---
kind: "range"
citation: "26 C.F.R. §§ 1.684-1–1.684-4"
title: "26"
from: "1.684-1"
to: "1.684-4"
count: 4
url: "https://uscodex.org/cfr/26/1.684-1..1.684-4"
---

# §1.684-1. Recognition of gain on transfers to certain foreign trusts and estates.

- (a) **Immediate recognition of gain—**
  - (1) **In general.** Any U.S. person who transfers property to a foreign trust or foreign estate shall be required to recognize gain at the time of the transfer equal to the excess of the fair market value of the property transferred over the adjusted basis (for purposes of determining gain) of such property in the hands of the U.S. transferor unless an exception applies under the provisions of [§ 1.684-3](/cfr/26/1.684-3.md). The amount of gain recognized is determined on an asset-by-asset basis.
  - (2) **No recognition of loss.** Under this section a U.S. person may not recognize loss on the transfer of an asset to a foreign trust or foreign estate. A U.S. person may not offset gain realized on the transfer of an appreciated asset to a foreign trust or foreign estate by a loss realized on the transfer of a depreciated asset to the foreign trust or foreign estate.
- (b) **Definitions.** The following definitions apply for purposes of this section:
  - (1) **U.S. person.** The term U.S. person means a United States person as defined in [section 7701(a)(30)](/cfr/26/7701.md?p=a-30), and includes a nonresident alien individual who elects under [section 6013(g)](/cfr/26/6013.md?p=g) to be treated as a resident of the United States.
  - (2) **U.S. transferor.** The term U.S. transferor means any U.S. person who makes a transfer (as defined in [§ 1.684-2](/cfr/26/1.684-2.md)) of property to a foreign trust or foreign estate.
  - (3) **Foreign trust.** [Section 7701(a)(31)(B)](/cfr/26/7701.md?p=a-31-B) defines foreign trust. See also [§ 301.7701-7](/cfr/26/301.7701-7.md) of this chapter.
  - (4) **Foreign estate.** [Section 7701(a)(31)(A)](/cfr/26/7701.md?p=a-31-A) defines foreign estate.
- (c) **Reporting requirements.** A U.S. person who transfers property to a foreign trust or foreign estate must comply with the reporting requirements under [section 6048](/cfr/26/6048.md).
- (d) **Examples.** The following examples illustrate the rules of this section. In all examples, A is a U.S. person and FT is a foreign trust. The examples are as follows:

# §1.684-2. Transfers.

- (a) **In general.** A transfer means a direct, indirect, or constructive transfer.
- (b) **Indirect transfers—**
  - (1) **In general.** [Section 1.679-3(c)](/cfr/26/1.679-3.md?p=c) shall apply to determine if a transfer to a foreign trust or foreign estate, by any person, is treated as an indirect transfer by a U.S. person to the foreign trust or foreign estate.
  - (2) **Examples.** The following examples illustrate the rules of this [paragraph (b)](#b). In all examples, A is a U.S. citizen, FT is a foreign trust, and I is A's uncle, who is a nonresident alien. The examples are as follows:
- (c) **Constructive transfers.** [Section 1.679-3(d)](/cfr/26/1.679-3.md?p=d) shall apply to determine if a transfer to a foreign trust or foreign estate is treated as a constructive transfer by a U.S. person to the foreign trust or foreign estate.
- (d) **Transfers by certain trusts—**
  - (1) **In general.** If any portion of a trust is treated as owned by a U.S. person, a transfer of property from that portion of the trust to a foreign trust is treated as a transfer from the owner of that portion to the foreign trust.
  - (2) **Examples.** The following examples illustrate the rules of this [paragraph (d)](#d). In all examples, A is a U.S. person, DT is a domestic trust, and FT is a foreign trust. The examples are as follows:
- (e) **Deemed transfers when foreign trust no longer treated as owned by a U.S. person—**
  - (1) **In general.** If any portion of a foreign trust is treated as owned by a U.S. person under [subpart E](/cfr/26/subpartE.md) of part I of subchapter J, chapter 1 of the Internal Revenue Code, and such portion ceases to be treated as owned by that person under such subpart (other than by reason of an actual transfer of property from the trust to which [§ 1.684-2(d)](#d) applies), the U.S. person shall be treated as having transferred, immediately before (but on the same date that) the trust is no longer treated as owned by that U.S. person, the assets of such portion to a foreign trust.
  - (2) **Examples.** The following examples illustrate the rules of this [paragraph (e)](#e). In all examples, A is a U.S. citizen and FT is a foreign trust. The examples are as follows:
- (f) **Transfers to entities owned by a foreign trust.** [Section 1.679-3(f)](/cfr/26/1.679-3.md?p=f) provides rules that apply with respect to transfers of property by a U.S. person to an entity in which a foreign trust holds an ownership interest.

# §1.684-3. Exceptions to general rule of gain recognition.

- (a) **Transfers to grantor trusts.** The general rule of gain recognition under [§ 1.684-1](/cfr/26/1.684-1.md) shall not apply to any transfer of property by a U.S. person to a foreign trust to the extent that any person is treated as the owner of the trust under [section 671](/cfr/26/671.md). [Section 1.684-2(e)](/cfr/26/1.684-2.md?p=e) provides rules regarding a subsequent change in the status of the trust.
- (b) **Transfers to charitable trusts.** The general rule of gain recognition under [§ 1.684-1](/cfr/26/1.684-1.md) shall not apply to any transfer of property to a foreign trust that is described in [section 501(c)(3)](/cfr/26/501.md?p=c-3) (without regard to the requirements of [section 508(a)](/cfr/26/508.md?p=a)).
- (c) **Certain transfers at death—**
  - (1) **Section 1014 basis.** The general rule of gain recognition under [§ 1.684-1](/cfr/26/1.684-1.md) shall not apply to any transfer of property to a foreign trust or foreign estate or, in the case of a transfer of property by a U.S. transferor decedent dying in 2010, to a foreign trust, foreign estate, or a nonresident alien, by reason of death of the U.S. transferor, if the basis of the property in the hands of the transferee is determined under [section 1014(a)](/cfr/26/1014.md?p=a).
  - (2) **Section 1022 basis election.** For U.S. transferor decedents dying in 2010, the general rule of gain recognition under [§ 1.684-1](/cfr/26/1.684-1.md) shall apply to any transfer of property by reason of death of the U.S. transferor if the basis of the property in the hands of the foreign trust, foreign estate, or the nonresident alien individual is determined under [section 1022](/cfr/26/1022.md). The gain on the transfer shall be calculated as set out under [§ 1.684-1(a)](/cfr/26/1.684-1.md?p=a), except that adjusted basis will reflect any increases allocated to such property under [section 1022](/cfr/26/1022.md).
- (d) **Transfers for fair market value to unrelated trusts.** The general rule of gain recognition under [§ 1.684-1](/cfr/26/1.684-1.md) shall not apply to any transfer of property for fair market value to a foreign trust that is not a related foreign trust as defined in [§ 1.679-1(c)(5)](/cfr/26/1.679-1.md?p=c-5). [Section 1.671-2(e)(2)(ii)](/cfr/26/1.671-2.md?p=e-2-ii) defines fair market value.
- (e) **Transfers to which section 1032 applies.** The general rule of gain recognition under [§ 1.684-1](/cfr/26/1.684-1.md) shall not apply to any transfer of stock (including treasury stock) by a domestic corporation to a foreign trust if the domestic corporation is not required to recognize gain on the transfer under [section 1032](/cfr/26/1032.md).
- (f) **Certain distributions to trusts.** For purposes of this section, a transfer does not include a distribution to a trust with respect to an interest held by such trust in an entity other than a trust or an interest in certain investment trusts described in [§ 301.7701-4(c)](/cfr/26/301.7701-4.md?p=c) of this chapter, liquidating trusts described in [§ 301.7701-4(d)](/cfr/26/301.7701-4.md?p=d) of this chapter, or environmental remediation trusts described in [§ 301.7701-4(e)](/cfr/26/301.7701-4.md?p=e) of this chapter.
- (g) **Examples.** The following examples illustrate the rules of this section. In all examples, A is a U.S. citizen and FT is a foreign trust. The examples are as follows:

# §1.684-4. Outbound migrations of domestic trusts.

- (a) **In general.** If a U.S. person transfers property to a domestic trust, and such trust becomes a foreign trust, and neither trust is treated as owned by any person under [subpart E](/cfr/26/subpartE.md) of part I of subchapter J, chapter 1 of the Internal Revenue Code, the trust shall be treated for purposes of this section as having transferred all of its assets to a foreign trust and the trust is required to recognize gain on the transfer under [§ 1.684-1(a)](/cfr/26/1.684-1.md?p=a). The trust must also comply with the rules of [section 6048](/cfr/26/6048.md).
- (b) **Date of transfer.** The transfer described in this section shall be deemed to occur immediately before, but on the same date that, the trust meets the definition of a foreign trust set forth in [section 7701(a)(31)(B)](/cfr/26/7701.md?p=a-31-B).
- (c) **Inadvertent migrations.** In the event of an inadvertent migration, as defined in [§ 301.7701-7(d)(2)](/cfr/26/301.7701-7.md?p=d-2) of this chapter, a trust may avoid the application of this section by complying with the procedures set forth in [§ 301.7701-7(d)(2)](/cfr/26/301.7701-7.md?p=d-2) of this chapter.
- (d) **Examples.** The following examples illustrate the rules of this section. In all examples, A is a U.S. citizen, B is a U.S. citizen, C is a nonresident alien, and T is a trust. The examples are as follows: