Userid: CPM          Schema: instrx Leadpct: 100%          Pt. size: 9             Draft           Ok to Print
AH XSL/XML            Fileid: … ns/I965D/201912/A/XML/Cycle05/source                                    (Init. & Date) _______

Page 1 of 3                                                                                  11:22 - 15-Jan-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

                                                                                             Department of the Treasury
                                                                                             Internal Revenue Service
Instructions for Form 965-D

(December 2019)
Transfer Agreement Under Section 965(i)(2)

Section references are to the Internal Revenue Code unless            covered triggering event. References in Part IV, Part V, and Part 
otherwise noted.                                                      VII (including the signature block area) to the “transferor” are 
                                                                      references to the “eligible section 965(i) transferor” filing the 
                                                                      form.
Future Developments
For the latest information about developments related to Form         Section 965(i) net tax liability. The section 965(i) net tax 
965-D and its instructions, such as legislation enacted after they    liability is, with respect to an S corporation and a shareholder of 
were published, go to IRS.gov/Form965D.                               the S corporation that has made a section 965(i) election, the 
                                                                      excess (if any) of the S corporation shareholder's net income tax 
Background                                                            for the taxable year in which the S corporation shareholder 
                                                                      includes a section 965(a) inclusion in income, determined as if 
On December 22, 2017, section 965 of the Code (section 965)           the only section 965(a) inclusions included in income by the S 
was amended. As a result of the amendment, certain taxpayers          corporation shareholder are domestic pass-through entity 
are required to include in income an amount (a section 965(a)         shares of section 965(a) inclusions by the S corporation with 
inclusion amount) based on the accumulated post-1986 deferred         respect to DFICs of which the S corporation is a U.S. 
foreign income of certain foreign corporations (specified foreign     shareholder, over the S corporation shareholder's net income 
corporations) they own either directly or indirectly through other    tax for the taxable year determined without regard to section 
entities. Taxpayers that are S corporation shareholders may           965, and without regard to any income, deduction, or credit 
have inclusions in income under section 951(a) by reason of           properly attributable to a dividend received (directly or through a 
section 965 due to ownership of deferred foreign income               chain of ownership described in section 958(a)) by the S 
corporations (DFICs) through S corporations that are                  corporation from, or an inclusion under sections 951(a)(1)(B) 
themselves U.S. shareholders of the DFICs.                            and 956 with respect to, a DFIC and paid during, or included with 
For each section 965(i) net tax liability (as defined later in        respect to, the DFIC's inclusion year.
these instructions), the taxpayer may elect to defer payment of 
such liability until a triggering event occurs. Each section 965(i)   Purpose of Form
net tax liability is calculated and the section 965(i) election is    Form 965-D should be used by an eligible section 965(i) 
made on an S corporation-by-S corporation basis. If a covered         transferor and an eligible section 965(i) transferee to enter into a 
triggering event (defined below) occurs, such event will not be       transfer agreement under section 965(i)(2).
considered to trigger the section 965(i) net tax liability if the     This form sets forth the information and representations that 
transferee enters into an agreement to be liable for the section      must be provided to meet the requirements of Regulations 
965(i) net tax liability with respect to the stock transferred in the section 1.965-7(c)(3)(iv)(B)(4) in order to enter into a transfer 
same manner as if the transferee were the original electing           agreement under section 965(i)(2). If an eligible section 965(i) 
taxpayer. Partial triggering events may occur if not all of the       transferor and an eligible section 965(i) transferee properly 
stock of the S corporation is transferred. In the case of multiple    complete and file this Form 965-D with respect to a covered 
partial transfers, an agreement must be entered into for each         triggering event in accordance with these instructions, they will 
partial transfer treated as a covered triggering event.               be considered to have properly entered into a transfer 
                                                                      agreement under section 965(i)(2). However, the Commissioner 
                                                                      may review the transfer agreement and may ask additional 
General Instructions                                                  questions or require additional information, including, for 
                                                                      example, information about the eligible section 965(i) 
Definitions                                                           transferee’s ability to pay the outstanding section 965(i) net tax 
Covered triggering event. A covered triggering event is, with         liability. If the Commissioner determines that the transfer 
respect to a shareholder’s section 965(i) net tax liability with      agreement contains a material misrepresentation or material 
respect to an S corporation, the transfer of any share of stock of    omission, or if the additional information requested is not 
the S corporation (including by death or otherwise) by the            provided within a reasonable timeframe (as communicated by 
shareholder that results in a change of ownership for federal         the Commissioner), then the transfer agreement may be rejected 
income tax purposes.                                                  as of the date of the original triggering event. Alternatively, the 
                                                                      Commissioner may determine that a triggering event has 
Eligible section 965(i) transferee. An eligible section 965(i)        occurred as of the date the transfer agreement was found to 
transferee is a single U.S. person (including a person listed in      have a material misrepresentation or material omission.
Regulations section 1.1362-6(b)(2) with respect to a trust or 
estate, but not a domestic pass-through entity itself) that           Who Must File
becomes a shareholder of an S corporation due to a transfer 
from an eligible section 965(i) transferor in a transaction that is a The eligible section 965(i) transferor and the eligible section 
covered triggering event. References in Part VI and Part VII          965(i) transferee with respect to a covered triggering event must 
(including the signature block area) to the “transferee” are          file Form 965-D to meet the requirements for the eligible section 
references to the “eligible section 965(i) transferee” filing the     965(i) transferee exception under Regulations section 1.965-7(c)
form.                                                                 (3)(iv). Form 965-D may only be filed by an eligible section 965(i) 
                                                                      transferor and eligible section 965(i) transferee.
Eligible section 965(i) transferor. An eligible section 965(i) 
transferor is a shareholder of an S corporation who has a section     Note.      Where there are multiple partial transfers, separate 
965(i) net tax liability with respect to the S corporation and who    transfer agreements must be filed for each partial transfer 
transfers stock of the S corporation in a transaction that is a 

Jan 15, 2020                                                      Cat. No. 73448A

Page 2 of 3           Fileid: … ns/I965D/201912/A/XML/Cycle05/source                                11:22 - 15-Jan-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

treated as a covered triggering event. In addition, an S                 covered triggering event that is the death of the eligible section 
corporation cannot file Form 965-D on behalf of its shareholders.        965(i) transferor, and the transfer agreement must be filed within 
                                                                         30 days of the covered triggering event (that is, the transfer of 
When and Where To File                                                   shares to the beneficiary or beneficiaries).
Except in the case of a covered triggering event that is the death 
of the eligible section 965(i) transferor, within 30 days of the 
covered triggering event, the original Form 965-D must be                Specific Instructions
mailed to the IRS’s Memphis Compliance Service Collection 
Operations at the following address.                                     Part I — Transferor Information
                                                                         Use Part I to provide the identifying information of the transferor. 
Memphis CSCO                                                             Enter the transferor’s complete legal name, taxpayer 
5333 Getwell Road MS 81                                                  identification number, and street address or post office box.
Memphis, TN 38118
                                                                         Part II — Transferee Information
In addition, both the eligible section 965(i) transferor and the         Use Part II to provide the identifying information of the 
eligible section 965(i) transferee must attach a duplicate copy of       transferee. Enter the transferee’s name, taxpayer identification 
Form 965-D to their tax returns for the tax years during which the       number, and street address or post office box.
covered triggering event occurs, filed by the due date for the 
returns (with regard to any extension of time to file).                           A transferee that is a foreign entity or a domestic 
                                                                                  pass-through entity is not an eligible section 965(i) 
        Except in the case of death, Form 965-D will be                  CAUTION! transferee. If a transfer consists of multiple partial 
!       considered timely filed only if filed within 30 days of the      transfers, a transfer agreement must be entered into by the 
CAUTION date that the covered triggering event occurs. No                eligible section 965(i) transferor and each eligible section 965(i) 
extension of time to file Form 965-D will be granted, and relief is      transferee for each partial transfer treated as a covered 
not available under Regulations section 301.9100-2 or                    triggering event.
301.9100-3 to enter into a transfer agreement late.
A copy of the eligible section 965(i) transferor’s most recent           Part III — Identifying Information of 
Form 965-A is required to be included with Form 965-D.                   the S Corporation (With Respect to 
Special Rules in the Case of Death of the                                Which the Section 965(i) Election 
Eligible Section 965(i) Transferor                                       Was Effective)
If the covered triggering event is the death of the eligible section     Use Part III to provide identifying information of the S corporation 
965(i) transferor, certain special rules apply regarding the due         with respect to which a section 965(i) election was in effect and 
date of the transfer agreement and the identity of the eligible          with respect to which the covered triggering event occurred. 
section 965(i) transferee.                                               Enter the name and taxpayer identification number of the S 
Due date of transfer agreement.  If the covered triggering               corporation.
event is the death of the eligible section 965(i) transferor, the 
transfer agreement must be filed by the unextended due date for          Part IV — Triggering Event Leading to 
the eligible section 965(i) transferor’s final income tax return.        Transfer Agreement
Eligible section 965(i) transferee.  Except in the case of               Line 1.  Provide the date on which the covered triggering event 
transfers to trusts, if the covered triggering event is the death of     for which the transfer agreement is being filed occurred.
the eligible section 965(i) transferor and the identity of the 
beneficiary or beneficiaries (in the case of multiple partial            Line 2.  Check the “Yes” box if the covered triggering event for 
transfers) is determined as of the due date for the eligible section     which the transfer agreement is being filed is the death of the 
965(i) transferor’s final income tax return, then the transfer may       eligible section 965(i) transferor. Otherwise, check the “No” box.
be treated as a transfer directly from the eligible section 965(i)                A transfer from an estate to the original eligible section 
transferor to the beneficiary or beneficiaries (provided the             !        965(i) transferor’s beneficiary or beneficiaries is not a 
beneficiary or beneficiaries are themselves eligible section             CAUTION  covered triggering event that is the death of the eligible 
965(i) transferees).                                                     section 965(i) transferor.
If, however, the identity of the beneficiary or beneficiaries is 
not determined as of the due date for the eligible section 965(i)        Line 3.  If the covered triggering event is a partial transfer, 
transferor’s final income tax return, then the transfer must be          provide the percentage of the section 965(i) net tax liability 
treated as two transfers: first, a transfer from the eligible section    attributable to the stock being transferred. If the covered 
965(i) transferor to his or her estate that occurs at the time of        triggering event is the transfer of all of the stock of the S 
death; and second, a transfer from the estate to the beneficiary         corporation, enter 100.00%.
or beneficiaries that occurs when the shares are actually 
transferred. Separate transfer agreements must be filed for each         Line 4.  Describe in detail the covered triggering event for which 
transfer.                                                                the transfer agreement is being filed. For example, indicate 
                                                                         whether the covered triggering event is a transfer pursuant to a 
Note. Where the transfer is treated as two transfers, the transfer       sale, gift, or other disposition, or whether the covered triggering 
from the eligible section 965(i) transferor to his or her estate is      event is the death of the eligible section 965(i) transferor.
treated as a transfer resulting from a covered triggering event 
that is the death of the eligible section 965(i) transferor, and the 
transfer agreement must be filed by the due date for the eligible 
section 965(i) transferor’s final income tax return (with regard to 
any extension of time to file). The transfer from the estate to the 
beneficiary or beneficiaries is not a transfer resulting from a 

                                                                      -2-

Page 3 of 3        Fileid: … ns/I965D/201912/A/XML/Cycle05/source                   11:22 - 15-Jan-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Part V — Report of Unpaid Section                                     Transferor Signature
965(i) Net Tax Liability or Portion                                   This transfer agreement must be signed by a person who is 
                                                                      authorized to sign a return on behalf of the eligible section 965(i) 
Thereof Attributable to Transferred                                   transferor. By signing this transfer agreement, you declare, 
                                                                      under penalties of perjury, that you have examined the form, and 
Stock                                                                 to the best of your knowledge and belief, Parts I, III, IV, and V are 
Line 5.  Enter the dollar amount of the eligible section 965(i)       true, correct, and complete. You also certify that you have the 
transferor’s section 965(i) net tax liability being assumed by the    authority to execute this transfer agreement.
eligible section 965(i) transferee.
                                                                      Transferee Signature
Note. The Commissioner may adjust the amount of the eligible          This transfer agreement must be signed by a person who is 
section 965(i) transferor’s section 965(i) net tax liability.         authorized to sign a return on behalf of the eligible section 965(i) 
                                                                      transferee. By signing this transfer agreement, you declare, 
Part VI —Transferee’s Ability To Pay                                  under penalties of perjury, that you have examined the form, and 
                                                                      to the best of your knowledge and belief, Parts II, III, IV, V, and VI 
Remaining Liability                                                   are true, correct, and complete. You also certify that you have 
Line 6. Check the “Yes” box to confirm that the transferee is         the authority to execute this transfer agreement.
able to pay the section 965(i) net tax liability being assumed by 
the transferee. If you check the “No” box, you do not meet the        Paperwork Reduction Act Notice
requirements to enter into a valid transfer agreement.
                                                                      We ask for the information on this form to carry out the Internal 
Line 7.  Check the “Yes” box if the leverage ratio of the eligible    Revenue laws of the United States. You are required to give us 
section 965(i) transferee exceeds three to one. Otherwise, check      the information. We need it to ensure that you are complying 
the “No” box. The leverage ratio means the ratio that the total       with these laws and to allow us to figure and collect the right 
indebtedness of the eligible section 965(i) transferee bears to       amount of tax.
the sum of its money and all other assets reduced, but not below 
zero, by the total indebtedness. See Regulations section              You are not required to provide the information requested on 
1.965-7(c)(3)(iv)(B)(6) for more information.                         a form that is subject to the Paperwork Reduction Act unless the 
                                                                      form displays a valid OMB control number. Books or records 
Note. The leverage ratio of the eligible section 965(i) transferee    relating to a form or its instructions must be retained as long as 
is a factor the Commissioner uses to determine whether the            their contents may become material in the administration of any 
eligible section 965(i) transferee has the ability to pay the         Internal Revenue law. Generally, tax returns and return 
outstanding section 965(i) net tax liability. A leverage ratio in     information are confidential, as required by section 6103.
excess of three to one does not by itself determine whether or        The time needed to complete and file this form will vary 
not a transfer agreement is valid.                                    depending on individual circumstances. The estimated burden 
Line 8. Provide any other pertinent information regarding the         for individual taxpayers filing this form is approved under OMB 
eligible section 965(i) transferee’s ability to pay the section       control number 1545-0123 and is included in the estimates 
965(i) net tax liability being assumed. This information may          shown in the instructions for their business income tax return.
include, but is not limited to, the adequacy of the transferee’s 
income, the value of the transferee’s assets, and the transferee’s 
access to capital.

Part VII — Terms of Agreement
By signing this transfer agreement, the eligible section 965(i) 
transferor and the eligible section 965(i) transferee agree to the 
terms set forth in Part VII of Form 965-D.

                                                                   -3-