Treasury Regulations · 26 CFR

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

In effect eCFR current as of October 15, 2026

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. § 684

Cite as 26 CFR § 1.684-1

At a glance

Read from the text and its source citation. Not part of the regulation.

Status: In the current eCFR
Issued: July 20, 2001 by T.D. 8956
Issued under: 26 U.S.C. § 684
Length: 812 words · about 4 min to read
Defines: 2 terms
Cross-references: cites 2 Code sections and 6 regulations; cited by 3

¶(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. 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), and includes a nonresident alien individual who elects under section 6013(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) of property to a foreign trust or foreign estate.

¶(3) Foreign trust. Section 7701(a)(31)(B) defines foreign trust. See also § 301.7701-7 of this chapter.

¶(4) Foreign estate. Section 7701(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.

¶(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:

¶Example 1. Transfer to foreign trust. A

transfers property that has a fair market value of 1000X to FT. A's adjusted basis in the property is 400X. FT has no U.S. beneficiary within the meaning of § 1.679-2, and no person is treated as owning any portion of FT. Under paragraph (a)(1) of this section, A recognizes gain at the time of the transfer equal to 600X.

¶Example 2. Transfer of multiple properties. A

transfers property Q, with a fair market value of 1000X, and property R, with a fair market value of 2000X, to FT. At the time of the transfer, A's adjusted basis in property Q is 700X, and A's adjusted basis in property R is 2200X. FT has no U.S. beneficiary within the meaning of § 1.679-2, and no person is treated as owning any portion of FT. Under paragraph (a)(1) of this section, A recognizes the 300X of gain attributable to property Q. Under paragraph (a)(2) of this section, A does not recognize the 200X of loss attributable to property R, and may not offset that loss against the gain attributable to property Q.

¶Example 3. Transfer for less than fair market value. A

transfers property that has a fair market value of 1000X to FT in exchange for 400X of cash. A's adjusted basis in the property is 200X. FT has no U.S. beneficiary within the meaning of § 1.679-2, and no person is treated as owning any portion of FT. Under paragraph (a)(1) of this section, A recognizes gain at the time of the transfer equal to 800X.

¶Example 4. Exchange of property for private annuity. A

transfers property that has a fair market value of 1000X to FT in exchange for FT's obligation to pay A 50X per year for the rest of A's life. A's adjusted basis in the property is 100X. FT has no U.S. beneficiary within the meaning of § 1.679-2, and no person is treated as owning any portion of FT. A is required to recognize gain equal to 900X immediately upon transfer of the property to the trust. This result applies even though A might otherwise have been allowed to defer recognition of gain under another provision of the Internal Revenue Code.

¶Example 5. Transfer of property to related foreign trust in exchange for qualified obligation. A

transfers property that has a fair market value of 1000X to FT in exchange for FT's obligation to make payments to A during the next four years. FT is related to A as defined in § 1.679-1(c)(5). The obligation is treated as a qualified obligation within the meaning of § 1.679-4(d), and no person is treated as owning any portion of FT. A's adjusted basis in the property is 100X. A is required to recognize gain equal to 900X immediately upon transfer of the property to the trust. This result applies even though A might otherwise have been allowed to defer recognition of gain under another provision of the Internal Revenue Code. Section 1.684-3(d) provides rules relating to transfers for fair market value to unrelated foreign trusts.

[T.D. 8956, 66 FR 37899, July 20, 2001]

Terms defined here

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U.S. person § 1.684-1(b)(1)
U.S. transferor § 1.684-1(b)(2)

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Cited by 3 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.

July 20, 2001Issued by T.D. 8956 (66 FR 37899)

Where it sits in 26 CFR

Subchapter A Income tax
Part 1 Income taxes
Miscellaneous

Nearby sections

§ 1.682(c)-1 Definitions.
§ 1.683-1 Applicability of provisions; general rule.
§ 1.683-2 Exceptions.
§ 1.683-3 Application of the 65-day rule of the Internal Revenue Code of 1939.
§ 1.684-1 Recognition of gain on transfers to certain foreign trusts and estates.
§ 1.684-2 Transfers.
§ 1.684-3 Exceptions to general rule of gain recognition.
§ 1.684-4 Outbound migrations of domestic trusts.
§ 1.684-5 Effective/applicability dates.