Instructions For Form 1099-S - 2006 (Page 3 of 27) in pdf

2006

Department of the Treasury

Internal Revenue Service

Instructions for Form 1099-S

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

Timber royalties. Report on Form 1099-S payments of timber

Reminder

royalties made under a pay-as-cut contract, reportable under

section 6050N. For more information, see Announcement

In addition to these specific instructions, you should also use

90-129, 1990-48 I.R.B. 10.

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

W-2G. Those general instructions include information about:

Exceptions

•

Backup withholding

•

The following is a list of transactions that are not reportable.

Magnetic media and electronic reporting requirements

•

However, you may choose to report them; but if you do, the

Penalties

•

return filed and the statement furnished to the transferor must

Who must file (nominee/middleman)

•

comply with the reporting rules.

When and where to file

•

1. Sale or exchange of a principal residence (including stock

Taxpayer identification numbers

•

in a cooperative housing corporation) for $250,000 or less

Statements to recipients

•

($500,000 or less for married filing a joint return) and you

Corrected and void returns

•

received an acceptable written assurance (certification) from

Other general topics

the seller. The certification must include information to support

You can get the general instructions from the IRS website at

the conclusion that the full gain on the sale is excludable from

or by calling 1-800-TAX-FORM (1-800-829-3676).

the seller’s gross income. If there are joint sellers, you must

obtain a certification from each seller (whether married or not)

or file Form 1099-S for any seller who does not make the

Specific Instructions for Form 1099-S

certification. The certification must be signed by each seller

under penalties of perjury.

File Form 1099-S, Proceeds From Real Estate Transactions, to

report the sale or exchange of real estate.

You may get the certification any time on or before January

31 of the year after the year of sale. You may rely on the

Reportable Real Estate

certification and not file or furnish Form 1099-S unless you

Generally, you are required to report a transaction that consists

know that any assurance on the certification is incorrect.

in whole or in part of the sale or exchange for money,

You must retain the certification for 4 years after the year of

indebtedness, property, or services of any present or future

sale. You may retain the certification on paper, microfilm,

ownership interest in any of the following:

microfiche, or in an electronic storage system.

1. Improved or unimproved land, including air space.

You are not required to obtain the certification. However, if

2. Inherently permanent structures, including any

you do not obtain it, you must file and furnish Form 1099-S.

residential, commercial, or industrial building.

2. Any transaction in which the transferor is a corporation

3. A condominium unit and its appurtenant fixtures and

(or is considered to be a corporation under Regulations section

common elements, including land.

1.6045-4(d)(2)); a governmental unit, including a foreign

4. Stock in a cooperative housing corporation (as defined in

government or an international organization; or an exempt

section 216).

volume transferor. Under this rule, if there are exempt and

nonexempt transferors, you must file Form 1099-S only for the

Sale or exchange. A sale or exchange includes any

nonexempt transferors.

transaction properly treated as a sale or exchange for federal

An exempt volume transferor is someone who sold or

income tax purposes, even if the transaction is not currently

exchanged during the year, who expects to sell or exchange

taxable. For example, a sale of a principal residence may be a

during the year, or who sold or exchanged in either of the 2

reportable sale even though the transferor may be entitled to

previous years, at least 25 separate items of reportable real

exclude the gain under section 121. But see Exceptions on this

estate to at least 25 separate transferees. In addition, each item

page. Also, a transfer to a corporation that qualifies for

of reportable real estate must have been held, at the date of

nonrecognition of gain under section 351 is a reportable

closing, or will be held, primarily for sale or resale to customers

exchange. In addition, a transfer under a land contract is

in the ordinary course of a trade or business. You are not

reportable in the year in which the parties enter into the

required to report an exempt volume transferor’s transactions if

contract.

you receive the penalties of perjury certification required by

Ownership interest. An ownership interest includes fee simple

Regulations section 1.6045-4(d)(3).

interests, life estates, reversions, remainders, and perpetual

3. Any transaction that is not a sale or exchange, including

easements. It also includes any previously created rights to

a bequest, a gift (including a transaction treated as a gift under

possession or use for all or part of any particular year (for

section 1041), and a financing or refinancing that is not related

example, a leasehold, easement, or timeshare), if such rights

to the acquisition of real estate.

have a remaining term of at least 30 years, including any period

4. A transfer in full or partial satisfaction of a debt secured

for which the holder may renew such rights, determined on the

by the property. This includes a foreclosure, a transfer in lieu of

date of closing. For example, a preexisting leasehold on a

foreclosure, or an abandonment.

building with an original term of 99 years and a remaining term

5. A de minimus transfer for less than $600. A transaction is

of 35 years on the closing date is an ownership interest;

de minimus if it can be determined with certainty that the total

however, if the remaining term is 10 years, it is not an

money, services, and property received or to be received is less

ownership interest. An ownership interest does not include any

than $600, as measured on the closing date. For example, if a

option to acquire real estate.

contract for sale provides for total consideration of “$1.00 plus

Involuntary conversion. A sale of real estate under threat or

other valuable consideration,” the transfer is not a de minimus

imminence of seizure, requisition, or condemnation is generally

transfer unless you can determine that the “other valuable

a reportable transaction.

consideration” is less than $599, as measured on the closing

Cat. No. 27988X

Instructions For Form 1099-S - 2006 Page 3

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