PRIA Logo™
Take the PRIA Score
Title 26 — Internal Revenue CodeRelease 119-73

§684 Recognition of gain on certain transfers to certain foreign trusts and estates

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter J— - Estates, Trusts, Beneficiaries, and Decedents › Part PART I— - ESTATES, TRUSTS, AND BENEFICIARIES › Subpart Subpart F— - Miscellaneous › § 684

Last updated Apr 6, 2026|Official source

Summary

When a U.S. person gives property to a foreign trust or foreign estate, the transfer is treated like a sale at the property's fair market value, unless official rules say otherwise. The person who gave the property must report as taxable gain the difference between that fair market value and their adjusted basis in the property. The rule does not apply to a transfer to a trust if someone is treated as the owner of that trust under section 671 (a tax rule about who counts as the trust owner). If a trust that was not foreign becomes a foreign trust, it is treated as if it had transferred all its assets to a foreign trust just before the change.

Full Legal Text

Title 26, §684

Internal Revenue Code — Source: USLM XML via OLRC

(a)Except as provided in regulations, in the case of any transfer of property by a United States person to a foreign estate or trust, for purposes of this subtitle, 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.
(b)Subsection (a) shall not apply to a transfer to a trust by a United States person to the extent that any person is treated as the owner of such trust under section 671.
(c)If a trust which is not a foreign trust becomes a foreign trust, such trust shall be treated for purposes of this section as having transferred, immediately before becoming a foreign trust, all of its assets to a foreign trust.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Codification Another section 1131(b) of Pub. L. 105–34 amended section 367, 721, and 1035 of this title.

Amendments

2010—Pub. L. 111–312 amended catchline, introductory provisions of subsec. (a), and subsec. (b) to read as if amendment by Pub. L. 107–16, § 542(e)(1)(A)–(C), had never been enacted. See 2001 Amendment note below. Prior to amendment, subsec. (b) read as follows: “Exceptions.— “(1) Transfers to certain trusts.—Subsection (a) shall not apply to a transfer to a trust by a United States person to the extent that any United States person is treated as the owner of such trust under section 671. “(2) Lifetime transfers to nonresident aliens.—Subsection (a) shall not apply to a lifetime transfer to a nonresident alien.” 2001—Pub. L. 107–16, § 542(e)(1)(A)–(C), amended section by inserting “and nonresident aliens” after “estates” in section catchline and “or to a nonresident alien” after “or trust” in introductory provisions of subsec. (a) and amending subsec. (b) generally. Prior to amendment, text of subsec. (b) read as follows: “Subsection (a) shall not apply to a transfer to a trust by a United States person to the extent that any person is treated as the owner of such trust under section 671.”

Statutory Notes and Related Subsidiaries

Effective Date

of 2010 AmendmentAmendment by Pub. L. 111–312 applicable to estates of decedents dying, and transfers made after Dec. 31, 2009, except as otherwise provided, see section 301(e) of Pub. L. 111–312, set out as an Effective and Termination Dates of 2010 Amendment note under section 121 of this title.

Effective Date

of 2001 AmendmentAmendment by Pub. L. 107–16 applicable to transfers after Dec. 31, 2009, see section 542(f)(2) of Pub. L. 107–16, set out as a note under section 121 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 684

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73