Instructions For Form 1099-S - 2006 (Page 4 of 27) in pdf

date. The $600 rule applies to the transaction as a whole, not

c. Transferee’s broker means the broker who significantly

separately to each transferor.

participates in the preparation of the offer to acquire the

property or who presents such offer to the transferor. If there is

The following are also not reportable if the transaction is not

more than one such person, the transferee’s broker is the one

related to the sale or exchange of reportable real estate:

who most significantly participates in the preparation of the

•

An interest in crops or surface or subsurface natural

acquisition offer. If there is no such person, the one who most

resources, that is, timber (however, see Timber royalties on

significantly participates in the presentation of the offer is the

page S-1), water, ores, and other natural deposits, whether or

transferee’s broker.

not such crops or natural resources are severed from the land.

d. Transferee means the person who acquires the greatest

•

A burial plot or vault.

interest in the property. If no one acquires the greatest interest,

•

A manufactured structure used as a dwelling that is

the transferee is the person listed first on the ownership transfer

manufactured and assembled at a location different from that

documents.

where it is used, but only if such structure is not affixed, on the

3. Designation agreement. You can enter into a written

closing date, to a foundation. This exception applies to an

agreement at or before closing to designate who must file Form

unaffixed mobile home.

1099-S for the transaction. The agreement will identify the

person responsible for filing if such designated person signs the

Who Must File

agreement. It is not necessary that all parties to the transaction

Generally, the person responsible for closing the transaction, as

(or that more than one party) enter into the agreement.

explained in 1 below, is required to file Form 1099-S. If no one

You may be designated in the agreement as the person who

is responsible for closing, the person required to file Form

must file if you are the person responsible for closing (as

1099-S is explained in 2 below. However, you may designate

explained in 1 above), the transferee’s or transferor’s attorney

the person required to file Form 1099-S in a written agreement,

(as explained in 1 above), a title or escrow company that is

as explained under 3 below.

most significant in terms of the gross proceeds disbursed, or

1. If you are the person responsible for closing the

the mortgage lender (as explained in 2a above).

transaction, you must file Form 1099-S. If a Uniform Settlement

The designation agreement may be in any written form and

Statement, prescribed under the Real Estate Settlement

may be included on the closing statement. It must:

Procedures Act of 1974 (RESPA), is used, the person

a. Identify by name and address the person designated as

responsible for closing is the person listed as the settlement

responsible for filing;

agent on that statement. A Uniform Settlement Statement

b. Include the names and addresses of each person

includes any amendments, variations, or substitutions that may

entering into the agreement;

be prescribed under RESPA if any such form requires

c. Be signed and dated by all persons entering into the

disclosure of the transferor and transferee, the application of

agreement;

the proceeds, and the name of the settlement agent or other

d. Include the names and addresses of the transferor and

person responsible for preparing the settlement statement.

transferee; and

If a Uniform Settlement Statement is not used, or no

e. Include the address and any other information necessary

settlement agent is listed, the person responsible for closing is

to identify the property.

the person who prepares the closing statement, including a

settlement statement or other written document that identifies

Each person who signs the agreement must retain it for 4

the transferor, transferee, and real estate transferred, and that

years.

describes how the proceeds are to be disbursed.

For each transaction, be sure that only one person is

If no closing statement is used, or if two or more statements

TIP

responsible for filing and that only one Form 1099-S is

are used, the person responsible for closing is, in the following

filed for each transferor.

order:

Employees, Agents, and Partners

a. The transferee’s attorney if the attorney is present at the

delivery of either the transferee’s note or a significant part of the

If an employee, agent, or partner, acting within the scope of

cash proceeds to the transferor or if the attorney prepares or

such person’s employment, agency, or partnership, participates

reviews the preparation of the documents transferring legal or

in a real estate transaction, only the employer, principal, or

equitable ownership;

partnership (not the employee, agent, or partner) may be the

b. The transferor’s attorney if the attorney is present at the

reporting person. However, the participation of a person listed

delivery of either the transferee’s note or a significant part of the

on the Uniform Settlement Statement as the settlement agent

cash proceeds to the transferor or if the attorney prepares or

acting as an agent of another is not attributed to the principal.

reviews the preparation of the documents transferring legal or

Foreign Transferors

equitable ownership; or

c. The disbursing title or escrow company that is most

Sales or exchanges involving foreign transferors are reportable

significant in disbursing gross proceeds.

on Form 1099-S. For information on the transferee’s

If there is more than one attorney described in (a) or (b), the

responsibility to withhold income tax when a U.S. real property

one whose involvement is most significant is the person

interest is acquired from a foreign person, see Pub. 515,

responsible for filing.

Withholding of Tax on Nonresident Aliens and Foreign Entities.

2. If no one is responsible for closing the transaction as

Multiple Transferors

explained in 1 above, the person responsible for filing is, in the

following order: (a) the mortgage lender, (b) the transferor’s

For multiple transferors of the same real estate, you must file a

broker, (c) the transferee’s broker, or (d) the transferee.

separate Form 1099-S for each transferor. At or before closing,

you must request from the transferors an allocation of the gross

For purposes of 2 above, apply the following definitions:

proceeds among the transferors. The request and the response

a. Mortgage lender means a person who lends new funds in

are not required to be in writing. You must make a reasonable

connection with the transaction, but only if the loan is at least

effort to contact all transferors of whom you have knowledge.

partially secured by the real estate. If there is more than one

However, you may rely on the unchallenged response of any

lender, the one who lends the most new funds is the mortgage

transferor, and you need not make additional contacts with

lender. If several lenders advance equal amounts of new funds,

other transferors after at least one complete allocation is

and no other person advances a greater amount of new funds,

received (100% of gross proceeds, whether or not received in a

the mortgage lender is the one who has the security interest

single response). If you receive the allocation, report gross

that is most senior in priority. Amounts advanced by the

proceeds on each Form 1099-S accordingly.

transferor are not treated as new funds.

b. Transferor’s broker means the broker who contracts with

You are not required to, but you may, report gross proceeds

the transferor and who is compensated for the transaction.

in accordance with an allocation received after the closing date

S-2

Instructions For Form 1099-S - 2006 Page 4

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