26 U.S.C. § 367 — Foreign corporations

(a) Transfers of property from the United States: (1) General rule — Normally, certain corporate reorganizations and exchanges (under sections 332, 351, 354, 356, or 361) let people move property between corporations without triggering tax. But if a U.S. person moves property to a foreign corporation this way, the foreign corporation is not treated as a "corporation" for figuring out how much gain must be taxed — meaning the transfer generally becomes taxable. (2) Exception — Unless regulations say otherwise, this rule doesn't apply to transferring stock or securities of a foreign corporation that is itself part of the exchange or reorganization. (3) If a U.S. person transfers a partnership interest to a foreign corporation this way, it's treated (unless regulations say otherwise) as if the person transferred their share of the partnership's actual assets. (4) The stock-or-securities exception in (2) does not apply to certain section 361 transactions, unless the transferring corporation is controlled by 5 or fewer domestic corporations (with all companies in the same affiliated group counted as one), subject to basis adjustments set by regulation. (5) The Secretary can exempt any transfer from this taxable treatment by regulation. (b) Other transfers: (1) For exchanges under sections 332, 351, 354, 355, 356, or 361 that don't involve a property transfer described in (a)(1), a foreign corporation is treated as a normal corporation, except as regulations say is needed to stop people from avoiding federal income tax. (2) Those regulations must cover sales or exchanges of stock or securities in a foreign corporation by a U.S. person, including rules for: (A) when gain must be taxed right away, or included in income as a dividend (or both), versus when it can be delayed to a later year; and (B) how much to adjust earnings and profits, and the basis of the stock, securities, or other assets involved. (c) Certain transactions are treated as exchanges for this section: (1) A distribution under section 355 (or the part of section 356 tied to it) counts as an exchange here, whether or not it technically is one. (2) If people who, right after transferring property to a foreign corporation as a capital contribution, own at least 80% of that corporation's voting stock, the transfer is treated as if they sold the property in exchange for stock worth its fair market value. (d) Special rules for transferring intangible property: (1) Unless regulations say otherwise, if a U.S. person transfers intangible property to a foreign corporation under section 351 or 361, the taxable rule in (a) does not apply — instead, this subsection's rules do. (2) The transferor is instead treated as having sold the property for payments tied to how much it's used, produced, or later disposed of — amounts reflecting what the transferor would reasonably have received each year over the property's useful life, or, if it's later disposed of, at that time — and these amounts must match the income the intangible actually generates. This reduces the foreign corporation's earnings and profits by the same amount, and any income counted this way is treated as ordinary income (treated like a royalty for foreign tax credit purposes under section 904(d)). The Secretary must require these transfers be valued either together as a group or based on realistic alternatives, whichever gives the most reliable value. (3) The Secretary can extend these same rules by regulation to a U.S. person transferring intangible property to a partnership. (4) "Intangible property" here covers things like: patents, inventions, formulas, processes, designs, know-how; copyrights and creative works; trademarks, trade names, brand names; franchises, licenses, contracts; methods, systems, customer lists, technical data; goodwill and workforce in place; and any other item whose value doesn't come from tangible property or from a person's services. (e) Distributions under section 355 or liquidations under section 332: (1) If a domestic corporation distributes property under section 355 to someone who isn't a U.S. person, regulations can require gain to be taxed using rules similar to this section's. (2) If a corporation liquidates under section 332, the tax-free treatment normally available under section 337(a) and (b)(1) does not apply — unless regulations say otherwise — when the corporation receiving at least 80% of the liquidating corporation is a foreign corporation. (f) Other transfers: If a U.S. person contributes property to a foreign corporation as paid-in surplus or capital in a way not already covered above, regulations can treat that as a sale at the property's fair market value — meaning the transferor must report as gain the amount by which the property's fair market value exceeds its adjusted basis.