Instructions For Form 1099-B - 2006 (Page 3 of 26) in pdf

2006

Department of the Treasury

Internal Revenue Service

Instructions for Form 1099-B

Section references are to the Internal Revenue Code unless otherwise noted.

Reporting

Reminder

Acquisition of control or substantial change in capital

In addition to these specific instructions, you should also use

structure. Any broker that holds shares on behalf of a

the 2006 General Instructions for Forms 1099, 1098, 5498,

customer in a corporation that the broker knows or has

and W-2G. Those general instructions include information

reason to know based on readily available information has

about:

•

engaged in a transaction of acquisition of control or

Backup withholding

•

substantial change in capital structure, must file Form

Magnetic media and electronic reporting requirements

•

1099-B. Readily available information includes information

Penalties

from a clearing organization, such as the Depository Trust

•

Who must file (nominee/middleman)

Company (DTC) or from information published on the IRS

•

When and where to file

website or in an IRS publication.

•

Taxpayer identification numbers

•

A broker is not required to file Form 1099-B for a

Statements to recipients

•

customer who is an exempt recipient (under Regulations

Corrected and void returns

sections 1.6045-1(c)(3)(i) or 1.6043-4(b)(5)). For a list of

•

Other general topics

exempt recipients, see the 2006 Instructions for Form

1099-CAP.

You can get the general instructions from the IRS website

at or by calling 1-800-TAX-FORM

If a broker is required to file a Form 1099-B for a

(1-800-829-3676).

customer to report proceeds from an acquisition of corporate

control or change in capital structure, the broker may satisfy

the filing requirements by filing and furnishing one Form

1099-B for amounts reported under both Regulations

Specific Instructions for Form 1099-B

sections 1.6045-1 and 1.6045-3. However, if the customer

had additional transactions during the year with the reporting

A broker or barter exchange must file Form 1099-B,

corporation, then a separate Form 1099-B would be

Proceeds From Broker and Barter Exchange Transactions,

required to report each of these transactions.

for each person:

•

For whom the broker has sold (including short sales)

Cash on delivery account. For a sale of securities through

stocks, bonds, commodities, regulated futures contracts,

a “cash on delivery” or similar account, only the broker that

foreign currency contracts, forward contracts, debt

receives the gross proceeds from the sale against delivery

instruments, etc.,

of the securities sold is required to report the sale. However,

•

Who received cash, stock, or other property from a

if such broker’s customer is a “second-party broker” that is

corporation that the broker knows or has reason to know

an exempt recipient, only the second-party broker is

has undergone a change in control or substantial change in

required to report the sale.

capital structure, or

Foreign currency. If the proceeds of a sale are paid in

•

Who exchanged property or services through a barter

foreign currency, you must convert the amount to be

exchange.

reported into U.S. dollars. Generally, you must convert the

foreign currency on the payment date at the spot rate or by

Brokers

following a reasonable spot rate convention. For example,

you may use a month-end spot rate or monthly average spot

A broker is any person who, in the ordinary course of a trade

rate. See Regulations section 1.6045-1(d)(6).

or business, stands ready to effect sales to be made by

others. A broker may include a U.S. or foreign person or a

Transactional/aggregate reporting. Report each

governmental unit and any subsidiary agency.

transaction (other than regulated futures or foreign currency

contracts) on a separate Form 1099-B. Report transactions

You are considered a broker if:

involving regulated futures or foreign currency contracts on

•

You are an obligor that regularly issues and retires its own

an aggregate basis.

debt obligations or

•

Substitute payments. Do not report substitute payments in

You are a corporation that regularly redeems its own

lieu of dividends and tax-exempt interest on Form 1099-B.

stock.

Instead, report these payments in box 8 of Form

However, for a sale, redemption, or retirement at an office

1099-MISC, Miscellaneous Income. See section 6045(d)

outside the United States, only a U.S. payer or U.S.

and the Instructions for Form 1099-MISC.

middleman is a broker. See Regulations sections

Stock options. If an employee, former employee, or other

1.6045-1(g)(1)(i) and 1.6049-5(c)(5).

service provider, in connection with the performance of

You are not considered a broker if:

services, obtains substantially vested shares of stock from

•

You are a corporation that purchases odd-lot shares from

the exercise of a stock option, and sells that stock through a

its stockholders on an irregular basis (unless facts indicate

broker on the same day, then the broker may not be

otherwise),

required to report the sale on Form 1099-B. For details, see

•

You manage a farm for someone else, or

Rev. Proc. 2002-50 which is on page 173 of Internal

•

You are an international organization that redeems or

Revenue Bulletin 2002-29 at /pub/irs-irbs/

retires its own debt. See Regulations section 1.6045-1(a)(1).

irb02-29.pdf.

Cat. No. 64171A

Instructions For Form 1099-B - 2006 Page 3

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