Instructions For Form 1099-Cap - 2006 (Page 3 of 25) in pdf

2006

Department of the Treasury

Internal Revenue Service

Instructions for Form

1099-CAP

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

as a result of the acquisition of control or substantial

Reminder

change in capital structure and who is not an exempt

In addition to these specific instructions, you should also

recipient. However, if the corporation can reasonably

use the 2006 General Instructions for Forms 1099, 1098,

determine that the receipt of such stock would not cause

5498, and W-2G. Those general instructions include

the shareholder to recognize gain, then the corporation is

information about:

not required to report the fair market value of any stock

•

Backup withholding

provided to a shareholder. Corporations do not file Form

•

Magnetic media and electronic reporting requirements

1099-CAP under one of the following conditions:

•

Penalties

The transaction involves the acquisition of control

•

Who must file (nominee/middleman)

within an affiliated group or involves stock valued at less

•

When and where to file

than $100 million.

•

Taxpayer identification numbers

The corporation makes the consent election on Form

•

Statements to recipients

8806. Under the election, the corporation is not required

•

Corrected and void returns

to file Form 1099-CAP with respect to shares held by a

•

Other general topics

clearing organization because it allows the IRS to publish

You can get the general instructions from the IRS

information necessary for brokers to meet their reporting

website at or by calling 1-800-TAX-FORM

obligations.

•

(1-800-829-3676).

The corporation properly reports the transaction under

section 6043(a).

•

Information returns are filed under section 6042 (Form

Specific Instructions for Form

1099-DIV) or section 6045 (Form 1099-B), unless the

corporation knows or has reason to know that such

1099-CAP

returns were not filed.

File Form 1099-CAP, Changes in Corporate Control and

Exempt Recipients

Capital Structure, for shareholders of a corporation if

control of the corporation was acquired or it underwent a

The corporation is not required to file Form 1099-CAP for

substantial change in capital structure. Form 1099-CAP

the following shareholders including brokers who are also

is furnished to shareholders who receive cash, stock, or

exempt:

•

other property from an acquisition of control or a

Any shareholder who receives only stock for its stock

substantial change in capital structure.

in the corporation.

•

Any shareholder whose amount of cash plus the fair

When To File

market value (FMV) of any stock and other property does

File Form 1099-CAP with the IRS by February 28, 2007

not exceed $1,000.

(April 2, 2007, if filed electronically); furnish the statement

•

Any shareholder from whom the corporation has

to shareholders by January 31, 2007.

received a properly completed exemption certificate.

•

Special reporting date –clearing organizations. A

Any one of the following:

corporation must file Form 1099-CAP and furnish a copy

1. A corporation, except a subchapter S corporation;

to each of its shareholders who receives any stock or

2. A tax-exempt organization;

other consideration in the transaction and who is not an

3. An individual retirement account (IRA);

exempt recipient. A clearing organization, such as the

4. The U.S. government or a state;

Depository Trust Company (DTC), is not an exempt

5. A foreign government, an international

recipient. The corporation is therefore required to file and

organization, or a foreign central bank of issue;

furnish a copy of Form 1099-CAP to a clearing

6. A real estate investment trust (REIT);

organization with respect to shares held by the clearing

7. A regulated investment company (RIC);

organization unless it makes a consent election, as

8. A securities or commodities dealer;

discussed below. Furnish Form 1099-CAP to the clearing

9. An entity registered under the Investment Company

organization on or before January 5 of the year following

Act of 1940;

the calendar year in which the transaction took place. If

10. A common trust fund; or

you are furnishing the DTC with Forms 1099-CAP, see

11. A financial institution such as a bank, savings and

Notice 2004-9, which is on page 334 of Internal Revenue

loan, credit union, or similar organization.

Bulletin 2004-4 at /pub/irs-irbs/irb04-04.pdf.

•

Any foreign person the corporation associates with a

Who Must File

valid Form W-8BEN, Certificate of Foreign Status of

A domestic corporation that is required to file Form 8806,

Beneficial Owner for United States Tax Withholding, or

Information Return for Acquisition of Control or

other documentation upon which the corporation relies in

Substantial Change in Capital Structure, must file Form

order to treat the shareholder as a foreign beneficial

1099-CAP with the IRS and furnish a copy to each

owner or foreign payee. See Regulations section

shareholder who receives cash, stock, or other property

1.6049-5(c) for more information.

Cat. No. 35150T

Instructions For Form 1099-Cap - 2006 Page 3

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