Treasury Regulations · 26 CFR
§ 1.367(a)-4. Special rule applicable to U.S. depreciated property.
Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).
Regulation under 26 U.S.C. § 367(a)
Cite as 26 CFR § 1.367(a)-4
At a glance
Read from the text and its source citation. Not part of the regulation.
- Status
- In the current eCFR
- Issued
- December 16, 2016 by T.D. 9803
- Issued under
- 26 U.S.C. § 367(a)
- Length
- 584 words · about 3 min to read
- Defines
- 1 term
- Cross-references
- cites 9 Code sections and 3 regulations; cited by 4
¶(a) Depreciated property used in the United States—
¶(1) In general. A U.S. person that transfers U.S. depreciated property (as defined in paragraph (a)(2) of this section) to a foreign corporation in an exchange described in section 367(a)(1), must include in its gross income for the taxable year in which the transfer occurs ordinary income equal to the gain realized that would have been includible in the transferor's gross income as ordinary income under section 617(d)(1), 1245(a), 1250(a), 1252(a), 1254(a), or 1255(a), whichever is applicable, if at the time of the transfer the U.S. person had sold the property at its fair market value. Recapture of depreciation under this paragraph (a) is required regardless of whether the exception to section 367(a)(1) provided by § 1.367(a)-2(a)(2) applies to the transfer of the U.S. depreciated property. However, the transfer of the U.S. depreciated property may qualify for the exception with respect to realized gain that is not included in ordinary income pursuant to this paragraph (a).
¶(2) U.S. depreciated property. U.S. depreciated property subject to the rules of this paragraph (a) is any property that—
¶(i) Is either mining property (as defined in section 617(f)(2)), section 1245 property (as defined in section 1245(a)(3)), section 1250 property (as defined in section 1250(c)), farm land (as defined in section 1252(a)(2)), section 1254 property (as defined in section 1254(a)(3)), or section 126 property (as defined in section 1255(a)(2)); and
¶(3) Property used within and without the United States.
¶(i) If U.S. depreciated property has been used partly within and partly without the United States, then the amount required to be included in ordinary income pursuant to this paragraph (a) is reduced to an amount determined in accordance with the following formula:
¶(ii) For purposes of the fraction in paragraph (a)(3)(i) of this section, the “full recapture amount” is the amount that would otherwise be included in the transferor's income under paragraph (a)(1) of this section. “U.S. use” is the number of months that the property either was used within the United States or has been described in section 168(g)(4), and was subject to depreciation by the transferor or a related person. “Total use” is the total number of months that the property was used (or available for use), and subject to depreciation, by the transferor or a related person. For purposes of this paragraph (a)(3), property is not considered to have been in use outside of the United States during any period in which such property was, for purposes of section 168, treated as property not used predominantly outside the United States pursuant to section 168(g)(4). For purposes of this paragraph (a)(3), the term “related person” has the meaning set forth in § 1.367(d)-1(h).
¶(b) Effective/applicability dates. The rules of this section apply to transfers occurring on or after September 14, 2015, and to transfers occurring before September 14, 2015, resulting from entity classification elections made under § 301.7701-3 that are filed on or after September 14, 2015. For transfers occurring before this section is applicable, see §§ 1.367(a)-4 and 1.367(a)-4T as contained in 26 CFR part 1 revised as of April 1, 2016.
[T.D. 9803, 81 FR 91027, Dec. 16, 2016]
Terms defined here
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Cross-references
Computed from the citations in the text of 26 CFR.
Code sections it cites
- § 367 Foreign corporations
- § 617 Deduction and recapture of certain mining exploration expenditures
- § 1245 Gain from dispositions of certain depreciable property
- § 1250 Gain from dispositions of certain depreciable realty
- § 1252 Gain from disposition of farm land
- § 1254 Gain from disposition of interest in oil, gas, geothermal, or other mineral properties
- § 126 Certain cost-sharing payments
- § 1255 Gain from disposition of section 126 property
- § 168 Accelerated cost recovery system
Regulations it cites
- § 1.367(a)-2 Exceptions for transfers of property for use in the active conduct of a trade or business.
- § 1.367(d)-1 Transfers of intangible property to foreign corporations.
- § 301.7701-3 Classification of certain business entities.
Cited by 4 other regulations
Amendment history
From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.
- Issued by T.D. 9803 (81 FR 91027)
Where it sits in 26 CFR
- Subchapter A Income tax
- Part 1 Income taxes
- Effects on corporation
Nearby sections
- § 1.367(a)-1 Transfers to foreign corporations subject to section 367(a): In general.
- § 1.367(a)-1T Transfers to foreign corporations subject to section 367(a): In general (temporary).
- § 1.367(a)-2 Exceptions for transfers of property for use in the active conduct of a trade or business.
- § 1.367(a)-3 Treatment of transfers of stock or securities to foreign corporations.
- § 1.367(a)-4 Special rule applicable to U.S. depreciated property.
- § 1.367(a)-6 Transfer of foreign branch with previously deducted losses.
- § 1.367(a)-6T Transfer of foreign branch with previously deducted losses (temporary).
- § 1.367(a)-7 Outbound transfers of property described in section 361(a) or (b).
- § 1.367(a)-8 Gain recognition agreement requirements.