Sec. 367. Foreign corporations
 
    (a) Transfers of property from the United States
      (1) General rule
        If, in connection with any exchange described in section 332,
      351, 354, 356, or 361, a United States person transfers property
      to a foreign corporation, such foreign corporation shall not, for
      purposes of determining the extent to which gain shall be
      recognized on such transfer, be considered to be a corporation.
      (2) Exception for certain stock or securities
        Except to the extent provided in regulations, paragraph (1)
      shall not apply to the transfer of stock or securities of a
      foreign corporation which is a party to the exchange or a party
      to the reorganization.
      (3) Exception for transfers of certain property used in the
          active conduct of a trade or business
        (A) In general
          Except as provided in regulations prescribed by the
        Secretary, paragraph (1) shall not apply to any property
        transferred to a foreign corporation for use by such foreign
        corporation in the active conduct of a trade or business
        outside of the United States.
        (B) Paragraph not to apply to certain property
          Except as provided in regulations prescribed by the
        Secretary, subparagraph (A) shall not apply to any -
            (i) property described in paragraph (1) or (3) of section
          1221(a) (relating to inventory and copyrights, etc.),
            (ii) installment obligations, accounts receivable, or
          similar property,
            (iii) foreign currency or other property denominated in
          foreign currency,
            (iv) intangible property (within the meaning of section
          936(h)(3)(B)), or
            (v) property with respect to which the transferor is a
          lessor at the time of the transfer, except that this clause
          shall not apply if the transferee was the lessee.
        (C) Transfer of foreign branch with previously deducted losses
          Except as provided in regulations prescribed by the
        Secretary, subparagraph (A) shall not apply to gain realized on
        the transfer of the assets of a foreign branch of a United
        States person to a foreign corporation in an exchange described
        in paragraph (1) to the extent that -
            (i) the sum of losses -
              (I) which were incurred by the foreign branch before the
            transfer, and
              (II) with respect to which a deduction was allowed to the
            taxpayer, exceeds
            (ii) the sum of -
              (I) any taxable income of such branch for a taxable year
            after the taxable year in which the loss was incurred and
            through the close of the taxable year of the transfer, and
              (II) the amount which is recognized under section
            904(f)(3) on account of the transfer.
        Any gain recognized by reason of the preceding sentence shall
        be treated for purposes of this chapter as income from sources
        outside the United States having the same character as such
        losses had.
      (4) Special rule for transfer of partnership interests
        Except as provided in regulations prescribed by the Secretary,
      a transfer by a United States person of an interest in a
      partnership to a foreign corporation in an exchange described in
      paragraph (1) shall, for purposes of this subsection, be treated
      as a transfer to such corporation of such person's pro rata share
      of the assets of the partnership.
      (5) Paragraphs (2) and (3) not to apply to certain section 361
          transactions
        Paragraphs (2) and (3) shall not apply in the case of an
      exchange described in subsection (a) or (b) of section 361.
      Subject to such basis adjustments and such other conditions as
      shall be provided in regulations, the preceding sentence shall
      not apply if the transferor corporation is controlled (within the
      meaning of section 368(c)) by 5 or fewer domestic corporations.
      For purposes of the preceding sentence, all members of the same
      affiliated group (within the meaning of section 1504) shall be
      treated as 1 corporation.
      (6) Secretary may exempt certain transactions from application of
          this subsection
        Paragraph (1) shall not apply to the transfer of any property
      which the Secretary, in order to carry out the purposes of this
      subsection, designates by regulation.
    (b) Other transfers
      (1) Effect of section to be determined under regulations
        In the case of any exchange described in section 332, 351, 354,
      355, 356, or 361 in connection with which there is no transfer of
      property described in subsection (a)(1), a foreign corporation
      shall be considered to be a corporation except to the extent
      provided in regulations prescribed by the Secretary which are
      necessary or appropriate to prevent the avoidance of Federal
      income taxes.
      (2) Regulations relating to sale or exchange of stock in foreign
          corporations
        The regulations prescribed pursuant to paragraph (1) shall
      include (but shall not be limited to) regulations dealing with
      the sale or exchange of stock or securities in a foreign
      corporation by a United States person, including regulations
      providing -
          (A) the circumstances under which -
            (i) gain shall be recognized currently, or amounts included
          in gross income currently as a dividend, or both, or
            (ii) gain or other amounts may be deferred for inclusion in
          the gross income of a shareholder (or his successor in
          interest) at a later date, and
          (B) the extent to which adjustments shall be made to earnings
        and profits, basis of stock or securities, and basis of assets.
    (c) Transactions to be treated as exchanges
      (1) Section 355 distribution
        For purposes of this section, any distribution described in
      section 355 (or so much of section 356 as relates to section 355)
      shall be treated as an exchange whether or not it is an exchange.
      (2) Contribution of capital to controlled corporations
        For purposes of this chapter, any transfer of property to a
      foreign corporation as a contribution to the capital of such
      corporation by one or more persons who, immediately after the
      transfer, own (within the meaning of section 318) stock
      possessing at least 80 percent of the total combined voting power
      of all classes of stock of such corporation entitled to vote
      shall be treated as an exchange of such property for stock of the
      foreign corporation equal in value to the fair market value of
      the property transferred.
    (d) Special rules relating to transfers of intangibles
      (1) In general
        Except as provided in regulations prescribed by the Secretary,
      if a United States person transfers any intangible property
      (within the meaning of section 936(h)(3)(B)) to a foreign
      corporation in an exchange described in section 351 or 361 -
          (A) subsection (a) shall not apply to the transfer of such
        property, and
          (B) the provisions of this subsection shall apply to such
        transfer.
      (2) Transfer of intangibles treated as transfer pursuant to sale
          of contingent payments
        (A) In general
          If paragraph (1) applies to any transfer, the United States
        person transferring such property shall be treated as -
            (i) having sold such property in exchange for payments
          which are contingent upon the productivity, use, or
          disposition of such property, and
            (ii) receiving amounts which reasonably reflect the amounts
          which would have been received -
              (I) annually in the form of such payments over the useful
            life of such property, or
              (II) in the case of a disposition following such transfer
            (whether direct or indirect), at the time of the
            disposition.
        The amounts taken into account under clause (ii) shall be
        commensurate with the income attributable to the intangible.
        (B) Effect on earnings and profits
          For purposes of this chapter, the earnings and profits of a
        foreign corporation to which the intangible property was
        transferred shall be reduced by the amount required to be
        included in the income of the transferor of the intangible
        property under subparagraph (A)(ii).
        (C) Amounts received treated as ordinary income
          For purposes of this chapter, any amount included in gross
        income by reason of this subsection shall be treated as
        ordinary income.  For purposes of applying section 904(d), 
        any such amount shall be treated in the same manner as 
        if such amount were a royalty.
      (3) Regulations relating to transfers of intangibles to
          partnerships
        The Secretary may provide by regulations that the rules of
      paragraph (2) also apply to the transfer of intangible property
      by a United States person to a partnership in circumstances
      consistent with the purposes of this subsection.
    (e) Treatment of distributions described in section 355 or
        liquidations under section 332
      (1) Distributions described in section 355
        In the case of any distribution described in section 355 (or so
      much of section 356 as relates to section 355) by a domestic
      corporation to a person who is not a United States person, to the
      extent provided in regulations, gain shall be recognized under
      principles similar to the principles of this section.
      (2) Liquidations under section 332
        In the case of any liquidation to which section 332 applies,
      except as provided in regulations, subsections (a) and (b)(1) of
      section 337 shall not apply where the 80-percent distributee (as
      defined in section 337(c)) is a foreign corporation.
    (f) Other transfers
      To the extent provided in regulations, if a United States person
    transfers property to a foreign corporation as paid-in surplus or
    as a contribution to capital (in a transaction not otherwise
    described in this section), 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.