Do I need to file a form 926 for an investment in a private UK technology company?

[jhulwick]

I invested $20k in 2020 into a UK private limited company in the technology industry (non-financial related). Turbotax shows a form 8938 is not necessary because the value of my investment did not exceed $100k (married filing jointly). I own roughly 1% of outstanding shares and did not receive any income from the investment. I have no other foreign investments or accounts. Is a form 926 necessary to file or is Turbotax correct that no reporting is necessary this year?

[JohnW152 · Accepted solution]

You don't appear to have a filing requirement for Form 926 for tax year 2020.  The mere investment of cash in a foreign corporation doesn't automatically mean you need to file the form. 

According to Transfers of cash in the Instructions for Form 926,

"A U.S. person that transfers cash to a foreign corporation must report the transfer on Form 926 if (a) immediately after the transfer, the person holds, directly or indirectly, at least 10% of the total voting power or the total value of the foreign corporation; or (b) the amount of cash transferred by the person to the foreign corporation during the 12-month period ending on the date of the transfer is more than $100,000."  [Bolding mine.]

Based on your statement, neither of these provisions trigger the need for a Form 926.

[jhulwick]

Many thanks @JohnW152 !

Is it your interpretation that no other reporting is necessary as well? 

[PattiF]

Yes, no other reporting is necessary. I just wanted to confirm and agree with johnW152 that he is absolutely correct. See page 1 of the IRS instructions  Form 926 Instructions. Future actions such as a sale of this investment or dividends would be reportable.

[jhulwick]

Thank you!

[santanu]

@JohnW152 I purchased stock of a publicly traded partnership and I sold it off in the same financial year. I received K-1 form along with instructions to fill 926. The cash transfer for the financial year is just $16. Do I have to file form 926. I was reading your bolded statements and it seems like I don't but just wanted to clarify.

[JohnW152]

It doesn’t look like you need to file Form 926, based on what you’re describing.

You’re fine by clause (b), so all you need to concern yourself with is clause (a).  

If you didn’t have at least 10% of the total voting power immediately after the transfer, clause (a) wouldn’t apply to you either, in which case you don’t need to worry about filing Form 926.

@santanu

[santanu]

@JohnW152  My voting power should be less that 0.01%. I had 40 shares out of 270 million shares of the partnership. So I satisfy both clause (a) and (b). Thanks for confirming my understanding. 

[Svensk_Cal]

Hi,

I intend to invest in a small company in France and also have a question on form 926.

I am not clear about the 10% value of the company threshold to file Form 926.

Is it the total value (assets + liabilities) or just book value that is taken into account to determine the value of the company? 

As an example, Let's say the founder raises 100.000 Euro, gets 100.000 euros loan from a bank to start the business and I invest 12.000 Euros.

Do I own 12% (have to file) or 6% (no need to file)?

Thanks in advance for your help!

Svensk_Cal