Instructions For Form 1099-Div - 2006 (Page 4 of 26) in pdf

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Dividends paid by a real estate investment trust that are not

Form 1099-DIV for the year preceding the January they are

treated as qualified dividend income under section 857(c).

actually paid. See sections 852(b)(7) and 857(b)(9) for RICs

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Deductible dividends paid on employer securities. See

and REITs respectively.

Section 404(k) Dividends below.

If a dividend paid in January is subject to backup

Qualified foreign corporation. A foreign corporation is a

withholding, withhold when the dividend is actually paid.

qualified foreign corporation if it is:

Therefore, backup withhold in January, deposit the withholding

when appropriate, and reflect it on Form 945, Annual Return of

1. Incorporated in a possession of the United States or

Withheld Federal Income Tax, for the year withheld. However,

2. Eligible for benefits of a comprehensive income tax treaty

since the dividend is reportable on Form 1099-DIV in the prior

with the United States that the Secretary determines is

year, the related backup withholding is also reportable on the

satisfactory for this purpose and that includes an exchange of

prior year Form 1099-DIV.

information program.

Qualified small business stock — RICs. Under section 1202,

For a list of income tax treaties of the United States that

a 50% exclusion may be allowed on the gain from the sale or

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(a) are comprehensive, (b) include an information

exchange of qualified small business stock issued after August

exchange program, and (c) have been determined by

10, 1993, and held for more than 5 years. If any part of the

the Treasury Department to be satisfactory for this purpose, see

capital gain distribution reported in box 2a may qualify for this

Notice 2003-69, which is on page 851 of Internal Revenue

exclusion (taking into consideration the recipient’s holding

Bulletin 2003-42 at

period), report the gain in box 2c, and furnish the recipient a

statement that reports separately for each designated section

If the foreign corporation does not meet either 1 or 2 above,

1202 gain the:

then it may be treated as a qualified foreign corporation for any

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Name of the corporation that issued the stock that was sold,

dividend paid by the corporation if the stock associated with the

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Date(s) on which the RIC acquired the stock,

dividend paid is readily tradable on an established securities

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Date sold,

market in the United States. See Notice 2003-71, which is on

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Recipient’s part of the sales price,

page 922 of Internal Revenue Bulletin 2003-43 at

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Recipient’s part of the RIC’s basis in the stock, and

pub/irs-irbs/irb03-43.pdf, for more information on when a stock

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Amount of the recipient’s section 1202 gain.

may be considered to be readily tradable. For additional

requirements that must be met, see Notice 2006-3 available on

Restricted Stock

page 306 of Internal Revenue Bulletin 2006-3 at

For information about reporting dividends on restricted stock,

pub/irs-irbs/irb06-03.pdf.

see Rev. Procs. 80-11, 1980-1 C.B. 616, and 83-38, 1983-1

C.B. 773, and Rev. Rul. 83-22, 1983-1 C.B. 17.

For guidance on the extent to which distributions,

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inclusions, and other amounts received by, or included

Statements to Recipients

in the income of, individual shareholders as ordinary

income from foreign corporations subject to certain anti-deferral

If you are required to file Form 1099-DIV, you must provide a

regimes may be treated as qualified dividends, see Notice

statement to the recipient. For information about the

2004-70, which is on page 724 of Internal Revenue Bulletin

requirement to furnish an official or acceptable substitute Form

2004-44 at pub/irs-irbs/irb04-44.pdf.

1099-DIV to recipients in person, by statement mailing, or

electronically, see part M in the 2006 General Instructions for

Section 404(k) Dividends

Forms 1099, 1098, 5498, and W-2G.

Report as ordinary dividends in box 1a of Form 1099-DIV

2nd TIN Not.

dividends distributed under section 404(k) on stock held by an

employee stock ownership plan (ESOP) or a tax credit ESOP. If

You may enter an “X” in this box if you were notified by the IRS

a section 404(k) distribution is made in the same year as a total

twice within 3 calendar years that the payee provided an

distribution from the ESOP, you may report the entire amount

incorrect taxpayer identification number (TIN). If you mark this

on Form 1099-R or you may report the dividends on Form

box, the IRS will not send you any further notices about this

1099-DIV and the remaining amount on Form 1099-R.

account. However, if you received both IRS notices in the same

year, or if you received them in different years but they both

Section 404(k) dividends are not subject to backup

related to information returns filed for the same year, do not

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withholding. Also, these dividends are not eligible for the

check the box at this time. For purposes of the two notices in

5% and 15% capital gains rates (see Exceptions on

3-year rule, you are considered to have received one notice.

page DIV-1).

You are not required to send a second “B” notice to the

taxpayer on receipt of the second notice. See Backup

RICs and REITs

Withholding in the 2006 General Instructions for Forms 1099,

Qualified dividends. If any part of the total ordinary dividends

1098, 5498, and W-2G for more information.

reported in box 1a is qualified dividends, report the qualified

For information on the TIN Matching System offered by

dividends in box 1b.

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the IRS, see the 2006 General Instructions for Forms

For guidance pertaining to dividends designated by

1099, 1098, 5498, and W-2G.

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RICs and REITs, see:

Account Number

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Notice 2004-39 (capital gain dividends of RICs and REITs)

The account number is required if you have multiple accounts

which is on page 982 of Internal Revenue Bulletin 2004-22 at

for a recipient for whom you are filing more than one Form

and

1099-DIV. Additionally, the IRS encourages you to designate an

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Rev. Rul. 2005-31 (limitations applicable to dividends

account number for all Forms 1099-DIV that you file. See part L

received from RICs) which is on page 1084 of Internal Revenue

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

Bulletin 2005-21 at pub/irs-irbs/irb05-21.pdf.

and W-2G.

Dividend payment delayed until January. If a regulated

Box 1a. Total Ordinary Dividends

investment company (RIC) or a real estate investment trust

(REIT) declares a dividend in October, November, or December

Enter dividends, including dividends from money market funds,

payable to shareholders of record on a specified date in such a

net short-term capital gains from mutual funds, and other

month, the dividends are treated as paid by the RIC or REIT

distributions on stock. Include reinvested dividends and section

and received by the recipients on December 31 of such year as

404(k) dividends. Include as a dividend the amount of the

long as the dividends are actually paid by the RIC or REIT

recipient’s share of investment expenses that you report in

during January of the following year. Report the dividends on

box 5.

DIV-2

Instructions For Form 1099-Div - 2006 Page 4

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