made by this section [amending this section and ] shall apply to transfers made after ; except that sections 367(d) and 1492 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by this section) shall apply only with respect to transfers made after .”
, , , as amended by , , , provided that:

Savings Provision

Pub. L. 115–141section 401(e) of Pub. L. 115–141section 23 of this titleFor provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .

Applicability of Subsection (e)(2)

Pub. L. 100–647, title I, § 1006(e)(13)(C)102 Stat. 3402

Pub. L. 99–514“Section 367(e)(2) of the 1986 Code (as amended by the Reform Act []) shall not apply in the case of any corporation completely liquidated before , into a corporation organized in a country which has an income tax treaty with the United States.”
, , , provided that:

Plan Amendments Not Required Until January 1, 1989

Pub. L. 99–514section 1140 of Pub. L. 99–514section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .