Form 926: US Citizens Moving Property Into a Canadian Corporation

Form 926 is the return a US person generally files after moving property into a foreign corporation, and a Canadian corporation counts, though an unlimited liability company generally doesn’t by default. It goes in with your income tax return for the year of the transfer. Cash is reportable if you hold at least 10% right after, or send over $100,000 in 12 months. Missing it can cost 10% of the property’s value, generally capped at $100,000.

Who has to file Form 926?

Generally, a US citizen or resident, a domestic corporation, or a domestic estate or trust files it to report certain transfers of property to a foreign corporation. That’s the IRS instruction. We read “citizen” as reaching a US citizen who lives in Canada, since the instruction has no carve-out for living abroad.

The duty covers the exchanges listed in section 6038B(a)(1)(A), including section 351, and the cash rule sits inside that same limit. A plain sale, or a transfer that misses the 80% control test in section 368(c), needs its own check.

Two special rules from the same instructions come up often. Spouses can share one form only if they file a joint income tax return. And when a partnership makes the transfer, its domestic partners file, each for a proportionate share of the property.

We found no change for 2025 and 2026 returns. The IRS still serves the November 2018 form and instructions, and the source notes for section 6038B, section 351 and section 367 list no amendment by the 2025 tax act, P.L. 119-21.

When is Form 926 due and what counts as a transfer?

It’s due with your income tax return for the tax year that includes the transfer date, by that return’s due date including extensions, so there’s no separate filing date. A transfer covers tangible and intangible property, and cash has its own test: at least 10% held right after the transfer, counting indirect and attributed holdings, or more than $100,000 in the 12 months ending on the transfer date.

The cash rule means an owner of a new Canadian company usually hits the 10% test on day one, whatever the amount. The $100,000 test matters more for smaller holders, and the regulation counts cash from related persons too.

What you move in	US gain treatment, generally	Form 926 trigger
Cash	This guide covers the reporting test only	At least 10% held after, or over $100,000 in 12 months
Equipment and other tangible property	Full gain recognition under section 367(a)(1)	Reportable transfer
Goodwill, going concern value, workforce in place	Section 367(d): treated as a sale for contingent payments, with annual ordinary income	Reportable, Part III Section C
Stock or securities	Special rules, including gain recognition agreements	Exceptions exist in the regulation, some for holders under 5%

How do sections 351 and 367 change the tax result?

Section 351 is the starting rule: no gain or loss when property goes into a corporation solely for stock and the transferors control it right after. Section 367 then changes the answer for foreign corporations, because for measuring gain the foreign corporation isn’t treated as a corporation at all. So gain that section 351 would defer can generally be taxed.

Section 351(a) defines control by reference to section 368(c). Section 367(a)(1) is the override.

The old relief for assets used in an active business is gone. The instructions say that for transfers after 2017 the active trade or business exception was repealed, and tangible property generally gets full gain recognition. Losses on other items you move in don’t reduce that gain.

Intangibles run on a different track. Section 367(d) treats you as having sold them for payments tied to their productivity, use or disposition, with ordinary income picked up annually over their useful life, and the definition now includes goodwill. That’s worth a hard look if you’re incorporating a practice or consulting business. Ownership after the transfer can also bring Form 5471 and the CFC rules, and a check-the-box election usually isn’t available to change the classification, because the entity regulation lists a Canadian Corporation and Company as corporations outright, apart from companies whose owners all have unlimited liability.

Does a Canadian section 85 rollover help on the US side?

Not by itself, on our reading. A section 85 rollover is a Canadian election, while sections 351 and 367 test the exchange on their own terms and don’t mention it. The US gain and the Form 926 filing are worked out separately, so a transfer can be deferred in Canada and still be reportable and taxable in the US.

This is our inference from the US text rather than a line the IRS has written about Canada. It also means the timing of tax in the two countries can differ, which is why foreign tax credit planning belongs in the same conversation. For the wider setup, see incorporating a business across the border.

What’s the penalty for missing Form 926?

The penalty is 10% of the property’s fair market value at the time of the exchange, limited to $100,000 per exchange unless the failure was due to intentional disregard. It doesn’t apply if you show reasonable cause and no willful neglect. A late or improper filing of material information can count as a failure too.

The figures come from section 6038B(c). Under the regulation, a failure includes not reporting material information at the proper time and in the proper manner. The cap falls away where the reasonable cause exception isn’t met and the taxpayer knew of the rule. The IRS decides reasonable cause on all the facts and circumstances, so nothing about it is automatic. The regulation also considers your statement only if you file an amended return with the missing information and a written explanation promptly after you learn of the failure. A separate 40% penalty may apply to an underpayment from an undisclosed foreign financial asset understatement.

If you’ve already missed the form, the late international information return procedures are the place to start.

How does Form 926 affect the statute of limitations?

Missing it can hold the assessment window open. Under section 6501(c)(8), the time to assess tax related to the information doesn’t expire until 3 years after the IRS is furnished that information. If the failure had reasonable cause, the extension applies only to the items related to the failure.

The rule is in section 6501(c)(8), and it reaches any tax return, event or period the information relates to. That makes a missing form more than a one-time penalty risk. Furnishing the required information, even late, is what starts the 3 years.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.