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Title 26 — Internal Revenue CodeRelease 119-73

§6038B Notice of Certain Transfers to Foreign Persons

Title 26 › Subtitle Subtitle F— Procedure and Administration › Chapter 61— INFORMATION AND RETURNS › Subchapter A— Returns and Records › Part III— INFORMATION RETURNS › Subpart A— Information Concerning Persons Subject to Special Provisions › § 6038B

Last updated Apr 6, 2026|Official source

Summary

If you are a U.S. person and you move property to a foreign corporation in certain tax-free exchanges, or contribute property to a foreign partnership, you must report the transfer to the IRS. The partnership rule kicks in only if you hold at least a 10 percent interest in the partnership right after the transfer, or if the property you and related persons moved to it over the past 12 months is worth more than $100,000. Reporting is also required for certain liquidating distributions to non-U.S. persons. If you fail to report, the penalty is 10 percent of the property's fair market value, capped at $100,000 per exchange unless you intentionally disregarded the rule. For partnership contributions, you may also have to recognize gain as if you had sold the property. No penalty applies if you can show the failure had a reasonable cause and was not willful neglect.

Full Legal Text

Title 26, §6038B

Internal Revenue Code — Source: USLM XML via OLRC

(a)Each United States person who—
(1)transfers property to—
(A)a foreign corporation in an exchange described in section 332, 351, 354, 355, 356, or 361, or
(B)a foreign partnership in a contribution described in section 721 or in any other contribution described in regulations prescribed by the Secretary, or
(2)makes a distribution described in section 336 to a person who is not a United States person,
(b)(1)Subsection (a)(1)(B) shall apply to a transfer by a United States person to a foreign partnership only if—
(A)the United States person holds (immediately after the transfer) directly or indirectly at least a 10-percent interest (as defined in section 6046A(d)) in the partnership, or
(B)the value of the property transferred (when added to the value of the property transferred by such person or any related person to such partnership or a related partnership during the 12-month period ending on the date of the transfer) exceeds $100,000.
(2)If by reason of an adjustment under section 482 or otherwise, a contribution described in subsection (a)(1) is deemed to have been made, such contribution shall be treated for purposes of this section as having been made not earlier than the date specified by the Secretary.
(c)(1)If any United States person fails to furnish the information described in subsection (a) at the time and in the manner required by regulations, such person shall pay a penalty equal to 10 percent of the fair market value of the property at the time of the exchange (and, in the case of a contribution described in subsection (a)(1)(B), such person shall recognize gain as if the contributed property had been sold for such value at the time of such contribution).
(2)Paragraph (1) shall not apply to any failure if the United States person shows such failure is due to reasonable cause and not to willful neglect.
(3)The penalty under paragraph (1) with respect to any exchange shall not exceed $100,000 unless the failure with respect to such exchange was due to intentional disregard.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

2005—Subsec. (a)(1)(B). Pub. L. 109–135 inserted “or” at end. 1998—Subsec. (c). Pub. L. 105–206, § 6011(g), made technical amendment to directory language of Pub. L. 105–206, § 1144(c). See 1997 Amendment note below. 1997—Subsec. (a)(1). Pub. L. 105–34, § 1144(a), amended par. (1) generally. Prior to amendment, par. (1) read as follows: “transfers property to a foreign corporation in an exchange described in section 332, 351, 354, 355, 356, or 361, or”. Subsec. (b). Pub. L. 105–34, § 1144(b), added subsec. (b). Former subsec. (b) redesignated (c). Subsec. (c). Pub. L. 105–34, § 1144(c), as amended by Pub. L. 105–206, § 6011(g), substituted “equal to 10 percent of the fair market value of the property at the time of the exchange (and, in the case of a contribution described in subsection (a)(1)(B), such person shall recognize gain as if the contributed property had been sold for such value at the time of such contribution)” for “equal to 25 percent of the amount of the gain realized on the exchange” in par. (1) and added par. (3). Pub. L. 105–34, § 1144(b), redesignated subsec. (b) as (c).

Statutory Notes and Related Subsidiaries

Effective Date

of 2005 AmendmentAmendment by Pub. L. 109–135 effective as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 409(d) of Pub. L. 109–135, set out as a note under section 961 of this title.

Effective Date

of 1998 AmendmentAmendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date

of 1997 Amendment Pub. L. 105–34, title XI, § 1144(d)(1), Aug. 5, 1997, 111 Stat. 985, provided that: “The

Amendments

made by this section [amending this section] shall apply to transfers made after the date of the enactment of this Act [Aug. 5, 1997].”

Effective Date

Section applicable to transfers or exchanges after Dec. 31, 1984, in taxable years ending after such date, with special rules for certain transfers and ruling requests before Mar. 1, 1984, see section 131(g) of Pub. L. 98–369, set out as an

Effective Date

of 1984 Amendment note under section 367 of this title. Election of Retroactive Effect Pub. L. 105–34, title XI, § 1144(d)(2), Aug. 5, 1997, 111 Stat. 985, provided that: “section 1494(c) of the Internal Revenue Code of 1986 shall not apply to any transfer after August 20, 1996, if all applicable reporting requirements under section 6038B of such Code (as amended by this section) are satisfied. The Secretary of the Treasury or his delegate may prescribe simplified reporting requirements under the preceding sentence.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 6038B

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73