Gain Recognition Agreement: What's Included and Who Must File
Jump to Section
What Is a Gain Recognition Agreement?
A gain recognition agreement (GRA) occurs when a U.S. securities holder (the US transferor) makes a transfer of a stock or security and agrees to recognize a gain, provided the transferee, a foreign corporation, disposes of the transferred stock during the term of the agreement and agrees to pay the interest on any owed taxes if a triggering event occurs.
A gain recognition agreement is a legal document that outlines who pays taxes on a stock gain when it’s a foreign transaction outside of American soil. Rather than the person transferring paying taxes, the person receiving it pays taxes, even if it’s a foreign entity.
A gain recognition agreement aims to make sure someone pays income taxes on a capital gain through the sale or profit of property, such as during a stock transfer agreement. The IRS instituted this regulation in 2014.
Who Must File a Gain Recognition Agreement?
The person or entity doing the transferring must file a gain recognition agreement according to Section 367 of the U.S. Treasury regulations. In addition, the foreign transferee must fill out IRS Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation.
The idea is to make sure every form of earned income in the United States is appropriately taxed.
What’s Included in a Gain Recognition Agreement?
Gain recognition agreements must include several legal elements and delineate who pays taxes. A GRA must consist of:
Information about the U.S. transferor.
Name of the U.S. transferor and the identifying number. The identifying number of an individual is their social security number (SSN). The identifying number of all others is their employer identification number (EIN). This is also the entity that must file the gain recognition agreement with the IRS.
List of any controlling shareholders if the shares remain in existence after the transfer. You must also include any identifying numbers here, too.
Noting if the U.S. transferor belongs to a parent corporation transferring the stock or security and the EIN of that entity.
The U.S. transferor must answer a series of questions to identify certain circumstances under the terms of the gain recognition agreement, including:
- Is the transferee a specified 10%-owned foreign corporation that is not a controlled foreign corporation? This identifies any potentially close relationships with foreign investors or conflicts of interest.
- Did the transferor remain in existence after the transfer? For example, did the U.S. transferor sell the stock or security as part of a bankruptcy filing?
- If the transferor was a member of an affiliated group filing a consolidated return, was it the parent corporation? Again, to identify where the stock transfer came from.
- For a partnership, did the partner pick up its pro-rata share of gain on the transfer of partnership assets? This identifies who stands to gain profits from the gain of transfer if more than one person owned the asset.
- Is the partner disposing of its entire interest in the partnership? If so, not all of the sale or gain of the stock may be taxable.
- Is the partner disposing of an interest in a limited partnership regularly traded on an established securities market? The IRS is trying to ascertain the tax liability of the stock.
Image via Pexels by Anna Nekrashevich
Information about the foreign transferee.
Identifying information, such as:
Name, address, identifying number or other identifying information, country code, and foreign law characterization/jurisdiction.
Answering the question: Is the transferee foreign corporation a controlled foreign corporation?
Information about the securities, stock, or cash value transferred.
Every security must have the same basic information in the gain recognition agreement:
- Date of transfer
- Description of property
- Fair market value on the date of transfer (in U.S. dollars)
- Cost or other basis
- Gain recognized on the transfer
Types of property for this form are:
- Cash/currency
- Stocks
- Securities including bonds, treasury notes, precious metals, and real estate
- Inventory
- Other property not listed
- Property with built-in loss, like liquidated property, sold for far less than its original value
- Intangible property, such as goodwill, workforce in place, or services of an individual
Questions answered here revolve around:
Is this a Section 367 gain recognition agreement? It’s letting the IRS know who has the tax liability in this situation.
Were any foreign branch assets (including a branch that is a foreign disregarded entity) transferred to a foreign corporation? The IRS is trying to ascertain who pays taxes based on the stock purchase agreement or asset transfer agreement.
Was the transferor a domestic corporation that substantially transferred all of the foreign branch's assets (including a branch that is a foreign disregarded entity) to a specified 10%-owned foreign corporation? The tax agency is trying to see if there is a potential conflict of interest.
Immediately after the transfer, was the domestic corporation a U.S. shareholder with respect to the transferee foreign corporation? In other words, does the U.S. transferor own a portion of the transferee?
Other questions revolve around what happened to the entities before and after the transfer.
How Long Does A Gain Recognition Agreement Last?
A gain recognition agreement will last 60 months following the end of the taxable year in which the transfer is made.
What Are Triggering Events for Gain Recognition Agreements?
A triggering event is anything that changes the disposition of the assets.
For example, a US transferor's failure to comply in any material respect within the confines of a gain recognition agreement or any other necessary reporting elements.
What Are Gain Recognition Agreement Filing Requirements?
A triggering event must occur first.
A U.S. transferor has to:
- Report the gain to the IRS via an amended return for the year of transfer.
- Adjust how the gain was recognized (i.e., the value in foreign currency).
- Pay any penalties or interest on the additional assessed taxes.
Here is an article on property transfer agreements.
What Are Gain Recognition Agreement Annual Certification Requirements?
A GRA must be certified for each of the five full taxable years following the taxable year of the initial transfer. For example, if you file a GRA in 2021, the fifth year is 2025.
How Can a Corporate Lawyer Help With Gain of Recognition Agreements?
A corporate lawyer has the experience and knowledge to navigate gain of recognition agreements and other issues.
You can find an excellent corporate lawyer by filling out a simple questionnaire about your needs, and Contracts Counsel will show you people through our platform who meet your requirements.
Why have a corporate lawyer on your side? Because you can file taxes correctly, navigate complex IRS issues with foreign corporations, and make sure your assets are fully protected.
Have questions?
Post a project in ContractsCounsel’s marketplace to get flat fee bids from lawyers to review for your legal projects. All lawyers in our network are vetted by our team and peer-reviewed by our customers for you to review before hiring.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Meet some of our Gain Recognition Agreement Lawyers
Tanasia T.
Tanasia is a licensed, Florida barred, attorney with diverse professional experience in the fields of family law, dependency, business formation, and debtor/creditor rights. After finding that many legal issues don't exist in isolation, Tanasia founded Trotter Law in 2025 to bridge her experience and provide a holistic approach to her client's unique needs. Tanasia is committed to providing solution-focused legal counsel with compassion. She is a partner and teammate while working with individuals, families, and businesses to achieve their goals. Whether embarking on new ventures or facing legal challenges, she is committed to guiding her clients with the support, knowledge, and direction needed to make informed decisions and ensure the most successful outcome.
"Tanasia did an excellent job. She was very responsive, took the time to explain everything clearly, and answered all questions with patience and professionalism. Highly recommend."
Brian R.
Highly respected strategic advisor and trusted business partner to diverse stakeholders, ranging from C-suite executives to frontline managers in both public and private sectors. Recognized thought leader known for translating complex legal concepts into straightforward, pragmatic, actionable advice. Proven track record of collaborating with executive teams to drive and execute corporate initiatives. Expert at leading tactical legal strategies across various business functions in dynamic, high-growth environments, with a keen sense for balancing legal rigor and practical business solutions.
"Brian is an excellent resource. He communicates well, presents a very realistic picture of options, and provides the right guidance. We were very happy with his work."
June 14, 2025
Khari P.
I’m a New York-based attorney with over 20 years of experience, working at the intersection of litigation and transactional law. I help individuals and businesses create solid legal documents — prenups, contracts, leases, and more — with an eye toward clarity, fairness, and long-term protection. As a litigator, I’ve seen firsthand how vague or one-sided agreements can lead to unnecessary disputes, court battles, and financial stress. That perspective shapes the way I draft and review documents: I build them to stand up, not just get signed. Whether you’re preparing for marriage, launching a business, or resolving a dispute, I bring a practical, client-first approach rooted in legal insight and lived experience. Clients appreciate that I explain the law in plain language, respect their time, and tailor every solution to fit their goals — not just the paperwork. Let’s make sure you’re protected — not just on paper, but in real life.
Lana A.
I am a New York Attorney for over 25 years with extensive experience in contract law of all types, including real estate, and was a bank closer for residential housing and refinancing. Extensive landlord-tenant work, including leases, commercial property, and telecom. I have done pre-trial civil litigation, motion practice, and forensic accountings for all types of disputes, from lawsuits to mediations and arbitrations, and created lasting agreements in conflicts. In addition, I have created and advised on business formation as well as dissolutions, recently doing a business acquisition for a scientist who worked for a major company but desired to create their own product and testing line. I maintain a NYC office but reside out of NY.
June 18, 2025
Laura C.
Serving the Greater New Orleans Westbank, Laura brings a unique blend of legal expertise and technical regulatory experience to individuals and small businesses navigating complex legal challenges. With a Juris Doctorate from Loyola College of Law’s Civil Law Night Program (2017) and a Bachelor of Science in Civil Engineering from the University of New Orleans (2011), Laura offers grounded, strategic legal support rooted in real-world problem-solving. Prior to practicing law, Laura spent over a decade at the U.S. Department of the Interior, focusing on environmental and safety regulatory enforcement for offshore oil and gas operations. There, she led compliance reviews, developed policy, mediated between federal experts and industry representatives, and presented at major professional conferences on exploration, development, and environmental planning. This experience has instilled a deep understanding of complex regulatory frameworks and strong negotiation skills—assets to any client. Laura also served as Vice President of her union local, where she advocated for federal employees in disciplinary matters, negotiated workplace policy changes, and secured ADA accommodations—experience that informs her empathetic, client-centered approach to employment and family law.
JOSEPH R.
June 20, 2025
JOSEPH R.
Since starting as a Wall Street lawyer in 2004, I have led and closed 100's of transactions ranging from small business acquisitions to multi-billion-dollar domestic and international deals as well as private capital raises large and small. With over 20 years of experience in corporate, M&A, and securities law, I provide strategic legal counsel tailored to high-stakes business initiatives as well as critical advice to startups and companies raising capital. 🔴CORE PRACTICE AREAS: Capital Raising: Structuring and preparing Private Placement Memorandums (PPMs), SAFE Notes, Convertible Notes, Promissory Notes, Bridge Notes, Warrants, Reg A, Reg CF, Reg D, and Reg S offerings. Business Transactions: Representing buyers and sellers in domestic and cross-border M&A. Startups and Growth-Stage Businesses: Formation, structuring, scaling, and preparing businesses for investment or acquisition. Exit Planning: Legal strategy and execution for business sales and investor exits. Strategic Advisory: Advising boards of directors, C-suite executives and founders on overall business strategy and business acquisition/disposition matters. 🔴LEGAL EXPERTISE: Structuring and negotiating complex M&A and capital markets transactions. Drafting core transactional documents: purchase agreements, subscription agreements, operating/shareholder agreements, and corporate governance materials. Advising on securities compliance, including Reg A, Reg D, and Reg S offerings, Blue Sky compliance, and SEC filings. Fund formation and structured finance: extensive experience with CDOs, CMBS/RMBS, and Investment Company Act issues. Partnering with senior management and boards to align legal strategies with business objectives. Collaborating with international counsel and multidisciplinary teams on multijurisdictional deals. 🔴TRACK RECORD: Former Senior Associate Attorney at international Corporate M&A powerhouse Clifford Chance and top Corporate & Structured Finance law firm Thacher Proffitt & Wood both in Manhattan (New York City), where I represented investment banks, public and private companies, private equity sponsors, startups and hedge funds on strategic transactions. Closed and supported multi-billion-dollar deals across industries and jurisdictions. Delivered practical legal solutions to drive successful outcomes for clients ranging from startups to global financial institutions. I am licensed to practice law in New York and Texas. Corporate & Securities Attorney | Strategic Deal Advisor | M&A and Capital Raising Specialist
July 8, 2025
Parsa G.
I’m a licensed attorney with a J.D. and a strong background in reviewing, negotiating, and drafting a wide range of commercial agreements, especially in the context of international trade and cross-border transactions. I’ve reviewed hundreds of sales contracts, and have experience drafting and negotiating international sale of goods agreements, distribution agreements, supplier/manufacturer contracts, licensing agreements, and service-level agreements (SLAs). My focus is on helping clients reduce risk and protect their interests through clear, enforceable contract language. I also advise on key international elements like Incoterms, dispute resolution mechanisms (including ICC arbitration), payment structuring, governing law, and IP protections. Whether you need a custom agreement, a contract review with redlines, or support structuring a cross-border deal, I bring both precision and practicality to every engagement.
Find the best lawyer for your project
Browse Lawyers Now
Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.
View Trustpilot ReviewHow It Works
Financial lawyers by top cities
- Austin Financial Lawyers
- Boston Financial Lawyers
- Chicago Financial Lawyers
- Dallas Financial Lawyers
- Denver Financial Lawyers
- Houston Financial Lawyers
- Los Angeles Financial Lawyers
- New York Financial Lawyers
- Phoenix Financial Lawyers
- San Diego Financial Lawyers
- Tampa Financial Lawyers
Gain Recognition Agreement lawyers by city
- Austin Gain Recognition Agreement Lawyers
- Boston Gain Recognition Agreement Lawyers
- Chicago Gain Recognition Agreement Lawyers
- Dallas Gain Recognition Agreement Lawyers
- Denver Gain Recognition Agreement Lawyers
- Houston Gain Recognition Agreement Lawyers
- Los Angeles Gain Recognition Agreement Lawyers
- New York Gain Recognition Agreement Lawyers
- Phoenix Gain Recognition Agreement Lawyers
- San Diego Gain Recognition Agreement Lawyers
- Tampa Gain Recognition Agreement Lawyers
Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.
View Trustpilot Review
I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.
View Trustpilot Review
I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.
View Trustpilot Review