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Title 26, Internal Revenue CodeRelease 119-110

§684 Recognition of Gain on Certain Transfers to Certain Foreign Trusts and Estates

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

Last updated Sep 22, 2026|Official source

Summary

If a U.S. person gives property to a foreign trust or foreign estate, they must treat the transfer as if they sold the property at its fair market value. They must report gain equal to the fair market value minus their adjusted basis in the property. This does not apply when someone is treated as the trust’s owner under section 671. If a trust becomes a foreign trust, it is treated as having transferred all its assets just before it became foreign.

Full Legal Text

Title 26, §684

Internal Revenue Code, Source: USLM XML via OLRC

(a)In general
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)
(2)the adjusted basis (for purposes of determining gain) of such property in the hands of the transferor.
(b)Exception
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)Treatment of trusts which become foreign trusts
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

Sep 22, 2026

Release point: 119-110