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

(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) 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) 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.

(Added Pub. L. 105–34, title XI, §1131(b), Aug. 5, 1997, 111 Stat. 978 ; amended Pub. L. 107–16, title V, §542(e)(1)(A)–(C), June 7, 2001, 115 Stat. 84 , 85.)

Amendment of Section

Pub. L. 107–16, title V, §542(e)(1)(A)–(C), (f)(2), title IX, §901, June 7, 2001, 115 Stat. 84–86 , 150, provided that, applicable to transfers after Dec. 31, 2009, this section is temporarily amended as follows:

(1) in section catchline, by inserting "and nonresident aliens" after "estates";

(2) in subsection (a), by inserting "or to a nonresident alien" after "or trust" in introductory provisions; and

(3) by amending subsection (b) to read as follows:

(b) 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.

See Effective and Termination Dates of 2001 Amendment note below.

Codification

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

Effective and Termination Dates of 2001 Amendment

Amendment 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.

Amendment by Pub. L. 107–16 inapplicable to estates of decedents dying, gifts made, or generation skipping transfers, after Dec. 31, 2010, and the Internal Revenue Code of 1986 to be applied and administered to such estates, gifts, and transfers as if such amendment had never been enacted, see section 901 of Pub. L. 107–16, set out as a note under section 1 of this title.