Title 26—Internal Revenue--Volume 1
PART 1—INCOME TAXES
§ 1.6045-2   Furnishing statement required with respect to certain substitute payments.
(a) Requirement of furnishing statements —(1) In general. Any broker (as defined in paragraph (a)(4)(ii) of this section) that transfers securities (as defined in § 1.6045-1(a)(3)) of a customer (as defined in paragraph (a)(4)(iii) of this section) for use in a short sale and receives on behalf of the customer a substitute payment (as defined in paragraph (a)(4)(i)) shall, except as otherwise provided, furnish a statement to the customer identifying such payment as being a substitute payment.
(2) Special rule for transfers for broker's own use. Any broker that borrows securities of a customer for use in a short sale entered into for the broker's own account shall be deemed to have transferred the stock to itself and received on behalf of the customer any substitute payment made with respect to the transferred securities, and shall be required to furnish a statement with respect to such payments in accordance with paragraph (a)(1) of this section.
(3) Special rule for furnishing statements to individual customers with respect to payments in lieu of dividends —(i) In general. Except as otherwise provided in paragraph (a)(3)(ii) of this section, for taxable years beginning before January 1, 2003, a broker that receives a substitute payment in lieu of a dividend on behalf of a customer who is an individual (“individual customer”) need not furnish a statement to the customer.
(ii) Reporting for certain dividends. Any broker that receives on behalf of an individual customer a substitute payment in lieu of—
(A) An exempt-interest dividend (as defined in paragraph (a)(4)(vii) of this section);
(B) A capital gain dividend (as defined in paragraph (a)(4)(vi) of this section);
(C) A distribution treated as a return of capital under section 301(c)(2) or (c)(3); or
(D) An FTC dividend (as defined in paragraph (a)(4)(viii) of this section) shall furnish a statement to the individual customer identifying the payment as being a substitute payment as prescribed by this section, provided that the broker has reason to know not later than the record date of the dividend payment that the payment is a substitute payment in lieu of an exempt-interest dividend, a capital gain dividend, a distribution treated as a return of capital, or an FTC dividend.
(4) Meaning of terms. The following definitions apply for purposes of this section.
(i) The term substitute payment means a payment in lieu of—
(A) Tax-exempt interest, to the extent that interest has accrued on the obligation for the period during which the short sale is open;
(B) A dividend, the ex-dividend date for which occurs during the period after the transfer of stock for use in a short sale, and prior to the closing of the short sale; or
(C) Any other item specified in a rule-related notice published in the Federal Register (provided that such items shall be subject to the rules of this section only subsequent to the time of such publication).
(ii) The term broker means both a person described in § 1.6045-1(a)(1) and a person that, in the ordinary course of a trade or business during the calendar year, loans securities owned by others.
(iii) The term customer means, with respect to a transfer of securities for use in a short sale, the person that is the record owner of the securities so transferred.
(iv) The term dividend means a dividend (as defined in section 316) or a distribution that is treated as a return of capital under section 301(c)(2) or (c)(3).
(v) The term tax-exempt interest means interest to which the exception in section 6049 (b)(2)(B) applies.
(vi) The term capital gain dividend means a capital gain dividend as defined in section 852(b)(3)(C) or section 857(b)(3)(C).
(vii) The term exempt-interest dividend means an exempt-interest dividend as defined in section 852(b)(5)(A).
(viii) The term FTC dividend means a dividend with respect to which the recipient is entitled to claim a foreign tax credit under section 901 (but not by virtue of taxes deemed paid under section 902 or 960).
(5) Examples. The following examples illustrate the definition of a substitute payment in lieu of tax-exempt interest found in paragraph (a)(4)(i)(A) of this section.
(b) Exceptions —(1) Minimal payments. No statement is required to be furnished under section 6045(d) or this section to any customer if the aggregate amount of the substitute payments received by a broker on behalf of the customer during a calendar year for which a statement must be furnished is less than $10.
(2) Exempt recipients —(i) In general. A statement shall not be required to be furnished with respect to substitute payments made to a broker on behalf of—
(A) An organization exempt from taxation under section 501(a);
(B) An individual retirement plan;
(C) The United States, a possession of the United States, or an instrumentality or a political subdivision or a wholly-owned agency of the foregoing;
(D) A State, the District of Columbia, or a political subdivision or a wholly-owned agency or instrumentality of either of the foregoing;
(E) A foreign government or a political subdivision thereof;
(F) An international organization; or
(G) A foreign central bank of issue, as defined in § 1.6049-4(c)(1)(ii)(H), or the Bank for International Settlements.
(ii) Determination of whether a person is described in paragraph (b)(2)(i) of this section. The determination of whether a person is described in paragraph (b)(2)(i) of this section shall be made in the manner provided in § 1.6045-1(c)(3)(i)(B).
(3) Exempt foreign persons. A statement shall not be required to be furnished with respect to substitute payments made to a broker on behalf of a person that is an exempt foreign person as described in § 1.6045-1(g)
(c) Form of statement. A broker shall furnish the statement required by paragraph (a) of this section on Form 1099. The statement must show the aggregate dollar amount of all substitute payments received by the broker on behalf of a customer (for which the broker is required to furnish a statement) during a calendar year, and such other information as may be required by Form 1099. A statement shall be considered to be furnished to a customer if it is mailed to the customer at the last address of the customer known to the broker. An IRS truncated taxpayer identifying number (TTIN) may be used as the identifying number of the customer in lieu of the identifying number appearing on the information return filed with the Internal Revenue Service. For provisions relating to the use of TTINs, see § 301.6109-4 of this chapter (Procedure and Administration Regulations).
(d) Time for furnishing statements —(1) General requirements. A broker must furnish the statements required by paragraph (a) of this section for each calendar year. The statements must be furnished after April 30th of the calendar year but in no case before the final substitute payment for the calendar year is made, and on or before February 15 of the following calendar year.
(2) Consolidated reporting. (i) The term consolidated reporting statement means a grouping of statements the same broker furnishes to the same customer or group of customers on the same date for the same reporting year that includes a statement required under this section. A consolidated reporting statement is limited to statements based on the same relationship of broker to customer as the statement required to be furnished under this section.
(ii) A consolidated reporting statement must be furnished on or before February 15 of the year following the calendar year reported. Any statement that otherwise must be furnished on or before January 31 must be furnished on or before February 15 if it is furnished in the consolidated reporting statement.
(e) When substitute payment deemed received. A Broker is deemed to have received a substitute payment on behalf of a customer when the amount is paid or deemed paid to the broker (or as it accrues in the case of original issue discount deemed a payment in lieu of tax-exempt interest).
(f) Identification of customer and recordkeeping with respect to substitute payments —(1) Payments in lieu of tax-exempt interest and exempt-interest dividends. A broker that receives substitute payments in lieu of tax-exempt interest, exempt-interest dividends, or other items (to the extent specified in a rule-related notice published pursuant to paragraph (a)(4)(i)(C) of this section) on behalf of a customer and is required to furnish a statement under paragraph (a) of this section must determine the identity of the customer whose security was transferred and on whose behalf the broker received such substitute payments by specific identification of the record owner of the security so transferred. A broker must keep adequate records of the determination so made.
(2) Payments in lieu of dividends other than exempt-interest dividends —(i) Requirements and methods. A broker that receives substitute payments in lieu of dividends, other than exempt-interest dividends, on behalf of a customer and is required to furnish a statement under paragraph (a) of this section must make a determination of the identity of the customer whose stock was transferred and on whose behalf such broker receives substitute payments. Such determination must be made as of the record date with respect to the dividend distribution, and must be made in a consistent manner by the broker in accordance with any of the following methods:
(A) Specific identification of the record owner of the transferred stock;
(B) The method of allocation and selection specified in paragraph (f)(2)(ii) of this section; or
(C) Any other method, with the prior approval of the Commissioner.
(ii) Method of allocation and selection —(A) Allocation to borrowed shares and individual and nonindividual pools. With respect to each substitute payment in lieu of a dividend received by a broker, the broker must allocate the transferred shares ( i.e., the shares giving rise to the substitute payment) among all shares of stock of the same class and issue as the transferred shares which were ( 1 ) borrowed by the broker, and ( 2 ) which the broker holds (or has transferred in a transaction described in paragraph (a)(1) of this section) and is authorized by its customers to transfer (including shares of stock of the same class and issue held for the broker's own account) (“loanable shares”). The broker may first allocate the transferred shares to any borrowed shares. Then to the extent that the number of transferred shares exceeds the number of borrowed shares (or if the broker does not allocate to the borrowed shares first), the broker must allocate the transferred shares between two pools, one consisting of the loanable shares of all individual customers (the “individual pool”) and the other consisting of the loanable shares of all nonindividual customers (the “nonindividual pool”). The transferred shares must be allocated to the individual pool in the same proportion that the number of loanable shares held by individual customers bears to the total number of loanable shares available to the broker. Similarly, the transferred shares must be allocated to the nonindividual pool in the same proportion that the number of loanable shares held by nonindividual customers bears to the total number of loanable shares available to the broker.
(B) Selection of deemed transferred shares within the nonindividual pool. The broker must select which shares within the nonindividual pool are deemed transferred for use in a short sale (the “deemed transferred shares”). Selection of deemed transferred shares may be made either by purely random lottery or on a first-in-first-out (“FIFO”) basis.
(C) Selection of deemed transferred shares within the individual pool. The broker must select which shares within the individual pool are deemed transferred shares (in the manner described in the preceding paragraph) only with respect to substitute payments as to which a statement is required to be furnished under paragraph (a)(2)(ii) of this section.
(3) Examples. The following examples illustrate the identification of customer rules of paragraph (f)(2):
(g) Reporting by brokers —(1) Requirement of reporting. Any broker required to furnish a statement under paragraph (a) of this section shall report on Form 1096 showing such information as may be required by Form 1096, in the form, manner, and number of copies required by Form 1096. With respect to each customer for which a broker is required to furnish a statement, the broker shall make a return of information on Form 1099, in the form, manner and number of copies required by Form 1099.
(2) Reporting in electronic form. For information returns filed after December 31, 1996, see § 301.6011-2 of this chapter for rules relating to filing information returns in electronic form and for rules relating to waivers granted for undue hardship. A broker or barter exchange that fails to file a Form 1099 electronically, when required, may be subject to a penalty under section 6721 for each such failure. See paragraph (g)(4) of this section.
(3) Time and place of filing. The returns required under this paragraph (g) for any calendar year shall be filed after September 30 of such year, but not before the final substitute payment for the year is received by the broker, and on or before February 28 (March 31 if filed electronically) of the following year with any of the Internal Revenue Service Centers, the addresses of which are listed in the instructions for Form 1096.
(4) Cross-reference to penalties. For provisions relating to the penalty provided for failure to file timely a correct information return required under section 6045(d) and § 1.6045-2(g)(1), including a failure to file on magnetic media, see § 301.6721-1 of this chapter. For provisions relating to the penalty provided for failure to furnish timely a correct payee statement required under section 6045(d) and § 1.6045-2(a), see § 301.6722-1 of this chapter. See § 301.6724-1 of this chapter for the waiver of a penalty if the failure is due to reasonable cause and is not due to willful neglect.
(h) Coordination with section 6042. In cases in which reporting is required by both sections 6042 and 6045(d) with respect to the same substitute payment in lieu of a dividend, the provisions of section 6045(d) control, and no report or statement under section 6042 need be made. If reporting is not required under section 6045(d) with respect to a substitute payment in lieu of a dividend, a report under section 6042 must be made if required in accordance with the rules of section 6042 and the regulations thereunder. Thus, if a broker receives a substitute payment in lieu of a dividend on behalf of an individual customer and the broker does not have reason to know by the record date of the payment that the payment is in lieu of a dividend of a type described in paragraphs (a)(3)(ii)(A) through (D) of this section, the broker must report with respect to the substitute payment if required in accordance with section 6042 and the regulations thereunder.
(i) Applicability date. This section applies to substitute payments received by a broker after December 31, 1984. Section 1.6045-2(c) (as contained in 26 CFR part 1, revised July 15, 2014) applies to payee statements due after December 31, 2014. For payee statements due before January 1, 2015, § 1.6045-2(c) (as contained in 26 CFR part 1, revised April 2013) applies. Paragraph (g)(2) of this section applies to information returns required to be filed during calendar years beginning after December 31, 2023.
§ 1.6045-3   Information reporting for an acquisition of control or a substantial change in capital structure.
(a) In general. Any broker (as defined in § 1.6045-1(a)(1)) that holds shares on behalf of a customer in a corporation that the broker knows or has reason to know based on readily available information (including, for example, information from a clearing organization or from information published by the Internal Revenue Service (IRS)) has engaged in a transaction described in § 1.6043-4(c) (acquisition of control) or § 1.6043-4(d) (substantial change in capital structure) shall file a return of information with respect to the customer, unless the customer is an exempt recipient as defined in paragraph (b) of this section.
(b) Exempt recipients. A broker is not required to file a return of information under this section with respect to the following customers:
(1) Any customer who receives only cash in exchange for its stock in the corporation, which must be reported by the broker pursuant to § 1.6045-1.
(2) Any customer who is an exempt recipient as defined in § 1.6043-4(b)(5) or § 1.6045-1(c)(3)(i).
(c) Form, manner and time for making information returns. The return required by paragraph (a) of this section must be on Forms 1096, “Annual Summary and Transmittal of U.S. Information Returns,” and 1099-B, “Proceeds from Broker and Barter Exchange Transactions,” or on an acceptable substitute statement. Such forms must be filed on or before February 28 (March 31 if filed electronically) of the year following the calendar year in which the acquisition of control or the substantial change in capital structure occurs.
(d) Contents of return. A separate Form 1099-B must be prepared for each customer. The Form 1099-B will request information with respect to the following and such other information as may be specified in the instructions:
(1) The name, address and taxpayer identification number (TIN) of the customer;
(2) The name of the corporation which engaged in the transaction described in § 1.6043-4(c) or (d);
(3) The number and class of shares in the corporation exchanged by the customer; and
(4) The aggregate amount of cash and the fair market value of any stock or other property provided to the customer in exchange for its stock.
(e) Furnishing of forms to customers —(1) General requirements. A broker must furnish Form 1099-B to the customer on or before February 15 of the year following the calendar year in which the customer receives stock, cash or other property. An IRS truncated taxpayer identifying number (TTIN) may be used as the identifying number of the customer. For provisions relating to the use of TTINs, see § 301.6109-4 of this chapter (Procedure and Administration Regulations).
(2) Consolidated reporting. (i) The term consolidated reporting statement means a grouping of statements the same broker furnishes to the same customer or group of customers on the same date for the same reporting year that includes a statement required under this section. A consolidated reporting statement is limited to statements based on the same relationship of broker to customer as the statement required to be furnished under this section.
(ii) A consolidated reporting statement must be furnished on or before February 15 of the year following the calendar year reported. Any statement that otherwise must be furnished on or before January 31 must be furnished on or before February 15 if it is furnished in the consolidated reporting statement.
(f) Single Form 1099. If a broker is required to file a Form 1099-B with respect to a customer under §§ 1.6045-3 and 1.6045-1(c) with respect to the same transaction, the broker may satisfy the requirements of both sections by filing and furnishing one Form 1099-B that contains all the relevant information, as provided in the instructions to Form 1099-B.
(g) Effective/applicability date. This section applies with respect to any acquisition of control and any substantial change in capital structure occurring after December 5, 2005. The amendments to paragraph (e)(1) apply to payee statements due after December 31, 2014. For payee statements due before January 1, 2015, § 1.6045-3(e)(1) (as contained in 26 CFR part 1, revised April 2013) shall apply.
§ 1.6045-4   Information reporting on real estate transactions.
(a) Requirement of reporting. Except as otherwise provided in paragraphs (c) and (d) of this section, a real estate reporting person (“reporting person”) must make an information return with respect to a real estate transaction and, under paragraph (m) of this section, must furnish a statement to the transferor. A reporting person may also report with respect to transactions otherwise excepted in paragraphs (c) and (d) of this section. However, if the reporting person so elects, the return must be filed and the statement furnished in accordance with the provisions of this section. For the definition of a real estate transaction for purposes of these reporting requirements, see paragraph (b) of this section. For rules for determining the reporting person with respect to a real estate transaction, see paragraph (e) of this section.
(b) Definition of real estate transaction —(1) In general. A transaction is a real estate transaction under this section if the transaction consists in whole or in part of the sale or exchange of reportable real estate (as defined in paragraph (b)(2) of this section) for money, indebtedness, property other than money, or services. The term sale or exchange shall include any transaction properly treated as a sale or exchange for Federal income tax purposes, whether or not the transaction is currently taxable. Thus, for example, a sale or exchange of a principal residence is a real estate transaction under this section even though the transferor may be entitled to the special exclusion of gain up to $250,000 (or $500,000 in the case of married persons filing jointly) from the sale or exchange of a principal residence provided by section 121 of the Code.
(2)(i) Definition of reportable real estate. Except as otherwise provided in paragraph (c)(2) of this section, the term “reportable real estate” means any present or future ownership interest in—
(A) Land (whether improved or unimproved), including air space;
(B) Any inherently permanent structure, including any residential, commercial or industrial building;
(C) Any condominium unit, including appurtenant fixtures and common elements (including land); or
(D) Any stock in a cooperative housing corporation (as defined in section 216).
(E) Any non-contingent interest in standing timber.
(ii) For purposes of this section, the term “ownership interest” includes fee simple interests, life estates, reversions, remainders, and perpetual easements. In addition, the term “ownership interest” includes any previously created rights to possession or use for all or a portion of any particular year ( i.e., a leasehold, easement, or “timeshare”), with a remaining term of at least 30 years, including any period for which such rights may be renewed at the option of the holder of the rights, as determined on the date of closing (as defined in paragraph (h)(2)(ii) of this section). Thus, for example, a pre-existing leasehold on a building with an original term of 99 years is an ownership interest in real estate for purposes of this section if it has a remaining term of 35 years as of the date of closing, but not if it has a remaining term of only 10 years as of the date of closing. However, the term “ownership interest” does not include an option to acquire otherwise reportable real estate. Further, the term “ownership interest” includes any contractual interest in a sale or exchange of standing timber for a lump-sum payment that is fixed and not contingent.
(c) Exception for certain exempt transactions —(1) Certain transfers. No return of information is required with respect to—
(i) A transaction that is not a sale or exchange (such as a gift (including a transaction treated as a gift under section 1041) or bequest, or a financing or refinancing that is not related to the acquisition of reportable real estate), even if the transaction involves reportable real estate, as defined in paragraph (b)(2) of this section;
(ii) A transfer in full or partial satisfaction of any indebtedness secured by the property so transferred including a foreclosure, a transfer in lieu of foreclosure or an abandonment; or
(iii) A transaction (a “de minimis transfer”) in which it can be determined with certainty that the total consideration (in money, services and property), received or to be received in connection with the transaction is less than $600 in value (determined without regard to any allocation of gross proceeds among multiple transferors under paragraph (i)(5) of this section) as of the date of the closing (as defined in paragraph (h)(2)(ii) of this section), even if the transaction involves reportable real estate. Thus, for example, if a contract for sale of reportable real estate recites total consideration of “$1.00 plus other valuable consideration,” the transfer is not a de minimis transfer unless the reporting person can determine that the “other valuable consideration” received or to be received is less than $599 in value as measured on the date of closing.
(2) Certain property. Notwithstanding the provisions of paragraph (b)(2) of this section, no return of information is required with respect to a sale or exchange of an interest in any of the following property—provided the sale or exchange of such property is not related to the sale or exchange of reportable real estate—
(i) An interest in surface or subsurface natural resources (for example, water, ores, and other natural deposits) or crops, whether or not such natural resources or crops are severed from the land. For purposes of this section, the terms “natural resources” and “crops” do not include standing timber;
(ii) A burial plot or vault;
(iii) A manufactured structure used as a dwelling that is manufactured and assembled at a location different from that where it is used, but only if such structure is not affixed, at the date of closing (as defined in paragraph (h)(2)(ii) of this section), to a foundation. Thus, a transfer of an unaffixed mobile home that is unrelated to the sale or exchange of reportable real estate is excepted from the reporting requirements of this section; or
(iv) A principal residence (including stock in a cooperative housing corporation) provided the reporting person obtain from the transferor a written certification consistent with guidance that the Secretary has designated or may designate by publication in the Federal Register or in the Internal Revenue Bulletin ( see § 601.601(d)(2) of this chapter). If a residence has more than one owner, a real estate reporting person must either obtain a certification from each owner (whether married or not) or file an information return and furnish a payee statement for any owner that does not make the certification. The certification must be retained by the reporting person for four years after the year of the sale or exchange of the residence to which the certification applies. A reporting person who relies on a certification made in compliance with this paragraph (c)(2)(iv) will not be liable for penalties under section 6721 of the Code for failure to file an information return, or under section 6722 of the Code for failure to furnish a payee statement to the transferor, unless the reporting person has actual knowledge or reason to know that any assurance is incorrect.
(d) Exception for certain exempt transferors —(1) General rule. No return of information is required with respect to a transferor that is a corporation under section 7701(a)(3) or section 7704(a) or is considered under paragraph (d)(2) of this section to be—
(i) A corporation;
(ii) A governmental unit; or
(iii) An exempt volume transferor.
(2) Treatment as exempt transferor. Absent actual knowledge to the contrary, a reporting person may treat a transferor as—
(i) A corporation if—
(A) The name of the transferor contains an unambiguous expression of corporate status, such as Incorporated, Inc., Corporation, Corp., or P.C. (but not Company or Co.);
(B) The name of the transferor contains the term “insurance company,” “reinsurance company,” or “assurance company”; or
(C) The transfer or loan documents clearly indicate the corporate status of the transferor;
(ii) A governmental unit if the transferor is—
(A) The United States or a State, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Commonwealth of Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa, a political subdivision of any of the foregoing, or any wholly owned agency or instrumentality of any one or more of the foregoing; or
(B) A foreign government, a political subdivision thereof, an international organization, as defined in section 7701(a)(18), or any wholly-owned agency or instrumentality of the foregoing; or
(iii) An exempt volume transferor if, and only if, the reporting person receives a certification of exempt status under paragraph (d)(3) of this section.
(3) Certification of exempt status —(i) In general. A certification of exempt status must contain—
(A) The name, address, and taxpayer identification number of the transferor (the address must be that of the permanent residence (in the case of an individual), that of the principal office (in the case of a corporation or partnership), or that of the permanent residence or principal office of any fiduciary (in the case of a trust or estate));
(B) Sufficient information to identify any otherwise reportable real estate not reported by virtue of the exempt status of the transferor; and
(C) A declaration that the transferor has sold or exchanged during either of the prior two calendar years, or previously sold or exchanged during the current calendar year, or, as of the date of closing (as defined in paragraph (h)(2)(ii) of this section), reasonably expects to sell or exchange during the current calendar year at least 25 separate items of reportable real estate (as defined in paragraph (b)(2) of this section) to at least 25 separate transferees, and that each such item, at the date of closing of the sale of such item was or will be held primarily for sale or resale to customers in the ordinary course of a trade or business. For example, the declaration may be worded as follows:
(1) __ has sold or exchanged during either of the prior two calendar years,
(2) __ previously sold or exchanged during the current calendar year,
(3) __ on the date of closing expects to sell or exchange during the current calendar year,
(ii) Additional requirements. A certification of exempt status must be—
(A) Signed under penalties of perjury by the transferor or any person who is authorized to sign a declaration under penalties of perjury in behalf of the transferor as described in section 6061 and the regulations thereunder;
(B) Received by the reporting person no later than the time of closing; and
(C) Retained by the reporting person for four years following the close of the calendar year in which the date of closing (as determined under paragraph (h)(2)(ii) of this section) occurs.
(iii) Reporting person may accept or disregard certification. A reporting person may solicit or merely accept a certification of exempt status. Moreover, notwithstanding a transferor's furnishing of such certification, a reporting person may disregard the certification and, instead, report with respect to the transaction. See paragraph (a) of this section for the requirement that such elective reporting must be in compliance with the provisions of this section.
(e) Person required to report —(1) In general. Although there may be other persons involved in a real estate transaction, only the reporting person is required to report with respect to any real estate transaction. Except as provided in a designation agreement under paragraph (e)(5) of this section, the reporting person with respect to a real estate transaction is—
(i) The person responsible for closing the transaction, as defined in paragraph (e)(3) of this section; or
(ii) If there is no person responsible for closing the transaction, the person determined to be the reporting person under paragraph (e)(4) of this section.
(2) Employees, agents, and partners. For purposes of this paragraph (e), if an employee, agent, or partner (other than an employee, agent, or partner of the transferor or the transferee) acting within the scope of such person's employment, agency, or partnership participates in a real estate transaction—
(i) Such participation shall be attributed to such person's employer, principal, or partnership; and
(ii) Only the employer, principal, or partnership (and not such person) may be the reporting person with respect to such transaction as a result of such participation.
However, the participation of a person described in paragraph (e)(3)(i) of this section ( i.e., a person listed on the Uniform Settlement Statement as the settlement agent) acting as an agent of another is not attributed to the principal.
(3) Person responsible for closing the transaction —(i) Uniform Settlement Statement used. If a Uniform Settlement Statement prescribed under the Real Estate Settlement Procedures Act of 1974 (RESPA), 12 U.S.C. 2601 et seq. (a “Uniform Settlement Statement”), is used with respect to the real estate transaction and a person is listed as settlement agent on the statement, such person is the person responsible for closing the transaction. For purposes of this section, a Uniform Settlement Statement shall include any amendments or variations thereto, or substitutions therefore that may hereafter be prescribed under RESPA, provided that any such amended, varied, or substituted form requires disclosure of the parties to the transaction, the application of the proceeds of the transaction, and the identity of the settlement agent or other person responsible for preparing the form.
(ii) Other closing statement used. If a Uniform Settlement Statement is not used, or if a Uniform Settlement Statement is used, but no person is listed as settlement agent, the person responsible for closing the transaction is the person who prepares a closing statement presented to the transferor and transferee at, or in connection with, the closing of the real estate transaction. For purposes of this section, a closing statement is any closing statement, settlement statement (including a Uniform Settlement Statement), or other written document that identifies the transferor and transferee, reasonably identifies the transferred real estate, and describes the manner in which the proceeds payable to the transferor are to be (or were) disbursed at, or in connection with, the closing.
(iii) No closing statement used or multiple closing statements used. If no closing statement is used or multiple closing statements are used, the person responsible for closing the transaction is the first-listed of the persons that participate in the transaction as—
(A) The attorney for the transferee who is present at the occasion of the delivery of either the transferee's note or a significant portion of the cash or digital asset proceeds to the transferor, or who prepares or reviews the preparation of the document(s) transferring legal or equitable ownership of the real estate;
(B) The attorney for the transferor who is present at the occasion of the delivery of either the transferee's note or a significant portion of the cash or digital asset proceeds to the transferor, or who prepares or reviews the preparation of the document(s) transferring legal or equitable ownership of the real estate; or
(C) The disbursing title or escrow company that is most significant in terms of gross proceeds disbursed.
(4) Determination of the real estate reporting person in the absence of a person responsible for closing the transaction. If no person is responsible for closing the transaction (within the meaning of paragraph (e)(3) of this section), the reporting person with respect to the real estate transaction is the person first-listed below of the persons that participate in the transaction as—
(i) The mortgage lender (as defined in paragraph (e)(6)(i) of this section);
(ii) The transferor's broker (as defined in paragraph (e)(6)(ii) of this section);
(iii) The transferee's broker (as defined in paragraph (e)(6)(iii) of this section); or
(iv) The transferee (as defined in paragraph (e)(6)(iv) of this section).
(5) Designation agreement —(i) In general. If a written designation agreement executed at or prior to the time of closing designates one of the persons described in paragraph (e)(5)(ii) of this section as the reporting person with respect to the transaction and the designated person is a party to the agreement, the designated person is the reporting person with respect to the transaction. It is not necessary that all parties to the transaction (or that more than one party) be parties to the agreement.
(ii) Persons eligible. A person may be designated as the reporting person under this paragraph (e)(5) only if the person is—
(A) The person responsible for closing the transaction (as defined in paragraph (e)(3) of this section);
(B) A person described in paragraph (e)(3)(iii) (A), (B) or (C) of this section (whether or not such person is responsible for closing the transaction); or
(C) The mortgage lender (as defined in paragraph (e)(6)(i) of this section).
(iii) Form of designation agreement. A designation agreement may be in any form that is consistent with the requirements of this paragraph (e)(5), and may be included on a closing statement with respect to the transaction. The designation agreement must, however, include the name and address of the transferor and transferee and the address and any additional information necessary to identify the real estate transferred. The agreement must identify, by name and address, the person designated as the reporting person with respect to the transaction, and all other parties (if any) to the agreement. All parties to the agreement must date and sign the agreement and must retain the agreement for four years following the close of the calendar year in which the date of closing (as determined under paragraph (h)(2)(ii) of this section) occurs. Upon request by the Internal Revenue Service, or any person involved in the transaction who did not participate in the designation agreement, the agreement must be made available for inspection.
(6) Meaning of terms —(i) Mortgage lender. For purposes of this paragraph (e), the term “mortgage lender” means the person who lends new funds in connection with the transaction, but only if the repayment of such funds is secured in whole or in part by the real estate transferred. If new funds are advanced by more than one person, the mortgage lender is the person who advances the largest amount of new funds. If two or more persons advance equal amounts of new funds and no other person advances a greater amount of new funds, the mortgage lender among the persons advancing such equal amounts is the person with the security interest that is most senior in terms of priority. For purposes of this paragraph (e)(6)(i), any amounts advanced by the transferor are not treated as new funds.
(ii) Transferor's broker. For purposes of this paragraph (e), the term “transferor's broker” means only the broker that contracts with the transferor and is compensated in connection with the transaction.
(iii) Transferee's broker. For purposes of this paragraph (e), the term “transferee's broker” means only the broker that participates to a significant extent in the preparation of the transferee's offer to acquire the real estate or that presents such offer to the transferor. If more than one person is so described, the transferee's broker is the person whose participation in the preparation of the transferee's offer to acquire the real estate is most significant or, in the event there is no such person, the person whose participation in the presentation of the offer is most significant.
(iv) Transferee. For purposes of this paragraph (e), the term “transferee” means the person who acquires the greatest interest in the real estate. If there is no such person, the transferee is the person listed first on the document(s) transferring legal or equitable ownership of the real estate.
(f) Multiple transferors —(1) General rule. In the case of multiple transferors, each of which transfers an interest in the same reportable real estate, the reporting person shall make a separate information return with respect to each transferor. Paragraph (i)(5) of this section provides rules for the determination of gross proceeds to be reported in the case of multiple transferors.
(2) Rules for spouses. Transferors who are husband and wife at the time of closing and hold the reportable real estate as tenants in common, joint tenants, tenants by the entirety, or community property are treated as a single transferor for purposes of paragraphs (f)(1), (h)(1)(i), (i)(5) and (l)(1)(i) of this section, unless the reporting person receives, at or prior to the time of closing, an uncontested allocation of gross proceeds between them. In the case of a husband and wife treated as a single transferor, the reporting person may treat either as the transferor for purposes of paragraphs (h)(1)(i) and (l)(1) of this section, relating to reporting and soliciting taxpayer identification numbers.
(g) Prescribed form. Except as otherwise provided in paragraph (k) of this section, the information return required by paragraph (a) of this section shall be made on Form 1099-S, Proceeds From Real Estate Transactions or any successor form.
(h) Information required —(1) In general. The following information must be set forth on the Form 1099-S required by this section:
(i) The name, address, and taxpayer identification number (TIN) of the transferor ( see also paragraph (f)(2) of this section);
(ii) A general description of the real estate transferred (in accordance with paragraph (h)(2)(i) of this section);
(iii) The date of closing (as defined in paragraph (h)(2)(ii) of this section);
(iv) To the extent required by the Form 1099-S and its instructions, the entire gross proceeds with respect to the transaction (as determined under the rules of paragraph (i) of this section), and, in the case of multiple transferors, the gross proceeds allocated to the transferor (as determined under paragraph (i)(5) of this section);
(v) To the extent required by the Form 1099-S and its instructions, an indication that the transferor—
(A) Received (or will, or may, receive) property (other than cash, consideration treated as cash, and digital assets in computing gross proceeds) or services as part of the consideration for the transaction; or
(B) May receive property (other than cash and digital assets) or services in satisfaction of an obligation having a stated principal amount; or
(C) May receive, in connection with a contingent payment transaction, an amount of gross proceeds that cannot be determined with certainty using the method described in paragraph (i)(3)(iii) of this section and is therefore not included in gross proceeds under paragraphs (i)(3)(i) and (iii) of this section;
(vi) The real estate reporting person's name, address, and TIN;
(vii) In the case of a payment made to the transferor using digital assets, the name and number of units of the digital asset, and the date the payment was made;
(viii) [Reserved]
(ix) Any other information required by the Form 1099-S or its instructions.
(2) Meaning of terms —(i) General description of the real estate transferred. A general description of the real estate transferred includes the complete address of the property. If the address would not sufficiently identify the property, a general description of the real estate also includes a legal description (e.g., section, lot, and block) of the property.
(ii) Date of closing. In the case of a real estate transaction with respect to which a Uniform Settlement Statement is used, the date of closing shall be the date (if any) properly described as the “Settlement Date” on such statement. In all other cases, the date of closing shall be the earlier of the date on which title is transferred or the date on which the economic burdens and benefits of ownership of the real estate shift from the transferor to the transferee.
(iii) Digital assets. For purposes of this section, a digital asset has the meaning set forth in § 1.6045-1(a)(19).
(3) Limitation on information provided. The information required in the case of payment made to the transferor using digital assets under paragraph (h)(1)(vii) of this section and the portion of any gross proceeds attributable to that payment required to be reported by paragraph (h)(1)(iv) of this section is not required unless the real estate reporting person has actual knowledge or ordinarily would know that digital assets were received by the transferor as payment. For purposes of this limitation, a real estate reporting person is considered to have actual knowledge that payment was made to the transferor using digital assets if the terms of the real estate contract provide for payment using digital assets.
(i) Gross proceeds —(1) In general. Except as otherwise provided in this paragraph (i), the term gross proceeds means the total cash received, including cash received from a processor of digital asset payments as described in § 1.6045-1(a)(22), consideration treated as cash received, and the value of any digital asset received by or on behalf of the transferor in connection with the real estate transaction.
(i) Consideration treated as cash. For purposes of this paragraph (i), consideration treated as cash received by or on behalf of the transferor in connection with the real estate transaction includes the following amounts:
(A) The stated principal amount of any obligation to pay cash to or for the benefit of the transferor in the future (including any obligation having a stated principal amount that may be satisfied by the delivery of property (other than cash) or services);
(B) The amount of any liability of the transferor assumed by the transferee as part of the consideration for the transfer or of any liability to which the real estate acquired is subject (whether or not the transferor is personally liable for the debt); and
(C) In the case of a contingent payment transaction, as defined in paragraph (i)(3)(ii) of this section, the maximum determinable proceeds, as defined in paragraph (i)(3)(iii) of this section.
(ii) Digital assets received. For purposes of this paragraph (i), the value of any digital asset received means the fair market value in U.S. dollars of the digital asset actually received. Additionally, if the consideration received by the transferor includes an obligation to pay a digital asset to, or for the benefit of, the transferor in the future, the value of any digital asset received includes the fair market value, as of the date and time the obligation is entered into, of the digital assets to be paid as stated principal under such obligation. The fair market value of any digital asset received must be determined based on the valuation rules provided in § 1.6045-1(d)(5)(ii).
(iii) Other property. Gross proceeds does not include the value of any property (other than cash, consideration treated as cash, and digital assets) or services received by, or on behalf of, the transferor in connection with the real estate transaction. See paragraph (h)(1)(v) of this section for the information that must be included on the Form 1099-S required by this section in cases in which the transferor receives (or will, or may, receive) property (other than cash, consideration treated as cash, and digital assets) or services as part of the consideration for the transfer.
(2) Treatment of sales commissions and similar expenses. In computing gross proceeds, the total cash, consideration treated as cash, and digital assets received by or on behalf of the transferor shall not be reduced by expenses borne by the transferor (such as sales commissions, amounts paid or withheld from consideration received to effect the digital asset transfer as described in § 1.1001-7(b)(2), expenses of advertising the real estate, expenses of preparing the deed, and the cost of legal services in connection with the transfer).
(3) Special rules for contingent payments —(i) In general. If a real estate transaction is a contingent payment transaction, gross proceeds consist of the maximum determinable proceeds, if any.
(ii) Contingent payment transaction. For purposes of this section, the term contingent payment transaction means a real estate transaction with respect to which the receipt, by or on behalf of the transferor, of cash, consideration treated as cash under paragraph (i)(1)(i)(A) of this section, or digital assets under paragraph (i)(1)(ii) of this section is subject to a contingency.
(iii) Maximum determinable proceeds. For purposes of this section, the term “maximum determinable proceeds” means the gross proceeds determined by assuming that all of the contingencies contemplated by the documents available at closing are met or otherwise resolved in a manner that will maximize the gross proceeds. If the maximum amount of gross proceeds cannot be determined with certainty using this method, the maximum determinable proceeds are the greatest amount that can be determined with certainty using this method. See paragraph (h)(1)(v)(C) of this section for the information that must be included on the Form 1099 required by this section in cases in which the maximum amount of gross proceeds cannot, by using the method described in this paragraph (i)(3)(iii), be determined with certainty.
(4) Uniform Settlement Statement used. If a Uniform Settlement Statement is used with respect to a real estate transaction involving a transfer of reportable real estate solely for cash and consideration treated as cash in computing gross proceeds, the gross proceeds generally will be the same amount as the contract sales price properly shown on that statement.
(5) Special rules for multiple transferors —(i) General rules. In the case of multiple transferors (within the meaning of paragraph (f) of this section) each of which transfers an interest in the same reportable real estate, the reporting person must request the transferors to provide an allocation of the gross proceeds among the transferors. The request must be made at or before the time of closing. Neither the request nor the response is required to be in writing. The reporting person must make a reasonable effort to contact all transferors of whom the reporting person has actual knowledge. The reporting person may, however, rely on the unchallenged response of any transferor and need not make additional efforts to contact other transferors after at least one complete allocation (whether or not contained in a single response) is received. Except as otherwise provided in this paragraph (i)(5), the reporting person shall report the gross proceeds in accordance with any allocation received at or before the time of closing. The reporting person may (but is not required to) report the gross proceeds in accordance with any allocation received after the time of closing and before the date (determined without regard to extensions) the Forms 1099 are required to be filed. The reporting person may not report the gross proceeds in accordance with any allocation received on or after the date (determined without regard to extensions) the Forms 1099 are required to be filed. If no gross proceeds are allocated to a transferor because no allocation or an incomplete allocation is received by the reporting person, the reporting person shall report the entire unallocated gross proceeds (if any) on the return of information made with respect to such transferor. If the reporting person receives conflicting allocations from the transferors, the reporting person shall report the entire gross proceeds on each return of information made with respect to the transaction.
(ii) Rules for spouses. The reporting person need not request an allocation of gross proceeds if the only transferors are husband and wife at the time of closing. If there are other transferors, the reporting person need only make a reasonable effort to contact either the husband or wife in connection with the request for an allocation. See paragraph (f)(2) of this section for rules that treat a husband and wife as multiple transferors if an uncontested allocation of gross proceeds is received by the reporting person at or prior to the time of closing.
(6) Multiple asset transactions. In the case of a real estate transaction reportable under this section that involves the transfer of reportable real estate and other assets, the amount attributable to both the real estate and other assets is treated as the gross proceeds with respect to that real estate transaction. No allocation of gross proceeds is made among the assets.
(j) Time and place for filing. A reporting person shall file the information returns required by this section with respect to a real estate transaction after December 31 of the calendar year that includes the date of closing (as determined under paragraph (h)(2)(ii) of this section) and on or before February 28 (March 31 if filed electronically) of the following calendar year. The returns shall be filed with the appropriate Internal Revenue Service Center at the address listed in the Instructions to Form 1099.
(k) [Reserved]
(l) Requesting taxpayer identification numbers (TINS) —(1) Solicitation —(i) General requirements. A reporting person who is required to make an information return with respect to a real estate transaction under this section must solicit a TIN from the transferor at or before the time of closing. The solicitation may be made in person or in a mailing that includes other items. Any person whose TIN is solicited under this paragraph (l) must furnish such TIN to the reporting person and certify that the TIN is correct. See paragraph (f)(2) of this section for rules that treat a husband and wife as a single transferor (and provide for the TIN solicitation of either) in the absence of an allocation of gross proceeds under paragraph (i)(5) of this section.
(ii) Content of solicitation. The solicitation shall be made by providing to the person from whom the TIN is solicited a written statement that the person is required by law to furnish a correct TIN to the reporting person, and that the person may be subject to civil or criminal penalties for failing to furnish a correct TIN. For example, the solicitation may be worded as follows:
You are required by law to provide [insert name of reporting person] with your correct taxpayer identification number. If you do not provide [insert name of reporting person] with your correct taxpayer identification number, you may be subject to civil or criminal penalties imposed by law.
(iii) Retention requirement. The solicitation shall be retained by the reporting person for four years following the close of the calendar year that includes the date of closing (as determined under paragraph (h)(2)(ii) of this section). Such solicitation must be made available for inspection upon request by the Internal Revenue Service.
(2) No TIN provided. A reporting person that does not receive the transferor's TIN will not be subject to any penalty cross-referenced in paragraph (n) of this section by reason of failure to report such TIN if the reporting person has complied with the requirements of paragraph (l)(1) of this section in good faith (determined with proper regard for a course of conduct and the overall results achieved for the year).
(m) Furnishing statements to transferors —(1)(i) Requirement of furnishing statements. A reporting person who is required to make a return of information under paragraph (a) of this section shall furnish to the transferor whose TIN is required to be shown on the return a written statement of the information required to be shown on such return. The written statement must bear either the legend shown on the recipient copy of Form 1099 or the following: “This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this item is required to be reported and the IRS determines that it has not been reported.”
(ii) This requirement may be satisfied by furnishing to the transferor a copy of a completed Form 1099 (or substitute Form 1099 that complies with current revenue procedures). An IRS truncated taxpayer identifying number (TTIN) may be used as the identifying number of the transferor in lieu of the identifying number appearing on the information return filed with the Internal Revenue Service. For provisions relating to the use of TTINs, see § 301.6109-4 of this chapter (Procedure and Administration Regulations).
(iii) In the case of a real estate transaction for which a Uniform Settlement Statement is used, this requirement also may be satisfied by furnishing to the transferor a copy of a completed statement that is modified to comply with the requirements of this paragraph (m), and by designating on the Uniform Settlement Statement the items of information (such as gross proceeds or allocated gross proceeds) required to be set forth on the Form 1099. For purposes of this paragraph (m), a statement shall be considered furnished to a transferor if it is given to the transferor in person, either at the closing or thereafter, or is mailed to the transferor at the transferor's last known address.
(2) Time for furnishing statement. The statement required under this paragraph (m) must be furnished to the transferor on or after the date of closing and on or before February 15 of the following calendar year.
(3) Consolidated reporting. (i) The term consolidated reporting statement means a grouping of statements the same reporting person furnishes to the same transferor or group of transferors on the same date for the same reporting year that includes a statement required under this section. A consolidated reporting statement is limited to statements based on the same relationship of reporting person to transferor as the statement required to be furnished under this section.
(ii) A consolidated reporting statement must be furnished on or before February 15 of the year following the calendar year reported. Any statement that otherwise must be furnished on or before January 31 must be furnished on or before February 15 if it is furnished in the consolidated reporting statement.
(n) Cross-reference to penalties. See the following sections regarding penalties for failure to comply with the requirements of section 6045(e) and this section:
(1) Section 6721 for failure to file a correct information return;
(2) Section 6722 for failure to furnish a correct statement to the transferor;
(3) Section 6723 for failure to comply with other information reporting requirements (including the requirement to furnish a TIN);
(4) Section 6724 for definitions and rules relating to waiver and payment; and
(5) Section 7203 for willful failure to supply information (including a taxpayer identification number).
(o) No separate charge. A reporting person may not separately charge any person involved in a real estate transaction for complying with any requirements of this section. A reporting person may, however, take into account its cost of complying with such requirements in establishing its fees (other than in charging a separate fee for complying with such requirements) to any customer for performing services in the case of a real estate transaction.
(p) Backup withholding requirements. [Reserved]
(q) Federally-subsidized indebtedness. [Reserved]
(r) Examples. The following examples illustrate the application of this section:
(1) Example 1. Sale or exchange. (i) On June 1, 1991, A, an individual, buys a house from B, an individual, for $200,000. The entire $200,000 is financed by B under an “installment land contract,” whereby A takes possession and assumes all significant economic benefits and burdens of ownership of the house, and B retains legal title to the property until A fully performs under the contract. On June 1, 1994, A refinances his purchase of the house with Z, a financial institution. The balance owed to B is repaid and B relinquishes title to the house. A retains possession and the benefits and burdens of ownership of the house.
(ii) For federal income tax purposes, the transaction occurring on June 1, 1991 is considered a sale of the house by B, notwithstanding his retention of legal title to the property. B's sale is subject to information reporting under this section. However, the transaction occurring on June 1, 1994 is not a sale or exchange for federal income tax purposes, and notwithstanding the change in legal title upon the deeding over of the property, that transaction is not subject to information reporting under this section.
(2) Example 2. Sale or exchange. On August 10, 1991, C, an individual, accepts an offer from Y, a corporation that acts on behalf of T (C's employer) to facilitate moves of T's transferred employees from one part of the country to another. Under the offer, C transfers his residence to Y for $250,000 by executing a deed to the property in blank and giving Y a power of attorney to dispose of the residence. C also immediately vacates the residence, whereupon Y begins paying all costs associated with the residence and is entitled to all income from the residence, including sales proceeds. On October 1, 1991, Y sells the residence to D and inserts C's name in the deed previously executed by C. Thus, neither Y nor T ever become record owners of the residence. C's transfer of the residence to Y on August 10, 1991 is a sale of reportable real estate and is subject to information reporting under this section; however, the sale on October 1, 1991 is not required to be reported because Y (the transferor in that sale) is a corporation. See paragraph (d) of this section.
(3) Example 3. Definition of ownership interest. E, an individual, owns a perpetual timeshare interest in a residential unit of real property at an oceanfront resort. For consideration, on November 15, 1991, E sells her rights in the property for the period January 1, 1992 through December 31, 1992 to F. The transfer of E's property interest is not the transfer of an ownership interest, as defined in paragraph (b)(2) of this section and therefore is not reportable real estate under paragraph (b)(2) of this section. Accordingly, the transfer is not a real estate transaction under paragraph (b)(1) of this section, and no return of information is required with respect to E's property transfer.
(4) Example 4. Gross proceeds (exchange). (i) G, an individual, agrees to transfer Blackacre, which has a fair market value of $100,000, plus $10,000 cash to H, an individual, in exchange for Whiteacre, which as a fair market value of $120,000 and is encumbered by a $10,000 liability (which is assumed by G). No other liabilities are involved in the transaction. P is the reporting person with respect to both sides of the transaction.
(ii) With respect to the transfer of Blackacre by G to H, P must report gross proceeds of $-0- (even though the exchange agreement may recite total exchange value of $120,000). See paragraph (i)(1) of this section. In addition, (to the extent required by the Form 1099 and its instructions) P must indicate that G will receive property as part of the consideration for the transaction. See paragraph (h)(v)(A) of this section.
(iii) With respect to the transfer of Whiteacre by H to G, P must report gross proceeds of $20,000 (the amount received by H consisting of cash ($10,000) and consideration treated as cash ($10,000) under paragraph (i) of this section). No other amount is reported under paragraph (i)(1) of this section even though the exchange agreement may recite total exchange value of $120,000. In addition, (to the extent required by the Form 1099 and its instructions) P must indicate that H will receive property as part of the consideration for the transaction. See paragraph (h)(v)(A) of this section.
(5) [Reserved]
(6) Example 6. Gross proceeds (contingencies). K, an individual, sells an unencumbered apartment building to L for $500,000, payable at closing, plus an amount equal to 2% of gross rents from the apartment building for each of the next 5 years, the contingent payments to be made annually with adequate stated interest. The agreement provides that the maximum amount K may receive (including the downpayment but excluding the interest) is $600,000. Under paragraph (i)(3)(ii) of this section the real estate transaction is a “contingent payment transaction.” Under paragraph (i)(3)(iii) of this section, the maximum amount of gross proceeds determined by assuming all contingencies are satisfied is $600,000. Thus, $600,000 is the “maximum determinable proceeds” and is the amount reported.
(7) Example 7: Gross proceeds (contingencies). The facts are the same as in paragraph (r)(6) of this section (the facts in Example 6 ), except that the agreement does not provide for adequate stated interest. The result is the same as in paragraph (r)(6) of this section (the results in Example 6 ).
(8) Example 8. Gross proceeds (contingencies). The facts are same as in paragraph (r)(6) of this section (the facts in Example 6 ), except that no maximum amount is stated in the agreement (or any other document available at closing). Under paragraph (i)(3)(iii) of this section, assuming all contingencies are satisfied, the maximum amount of gross proceeds cannot be determined with certainty. The greatest amount that can be determined with certainty at the time of the closing, assuming all contingencies are satisfied, is $500,000, the cash downpayment. Therefore, $500,000 is the “maximum determinable proceeds” under paragraph (i)(3)(iii) of this section and is the amount reported. In addition, (to the extent required by the Form 1099 and its instructions) the reporting person must indicate that the gross proceeds cannot be determined with certainty. See paragraph (h)(1)(iv)(C) of this section.
(9) Example 9. Gross proceeds (contingencies). The facts are the same as in paragraph (r)(8) of this section (the facts in Example 8 ), except that the agreement provides that the minimum amount K will receive (including the downpayment) is $570,000. Thus, under paragraph (i)(3)(iii) of this section, assuming all contingencies are satisfied, the maximum amount of gross proceeds cannot be determined with certainty. The greatest amount that can be determined with certainty at the time of the closing, assuming all contingencies are satisfied, is $570,000, the minimum amount stated in the agreement. Therefore, $570,000 is the “maximum determinable proceeds” under paragraph (i)(3)(iii) of this section and is the amount reported. In addition, (to the extent required by the Form 1099 and its instructions) the reporting person must indicate that the gross proceeds cannot be determined with certainty. See paragraph (h)(1)(iv)(C) of this section.
(10) Example 10: Gross proceeds (exchange involving digital assets) —(i) Facts. K, an individual, agrees in a contract for sale to pay 140 units of digital asset DE with a total fair market value of $280,000 to J, an unmarried individual who is not an exempt transferor, in exchange for Whiteacre, which has a fair market value of $280,000. No liabilities are involved in the transaction. P is the reporting person with respect to both sides of the transaction.
(ii) Analysis. P has actual knowledge that payment was made to J using digital assets because the terms of the real estate contract provide for payment using digital assets. Accordingly, with respect to the payment by K of 140 units of digital asset DE to J, P must report gross proceeds received by J of $280,000 (140 units of DE) on Form 1099-S, Proceeds From Real Estate Transactions. Additionally, to the extent K is not an exempt recipient under § 1.6045-1(c) or an exempt foreign person under § 1.6045-1(g), P is required to report gross proceeds paid to K on Form 1099-DA, Digital Asset Proceeds from Broker Transactions, with respect to K's sale of 140 units of digital asset DE, in the amount of $280,000 pursuant to § 1.6045-1.
(s) Applicability date. This section applies for real estate transactions with dates of closing (as determined under paragraph (h)(2)(ii) of this section) that occur on or after January 1, 1991. Section 1.6045-4(b)(2)(i)(E), (b)(2)(ii), and (c)(2)(i) (as contained in 26 CFR part 1, revised May 28, 2009) applies to sales or exchanges of standing timber for lump-sum payments completed after May 28, 2009. Section 1.6045-4(m)(1) (as contained in 26 CFR part 1, revised July 15, 2014) applies to payee statements due after December 31, 2014. For payee statements due before January 1, 2015, § 1.6045-4(m)(1) (as contained in 26 CFR part 1, revised April 2013) applies. The removal of paragraph (k) of this section applies for information returns required to be filed during calendar years beginning after December 31, 2023. The amendments to paragraphs (b)(1), (c)(2)(iv), (d)(2)(ii), (e)(3)(iii), (h)(1)(v) through (ix), (h)(2)(iii), (i)(1) and (2), (i)(3)(ii), (o), and (r) of this section apply to real estate transactions with dates of closing occurring on or after January 1, 2026.
§ 1.6045-5   Information reporting on payments to attorneys.
(a) Requirement of reporting —(1) In general. Except as provided in paragraph (c) of this section, every payor engaged in a trade or business who, in the course of that trade or business, makes payments aggregating $600 or more during a calendar year to an attorney in connection with legal services (whether or not the services are performed for the payor) must file an information return for such payments. The information return must be filed on the form and in the manner required by the Commissioner. For the time and place for filing the form, see § 1.6041-6. For definitions of the terms under this section, see paragraph (d) of this section. The requirements of this paragraph (a)(1) apply whether or not—
(i) A portion of a payment is kept by the attorney as compensation for legal services rendered; or
(ii) Other information returns are required with respect to some or all of a payment under other provisions of the Internal Revenue Code and the regulations thereunder.
(2) Information required. The information return required under paragraph (a)(1) of this section must include the following information:
(i) The name, address, and taxpayer identifying number (TIN) (as defined in section 7701(a)) of the payor;
(ii) The name, address, and TIN of the payee attorney;
(iii) The amount of the payment or payments (as defined in paragraph (d)(5) of this section); and
(iv) Any other information required by the Commissioner in forms, instructions or publications.
(3) Requirement to furnish statement —(i) General requirements. A person required to file an information return under paragraph (a)(1) of this section must furnish to the attorney a written statement of the information required to be shown on the return. This requirement may be met by furnishing a copy of the return to the attorney. An IRS truncated taxpayer identifying number (TTIN) may be used as the identifying number of the attorney in lieu of the identifying number appearing on the information return filed with the Internal Revenue Service. For provisions relating to the use of TTINs, see § 301.6109-4 of this chapter (Procedure and Administration Regulations). The written statement must be furnished to the attorney on or before February 15 of the year following the calendar year in which the payment was made.
(ii) Consolidated reporting. (A) The term consolidated reporting statement means a grouping of statements the same payor furnishes to the same payee or group of payees on the same date for the same reporting year that includes a statement required under this section. A consolidated reporting statement is limited to statements based on the same relationship of payor to payee as the statement required to be furnished under this section.
(B) A consolidated reporting statement must be furnished on or before February 15 of the year following the calendar year reported. Any statement that otherwise must be furnished on or before January 31 must be furnished on or before February 15 if it is furnished in the consolidated reporting statement.
(b) Special rules —(1) Joint or multiple payees —(i) Check delivered to one payee attorney. If more than one attorney is listed as a payee on a check, an information return must be filed under paragraph (a)(1) of this section with respect to the payee attorney to whom the check is delivered.
(ii) Check delivered to payee nonattorney. If an attorney is listed as a payee on a check but the check is delivered to a nonattorney who is a payee on the check, an information return must be filed under paragraph (a)(1) of this section with respect to the payee attorney listed on the check. If more than one attorney is listed as a payee on a check but the check is delivered to a nonattorney who is a payee on the check, the information return must be filed with respect to the first-listed payee attorney on the check.
(iii) Check delivered to nonpayee. If two or more attorneys are listed as payees on a check, but the check is delivered to a person who is not a payee on the check, an information return must be filed under paragraph (a)(1) of this section with respect to the first-listed payee attorney on the check.
(2) Attorney required to report payments made to other attorneys. If an information return is required to be filed with respect to a payee attorney under paragraph (b)(1) of this section, the attorney with respect to whom the information return is required to be filed (tier-one attorney) must file an information return under this section for any payment that the tier-one attorney makes to other payee attorneys with respect to that check, regardless of whether the tier-one attorney is a payor under paragraph (d)(3) of this section.
(c) Exceptions. Notwithstanding paragraphs (a) and (b) of this section, a return of information is not required under section 6045(f) with respect to the following payments:
(1) Payments of wages or other compensation paid to an attorney by the attorney's employer.
(2) Payments of compensation or profits paid or distributed to its partners by a partnership engaged in providing legal services.
(3) Payments of dividends or corporate earnings and profits paid to its shareholders by a corporation engaged in providing legal services.
(4) Payments made by a person to the extent that the person is required to report with respect to the same payee the payments or portions thereof under section 6041(a) and § 1.6041-1(a) (or would be required to so report the payments or portions thereof but for the dollar amount limitation contained in section 6041(a) and § 1.6041-1(a)).
(5) Payments made to a nonresident alien individual, foreign partnership, or foreign corporation that is not engaged in trade or business within the United States, and does not perform any labor or personal services in the United States, in the taxable year to which the payment relates. For how a payor determines whether a payment is subject to this exception, see § 1.6041-4(a)(1).
(6) Payments made to an attorney in the attorney's capacity as the person responsible for closing a transaction within the meaning of § 1.6045-4(e)(3) for the sale or exchange or financing of any present or future ownership interest in real estate described in § 1.6045-4(b)(2)(i) through (iv).
(7) Payments made to an attorney in the attorney's capacity as a trustee in bankruptcy under title 11, United States Code.
(d) Definitions. The following definitions apply for purposes of this section:
(1) Attorney means a person engaged in the practice of law, whether as a sole proprietorship, partnership, corporation, or joint venture.
(2) Legal services means all services related to, or in support of, the practice of law performed by, or under the supervision of, an attorney.
(3) Payor means a person who makes a payment if that person is an obligor on the payment, or the obligor's insurer or guarantor. For example, a payor includes—
(i) A person who pays a settlement amount to an attorney of a client who has asserted a tort, contract, violation of law, or workers' compensation claim against that person; and
(ii) The person's insurer if the insurer pays the settlement amount to the attorney.
(4) Payments to an attorney include payments by check or other method such as cash, wire or electronic transfer. Payment by check to an attorney means a check on which the attorney is named as a sole, joint, or alternative payee. The attorney is the payee on a check written to the attorney's client trust fund. However, the attorney is not a payee when the attorney's name is included on the payee line as “in care of,” such as a check written to “client c/o attorney,” or if the attorney's name is included on the check in any other manner that does not give the attorney the right to negotiate the check.
(5) Amount of the payment means the amount tendered (e.g., the amount of a check) plus the amount required to be withheld from the payment under section 3406(a)(1), because a condition for withholding exists with respect to the attorney for whom an information return is required to be filed under paragraph (a)(1) of this section.
(e) Attorney to furnish TIN. A payor that is required to file an information return under this section must solicit a TIN from the attorney at or before the time the payor makes a payment to the attorney. The attorney must furnish the correct TIN to the payor, but is not required to certify the TIN. A payment for which a return of information is required under this section is subject to backup withholding under section 3406 and the regulations thereunder.
(f) Examples. The following examples illustrate the provisions of this section. The examples assume that P is not a payor with respect to A, the attorney, under section 6041. See section 6041 and the regulations thereunder for rules regarding whether P is required under section 6041 to file information returns with respect to C. The examples are as follows:
(ii) Rather than paying by joint check to C and A, P will pay the damages by a joint check to C and F, A's law firm. F failed to furnish its TIN to P. P is required to deduct and withhold 28 percent tax from the $300,000 under section 3406(a)(1)(A) and paragraph (e) of this section. P writes the check to C and F as joint payees, in the amount of $216,000. P also must file an information return with respect to F under paragraph (a)(1) of this section in the amount of $300,000, as prescribed in paragraph (d)(5) of this section. If the damages are reportable under section 6041 because they are not excludable from gross income under existing legal principles, and are not subject to any exception under section 6041, P must also file an information return with respect to C pursuant to § 1.6041-1(a) and (f) in the amount of $300,000.
(ii) P, not L, is the payor of the payment to A under paragraph (d)(3) of this section. P, however, is not required to file an information return with respect to A under paragraph (a)(1) of this section because the payment was not made in the course of P's trade or business. Even if P made the payment in the course of P's trade or business, P would not be required to file an information return under section 6045(f) with respect to A because P is excepted under paragraph (c)(6) of this section.
(iii) A is not required to file an information return under paragraph (a)(1) of this section with respect to the payment to B because A is not the payor as that term is defined under paragraph (d)(3) of this section. A is not required to file an information return under paragraph (b)(2) with respect to the payment to B because A was listed as sole payee on the check it received from P. See section 6041 and § 1.6041-1(e) for whether A or L must file information returns under that section. See section 6045(e) and § 1.6045-4 for whether A is required to file an information return under that section.
(g) Cross reference to penalties. See the following sections regarding penalties for failure to comply with the requirements of section 6045(f) and this section:
(1) Section 6721 for failure to file a correct information return.
(2) Section 6722 for failure to furnish a correct payee statement.
(3) Section 6723 for failure to comply with other information reporting requirements (including the requirement to furnish a TIN).
(4) Section 7203 for willful failure to supply information (including a TIN).
(h) Effective/applicability date. The rules in this section apply to payments made on or after January 1, 2007. The amendments to paragraph (a)(3)(i) apply to payee statements due after December 31, 2014. For payee statements due before January 1, 2015, § 1.6045-5(a)(3)(i) (as contained in 26 CFR part 1, revised April 2013) shall apply.
§ 1.6045A-1   Statements of information required in connection with transfers of securities.
(a) Duty to furnish transfer statement —(1) In general —(i) Transfers between accounts. Except as provided in  paragraphs (a)(1)(ii) through (vi) of this section, every applicable person (transferor) (as described in paragraph (a)(4) of this section) that transfers custody of a specified security to a broker (as described in paragraph (a)(5) of this section) must furnish to the receiving broker a transfer statement that includes the information described in paragraph (b) of this section with respect to the transferred security. Except as provided in paragraphs (b)(1)(vii) and (b)(3) of this section (relating to noncovered securities and certain securities for which basis is determined under an average basis method), a transferor must furnish a separate statement for each security and, if transferring custody of the same security acquired on different dates or at different prices, for each acquisition.
(ii) Cash on delivery accounts and multiple broker arrangements —(A) Sales. A custodian or other transferor that transfers custody of a security to a broker solely to effect a sale must furnish a transfer statement only to the broker that effects the sale. However, no transfer statement is required if the transferor itself either effects the sale or is required to report the sale of the security under § 1.6045-1.
(B) Purchases. A broker that effects a purchase but does not receive custody of the security must furnish a transfer statement to the broker receiving custody. However, no transfer statement is required if the broker effects the purchase solely at the instruction of the broker receiving custody.
(iii) Exempt recipients and exempt foreign payees. A transferor is not required to furnish a transfer statement for a security that, after the transfer, is held for a customer that is an exempt recipient under § 1.6045-1(c)(3)(i) or an exempt foreign person under § 1.6045-1(g)(1)(i).
(iv) Securities lending transactions—transferor as principal. A transferor that lends or borrows securities as a principal is not required to furnish a transfer statement for a security that is transferred pursuant to such lending or borrowing arrangement (for example, when a customer opens or closes a short sale). This exception does not apply when a transferor transfers a security under a lending or borrowing arrangement of the customer. This exception also does not apply when a transferor transfers a previously borrowed security to another account of the same customer (for example, to satisfy an existing short sale obligation). See paragraph (b)(4) of this section.
(v) Certain money market funds. A transferor of stock in a regulated investment company described in § 1.6045-1(c)(3)(vi) is not required to furnish a transfer statement.
(vi) Exception for transfers of specified securities that are reportable as digital assets. No transfer statement is required under paragraph (a)(1)(i) of this section with respect to a specified security, the sale of which is reportable as a digital asset after the application of the special coordination rules under § 1.6045-1(c)(8). A transferor that chooses to provide a transfer statement with respect to a specified security described in the preceding sentence that is a tokenized security described in § 1.6045-1(c)(8)(i)(D) that reports some or all of the information described in paragraph (b) of this section is not subject to penalties under section 6722 of the Code for failure to report this information correctly.
(2) Format of transfer statement. The transfer statement must be furnished in writing unless both the transferor and the receiving broker agree to a different format or method before the transfer. If a transfer occurs between accounts at the same or affiliated entities, a transfer statement is deemed to have been furnished and received if the required information, including any required adjustments, is incorporated into the records for the recipient account.
(3) Time for furnishing statement. A transferor must furnish a transfer statement within fifteen days after the date of settlement for the transfer.
(4) Applicable person effecting transfer. Applicable person means any transferor who is a person described in § 1.6045-1(a)(1), a person that acts as a custodian of securities in the ordinary course of a trade or business, an issuer of securities, a trustee or custodian of an individual retirement plan, or any agent of these persons. Applicable person does not include the beneficial owner of a security or any agent substituted for an undisclosed beneficial owner, any governmental unit or agency or instrumentality of a governmental unit holding escheated securities, or any organization that holds and transfers obligations among members of the organization as a service to its members.
(5) Broker receiving custody. Solely for purposes of this section, broker means any person described in § 1.6045-1(a)(1), any person that acts as a custodian of securities in the ordinary course of a trade or business, any issuer of securities, and any agent of these persons. Broker does not include the beneficial owner of a security or any agent substituted for an undisclosed beneficial owner, any governmental unit or agency or instrumentality of a governmental unit holding escheated securities, or any organization that holds and transfers obligations among members of the organization as a service to its members.
(6) Other terms. For purposes of this section, the terms sale, specified security, covered security, noncovered security, and customer have the same meaning as in § 1.6045-1(a)(9), (a)(14), (a)(15), (a)(16), and (h)(1).
(7) Examples. The following examples illustrate the rules of this paragraph (a). Unless otherwise stated, in each example the customer is not treated as an exempt recipient under § 1.6045-1(c)(3)(i) or an exempt foreign person under § 1.6045-1(g)(1)(i). The examples are as follows:
(ii) K is a broker and therefore is an applicable person that is a transferor within the meaning of paragraph (a)(4) of this section. L acts as a custodian of securities in the ordinary course of a trade or business and therefore is a broker within the meaning of paragraph (a)(5) of this section. Because K effects the purchase of the security but does not receive custody of the security, under paragraphs (a)(1)(i) and (a)(1)(ii)(B) of this section, K must furnish a transfer statement to L.
(ii) L acts as a custodian of securities in the ordinary course of a trade or business and therefore is an applicable person that is a transferor within the meaning of paragraph (a)(4) of this section. Because L transfers custody of the security to the purchaser's broker solely to effect the sale, under paragraphs (a)(1)(i) and (a)(1)(ii)(A) of this section, L must furnish a transfer statement to K.
(iii) If the terms of their custody arrangement so provide, K may furnish the transfer statement as L's agent and satisfy L's duty to furnish the transfer statement under paragraphs (a)(1)(i) and (a)(1)(ii)(A) of this section. Under paragraph (a)(2) of this section, K may satisfy this duty by maintaining the information required on the transfer statement, including all required adjustments, in its records for X's account.
(ii) M is a broker and therefore is an applicable person that is a transferor within the meaning of paragraph (a)(4) of this section. N acts as a custodian of securities in the ordinary course of a trade or business and therefore is a broker within the meaning of paragraph (a)(5) of this section. Because M effects the purchase of the stock and N receives custody of the stock, under paragraphs (a)(1)(i) and (a)(1)(ii)(B) of this section, M must furnish a transfer statement to N.
(ii) O is a broker and therefore is an applicable person that is a transferor within the meaning of paragraph (a)(4) of this section. D is an agent of C, the issuer of the stock, and therefore is a broker within the meaning of paragraph (a)(5) of this section. Because O transfers custody of the stock to D, under paragraph (a)(1)(i) of this section, O must furnish a transfer statement to D.
(b) Information required —(1) In general. For all specified securities, each transfer statement must include the information described in this paragraph (b)(1).
(i) Statement date. The date the statement is furnished.
(ii) Applicable person effecting transfer. The name, address, and telephone number of the applicable person furnishing the statement.
(iii) Broker receiving custody. The name, address, and telephone number of the broker receiving custody of the security.
(iv) Customers. The name and account number of the customer or customers for the account from which the security is transferred and, if different, the name and account number of the customer or customers for the account to which the security is transferred.
(v) Security identifiers. The Committee on Uniform Security Identification Procedures (CUSIP) number of the security transferred (if applicable) or other security identifier number that the Secretary may designate by publication in the Federal Register or in the Internal Revenue Bulletin ( see § 601.601(d)(2) of this chapter), quantity of shares, units, or amounts, and classification of the security (such as stock or debt).
(vi) Transfer dates. The date the transfer was initiated and the settlement date of the transfer (if known when furnishing the statement).
(vii) Adjusted basis and acquisition date. The total adjusted basis of the security, the original acquisition date of the security, and, if applicable, the holding period adjustment required by section 1091. The transferor must determine this information as provided under §§ 1.6045-1(d), 1.6045-1(m), and 1.6045-1(n), including reporting the adjusted basis of the security in U.S. dollars. If the basis of the transferred security is determined using an average basis method (as described in § 1.1012-1(e)), the transferor may report any securities acquired more than five years before the transfer on a single statement on which the original acquisition date is reported as “VARIOUS” if the other information reported on the statement applies to all of the securities.
(2) Examples. The following examples illustrate the rules of paragraph (b)(1) of this section:
(ii) Under paragraph (a)(1)(i) of this section, P must furnish three transfer statements. Under paragraph (b)(1) of this section, one statement must report the transfer of 100 shares with an original acquisition date of April 2, 2012, one statement must report the transfer of 100 shares with an original acquisition date of July 2, 2012, and one statement must report the transfer of 100 shares with an original acquisition date of October 2, 2012.
(ii) Under paragraph (a)(1)(i) of this section, P must furnish two transfer statements. Under paragraph (b)(1)(vii) of this section and § 1.6045-1(d)(6)(iii) and (d)(7)(ii), P must determine the average basis for the 200 transferred shares and the date for computing whether any gain or loss with respect to the stock purchased on July 2, 2012, is long-term or short-term by applying the rules for broker reporting of wash sales to the stock purchased on July 2, 2012. Therefore, on both transfer statements, P must increase the average basis of the stock by the amount of loss disallowed under section 1091 on the sale of the 100 shares purchased on April 2, 2012. On the transfer statement reporting the transfer of the 100 shares purchased on July 2, 2012, P must adjust the holding period of the July 2, 2012, shares in accordance with section 1091.
(ii) D is the agent of C, the issuer of the securities, and therefore is an applicable person within the meaning of paragraph (a)(4) of this section. Because S is a broker and D transfers custody of the stock to S, under paragraph (a)(1)(i) of this section, D must furnish a transfer statement to S.
(iii) Under paragraph (b)(1)(vii) of this section and § 1.6045-1(d)(6)(ii)(A), D must report adjusted basis on the transfer statement based on the amount paid by R. Under paragraph (b)(1)(vii) of this section and § 1.6045-1(d)(6)(ii)(A), D is permitted, but is not required, to increase the adjusted basis for the amount (if any) includible as wage income by R for R's purchases of the stock.
(3) Additional information required for a transfer of a debt instrument. In addition to the information required in paragraph (b)(1) of this section, for a transfer of a debt instrument that is a covered security, the following additional information is required:
(i) A description of the payment terms used by the broker to compute any basis adjustments under § 1.6045-1(n);
(ii) The issue price of the debt instrument;
(iii) The issue date of the debt instrument (if different from the original acquisition date of the debt instrument);
(iv) The adjusted issue price of the debt instrument as of the transfer date;
(v) The customer's initial basis in the debt instrument;
(vi) Any market discount that has accrued as of the transfer date (as determined under § 1.6045-1(n));
(vii) Any bond premium that has been amortized as of the transfer date (as determined under § 1.6045-1(n));
(viii) Any acquisition premium that has been amortized as of the transfer date (as determined under § 1.6045-1(n));
(ix) Whether the transferring broker has computed any of the information described in this paragraph (b)(3) by taking into account one or more elections described in § 1.6045-1(n), and, if so, which election or elections were taken into account by the transferring broker; and
(x) For a transfer that occurs on or after January 1, 2016, the last date on or before the transfer date that the transferor made an adjustment for a particular item (for example, the last date on or before the transfer date that bond premium was amortized). A broker, however, may rely on this paragraph (b)(3)(x) for a transfer of a covered security that occurs on or after June 30, 2015, and before January 1, 2016.
(4) Additional information required for option transfers. In addition to the information required in paragraph (b)(1) of this section, for a transfer of an option that is a covered security, the following additional information is required:
(i) The date of grant or acquisition of the option;
(ii) The amount of premium paid or received;
(iii) Any other information required to fully describe the option, which may include a security identifier used by option exchanges, or details about the underlying asset, quantity covered, exercise type, strike price, and maturity date; and
(iv) For a transfer of an option described in § 1.6045-1(m)(3) (section 1256 option) that occurs on or after January 1, 2016, the original basis of the option and the fair market value of the option as of the end of the prior calendar year.
(5) Format of identification. An applicable person furnishing a transfer statement and a broker receiving the transfer statement may agree to combine the information required in paragraphs (b)(1), (b)(3), and (b)(4) of this section in any format or to use a code in place of one or more required items. For example, a transferor and a receiving broker may agree to use a single code to represent the broker instead of the broker's name, address, and telephone number, or may use a security symbol or other identification number or scheme instead of the security identifier required by paragraphs (b)(1), (b)(3), and (b)(4) of this section. As another example, a transferor and a receiving broker may agree to use a security identifier for an exchange-traded option if that information would be sufficient to inform the receiving broker of the terms for that option.
(6) Transfers of noncovered securities. The information described in paragraphs (b)(1)(vii), (b)(3), (b)(4), (b)(8), and (b)(9) of this section is not required for a transfer of a noncovered security if the transfer statement identifies the security as a noncovered security. A transferor that chooses to report nonrequired information is not subject to penalties under section 6722 for failure to report this information correctly if the transfer statement identifies the security as a noncovered security. A single transfer statement may report the transfer of multiple noncovered securities if the transfer statement clearly conveys, either specifically or generally, the information described in paragraph (b)(1)(v) of this section to identify each security. For purposes of this paragraph (b)(6), a transferor must treat a security for which a broker makes a single-account election described in § 1.1012-1(e)(11)(i) as a covered security.
(7) Transfers of borrowed securities. The transfer statement must indicate that a transferred security is borrowed if the transferor knows that the security is transferred pursuant to a lending or borrowing arrangement. The transfer statement must not report an adjusted basis If the transferor knows that the transferred security is lent or borrowed pursuant to a short sale. The receiving broker may be subject to special transfer reporting rules upon receipt of a borrowed security if the security is used to satisfy an existing short sale obligation. See § 1.6045-1(c)(3)(xi)(C).
(8) Transfers pursuant to an inheritance —(i) In general. A transfer statement for a transfer of a security from a decedent or decedent's estate must indicate that the security is inherited. The transfer statement must report the date of death as the original acquisition date and must report adjusted basis according to the instructions or valuations furnished by an authorized representative of the estate, including any required adjustments to basis for property acquired from a decedent. If a transferor has not received instructions or valuations from an authorized representative, the transferor must report basis as the fair market value of the security on the date of death.
However, if the transferor neither knows nor can readily ascertain the fair market value of the security on the date of death at the time the transfer statement is prepared, the transfer statement must indicate that the transfer consists of an inherited security but may otherwise report the security as if it were a noncovered security. If the transferor cannot identify which securities in a joint account have been transferred from the decedent, the transferor must treat each security in the account as if it were a noncovered security but must not indicate that any security is an inherited security.
(ii) Transfers of securities to satisfy a cash legacy. If a security is transferred from a decedent or a decedent's estate to satisfy a cash legacy, paragraphs (b)(1), (b)(3), and (b)(4) of this section apply and paragraph (b)(8)(i) of this section does not apply.
(iii) Subsequent transfers of inherited securities. A transfer statement must indicate that the transfer consists of an inherited security if a prior transfer statement reported the security as inherited.
(9) Gift or deemed gift transfers —(i) In general. A transfer statement for a security transferred to a different owner (other than a transfer that the transferor knows is pursuant to a lending or borrowing arrangement or is from a decedent or decedent's estate) must indicate that the security is a gift and must report the date of the gift (if known when furnishing the statement) and the fair market value of the gift on that date (if known or readily ascertainable at the time the transfer statement is prepared). The transfer statement must report the adjusted basis and original acquisition date of the security in the hands of the donor. However, if the transfer is between persons for whom gift-related basis adjustments are inapplicable or between accounts that share at least one common customer, the transferor must apply paragraph (b)(1) of this section as if the security were not a gift or deemed gift.
(ii) Subsequent transfers of gifts by the same customer. If a transferor transfers to a different account of the same customer a security that a prior transfer statement reported as a gifted security, the transferor must include on the transfer statement the information described in paragraph (b)(9)(i) of this section for the date of the gift to the customer. If the prior transfer statement did not report a date for the gift, the transferor must treat the settlement date for the prior transfer as the date of the gift.
(iii) Examples. The following examples illustrate the rules of this paragraph (b)(9):
(10) Specific identification of securities. Except as provided in § 1.1012-1(e)(7)(ii), a transfer statement must report a transfer of less than the entire position in an account of a security that was acquired on different dates or at different prices consistently with a customer's adequate and timely identification of the security to be transferred. See § 1.1012-1(c). If the customer does not provide an adequate and timely identification for the transfer, a transferor must first report the transfer of any securities in the account for which the transferor does not know the acquisition or purchase date followed by the earliest securities purchased or acquired, whether covered securities or noncovered securities.
(11) Information from other parties and other accounts —(i) Transfer and issuer statements and transfers pursuant to an inheritance. When reporting a transfer of a covered security, a transferor must take into account all information, other than the classification of the security (such as stock), furnished on a transfer statement, all information furnished or deemed furnished on an issuer statement (as described in § 1.6045B-1), and all instructions and valuations furnished by an authorized representative of the estate of a decedent, unless the statement or instructions are incomplete or the broker has actual knowledge that they are incorrect. A transferor may treat a customer as a minority shareholder when taking the information on an issuer statement into account unless the transferor knows that the customer is a majority shareholder and the issuer statement reports the action's effect on the basis of majority shareholders. Any failure to report correct information that arises solely from reliance on information furnished on a transfer statement or issuer statement or by an authorized representative of the estate is deemed to be due to reasonable cause for purposes of penalties under section 6722. See § 301.6724-1(a)(1) of this chapter.
(ii) Other information. A transferor is permitted, but not required, to take into account information about a covered security other than what is furnished on a transfer statement or issuer statement or by an authorized representative of the estate of a decedent, including any information the transferor has about securities held by the same customer in other accounts with the transferor. For purposes of penalties under section 6722, a transferor that takes into account information received from a customer or third party other than information furnished on a transfer statement or issuer statement or by an authorized representative of the estate of a decedent is deemed to have relied upon this information in good faith if the transferor neither knows nor has reason to know that the information is incorrect. See § 301.6724-1(c)(6) of this chapter.
(12) Failure to receive a complete transfer statement —(i) In general. A receiving broker that has not received a complete transfer statement as required under paragraph (a)(3) of this section for the transfer must request a complete statement from the transferor unless, under paragraph (a) of this section, the transferor has no duty to furnish a transfer statement for the transfer. The receiving broker is only required to make this request once. If the receiving broker does not receive a complete transfer statement after requesting it, the receiving broker may treat the security as a noncovered security upon its subsequent sale or transfer. A transfer statement for a covered security is complete if, in the view of the receiving broker, it provides sufficient information to comply with § 1.6045-1 when reporting the sale of the security. A transfer statement for a noncovered security is complete if it indicates that the security is a noncovered security.
(ii) Transition rules for transfers of debt instruments, options, and securities futures contracts. If an option described in § 1.6045-1(a)(14)(iii), a securities futures contract described in § 1.6045-1(a)(14)(iv), or a debt instrument described in § 1.6045-1(a)(15)(i)(C) is transferred in 2014 and no transfer statement is received, the receiving broker is not required to request a transfer statement from the transferor and may treat the security as a noncovered security. If a debt instrument described in § 1.6045-1(a)(15)(i)(D) is transferred in 2016 and no transfer statement is received, the receiving broker is not required to request a transfer statement from the transferor and may treat the security as a noncovered security.
(c) Reporting by other parties after a transfer —(1) In general. A transferor that has furnished a transfer statement must furnish a corrected statement for a covered security within fifteen days of receiving a transfer statement, an issuer statement (as described in § 1.6045B-1), or instructions or valuations from an authorized representative of an estate, that provides information under paragraph (b) of this section that was not reported on the initial transfer statement.
(2) Exception. A transferor is not required to furnish a corrected transfer statement for a covered security under this paragraph (c) if the transferor receives the transfer statement or issuer statement or receives the instructions or valuations from an authorized representative of an estate more than eighteen months after the transferor furnished the transfer statement.
(d) Effective/applicability dates. This section applies to:
(1) A transfer on or after January 1, 2011, of stock other than stock in a regulated investment company within the meaning of § 1.1012-1(e)(5);
(2) A transfer on or after January 1, 2012, of stock in a regulated investment company;
(3) A transfer on or after January 1, 2015, of an option described in § 1.6045-1(a)(14)(iii), a securities futures contract described in § 1.6045-1(a)(14)(iv), or a debt instrument described in § 1.6045-1(a)(15)(i)(C); and
(4) A transfer on or after January 1, 2017, of a debt instrument described in § 1.6045-1(a)(15)(i)(D).
§ 1.6045B-1   Returns relating to actions affecting basis of securities.
(a) In general —(1) Information required. Except as provided in paragraphs (a)(4) and (5) of this section, an issuer of a specified security within the meaning of § 1.6045-1(a)(14)(i) through (iv) that takes an organizational action that affects the basis of the security must file an issuer return setting forth the following information and any other information specified in the return form and instructions:
(i) Reporting issuer. The name and taxpayer identification number of the reporting issuer.
(ii) Security identifiers. The identifiers of each security involved in the organizational action including, as applicable, the Committee on Uniform Security Identification Procedures (CUSIP) number or other security identifier number that the Secretary may designate by publication in the Federal Register or in the Internal Revenue Bulletin ( see § 601.601(d)(2) of this chapter), classification of the security (such as stock), account number, serial number, and ticker symbol, as well as any descriptions about the class of security affected.
(iii) Contact at reporting issuer. The name, address, e-mail address, and telephone number of a contact person at the issuer.
(iv) Information about action. The type or nature of the organizational action including, as applicable, the date of the action or the date against which shareholders' ownership is measured for the action.
(v) Effect of the action. The quantitative effect of the organizational action on the basis of the security in the hands of a U.S. taxpayer as an adjustment per share or as a percentage of old basis, including a description of the calculation, the applicable Internal Revenue Code section and subsection upon which the tax treatment is based, the data supporting the calculation such as the market values of securities and valuation dates, any other information necessary to implement the adjustment including the reportable taxable year, and whether any resulting loss may be recognized.
(2) Time for filing the return —(i) In general. An issuer must file an issuer return with the IRS pursuant to the prescribed form and instructions on or before the 45th day following the organizational action, or, if earlier, January 15 of the year following the calendar year of the organizational action. For purposes of this paragraph (a)(2), a redemption occurs on the last day a holder may redeem a security. The issuer may file the return before the organizational action if the quantitative effect on basis is determinable beforehand.
(ii) Reasonable assumptions. To report the quantitative effect on basis by the due date in paragraph (a)(2)(i) of this section, an issuer may make reasonable assumptions about facts that cannot be determined before the due date. An issuer must file a corrected return within forty-five days of determining facts that result in a different quantitative effect on basis from what the issuer previously reported. However, for purposes of this paragraph (a)(2)(ii), an issuer must treat a payment that may be a dividend consistently with its treatment of the payment under section 6042(b)(3) and § 1.6042-3(c).
(3) Exception for public reporting. An issuer is not required to file a return with the IRS under this paragraph (a) if, by the due date described in paragraph (a)(2)(i) of this section, the issuer posts the return with the required information in a readily accessible format in an area of its primary public Web site dedicated to this purpose and keeps the return accessible for ten years to the public on its primary public Web site or the primary public Web site of any successor organization. An issuer may electronically sign a return that is publicly reported in accordance with this paragraph (a)(3). The electronic signature must identify the individual who attests to the declaration in the jurat.
(4) Exception when holders are exempt recipients. No reporting is required under this paragraph (a) if the issuer reasonably determines that all of the holders of the security are exempt recipients under paragraph (b)(5) of this section.
(5) Exception for certain money market funds. No reporting is required under this paragraph (a) by a regulated investment company described in § 1.6045-1(c)(3)(vi).
(6) Reporting for certain specified securities that are digital assets. Unless otherwise excepted under this section, an issuer of a specified security described in paragraph (a)(1) of this section is required to report under this section without regard to whether the specified security is also described in § 1.6045-1(a)(14)(v) or (vi). If a specified security is described in § 1.6045-1(a)(14)(v) or (vi) but is not also described in § 1.6045-1(a)(14)(i), (ii), (iii) or (iv), the issuer of that specified security is permitted, but not required, to report under this section. An issuer that chooses to provide the reporting and furnish statements for a specified security described in the previous sentence is not subject to penalties under section 6721 or 6722 of the Code for failure to report this information correctly.
(b) Statements to nominees and certificate holders —(1) In general. An issuer required to file an information return under this section must furnish a written statement with the same information to each holder of record of the security or to the holder's nominee. This issuer statement must indicate that the information is being reported to the IRS. An issuer may satisfy this requirement by furnishing a copy of the information return.
(2) Time for furnishing statements. An issuer must furnish each issuer statement on or before January 15 of the year following the calendar year of the organizational action. For purposes of this paragraph (b)(2), a redemption occurs on the last day a holder may redeem a security. An issuer may furnish the statement before the organizational action if the quantitative effect on basis is determinable beforehand. An issuer must furnish a statement that corresponds to a corrected return described in paragraph (a)(2)(ii) of this section by the later of the due date described in this paragraph (b)(2) or forty-five days after determining the facts that result in a different quantitative effect on basis from what the issuer previously reported on the return.
(3) Recipients of statements. An issuer must furnish a separate statement to each holder of record of the security as of the date of the organizational action and all subsequent holders of record up to the date the issuer furnishes the statement required under this section. If the issuer records the security on its books in the name of a nominee, the issuer must furnish the statement to the nominee in lieu of the holder. However, if the nominee is the issuer, an agent of the issuer, or a plan operated by the issuer, the issuer must furnish the statement to the holder.
(4) Exception for public reporting. An issuer is deemed to furnish an issuer statement under this paragraph (b) to all holders and nominees if the issuer satisfies the public reporting requirements of paragraph (a)(3) of this section.
(5) Exempt recipients —(i) In general. An issuer is not required to furnish an issuer statement to a holder or its nominee if the holder is an exempt recipient under § 1.6045-1(c)(3)(i)(B), provided the issuer has actual knowledge that the holder is described in that section or has a properly completed exemption certificate from the holder asserting that the holder is an exempt recipient (as provided in § 31.3406(h)-3 of this chapter). An issuer may treat a holder as an exempt recipient based on the applicable indicators described in § 1.6049-4(c)(1)(ii)(A) through (M).
(ii) Limitation for corporate holders. For an organizational action occurring on or after January 1, 2012, an issuer may treat a holder as an exempt recipient based on the indicator described in § 1.6049-4(c)(1)(ii)(A) only if one of the following applies:
(A) The name of the holder contains the term “insurance company,” “indemnity company,” “reinsurance company,” or “assurance company.”
(B) The name of the holder indicates that it is an entity listed as a per se corporation under § 301.7701-2(b)(8)(i) of this chapter.
(C) The issuer receives a properly completed exemption certificate (as provided in § 31.3406(h)-3 of this chapter) that asserts that the holder is not an S corporation as defined in section 1361(a).
(D) The issuer receives a withholding certificate described in § 1.1441-1(e)(2)(i) that includes a certification that the person whose name is on the certificate is a foreign corporation.
(iii) Foreign holders. An issuer may treat a holder as an exempt recipient if the issuer, prior to the transaction, associates the holder with documentation upon which the issuer may rely in order to treat payments to the holder as made to a foreign beneficial owner in accordance with § 1.1441-1(e)(1)(ii) or as made to a foreign payee in accordance with § 1.6049-5(d)(1) or presumed to be made to a foreign payee under § 1.6049-5(d)(2) or (3). For purposes of this paragraph (b)(5)(iii), the provisions in § 1.6049-5(c) (regarding rules applicable to documentation of foreign status and definition of U.S. payor and non-U.S. payor) apply. Rules similar to the rules of § 1.1441-1 apply by substituting the terms “issuer” and “holder” in place of the terms “withholding agent” and “payee” and without regard to the limitation to amounts subject to withholding under chapter 3 of the Internal Revenue Code. Rules similar to the rules of § 1.6049-5(d) apply by substituting the terms “issuer” and “holder” in place of the terms “payor” and “payee.”
(c) Special rule for S corporations. An S corporation (as defined in section 1361(a)) is deemed to satisfy the requirements of paragraphs (a) and (b) of this section for any organizational action affecting the basis of its stock if the corporation reports the effect of the organizational action on a timely filed Schedule K-1 (Form 1120S), “Shareholder's Share of Income, Deductions, Credits, etc.,” for each shareholder and timely furnishes copies of these schedules to all proper parties.
(d) Special rule for certain regulated investment companies and real estate investment trusts. A regulated investment company (RIC) that reports undistributed capital gains to shareholders under section 852(b)(3)(D) or a real estate investment trust (REIT) that reports undistributed capital gains to shareholders under section 857(b)(3)(D) is deemed to have satisfied the requirements of paragraphs (a) and (b) of this section for undistributed capital gains affecting the basis of its stock if the RIC or REIT timely files and furnishes the information returns required under section 852(b)(3)(D) or section 857(b)(3)(D) to all proper parties for the organizational action.
(e) Acquiring and successor entities. An acquiring or successor entity of an issuer that fails to satisfy the reporting obligations of paragraphs (a) or (b) of this section must satisfy these reporting obligations. If neither the issuer nor the acquiring or successor entity satisfies these reporting obligations, both parties are jointly and severally liable for any applicable penalties.
(f) Penalties. An issuer may use an agent to satisfy the requirements of this section for the issuer. Nonetheless, the issuer remains liable for penalty for any failure to comply unless it is shown that the failure is due to reasonable cause and not willful neglect. See sections 6721 through 6724.
(g) Examples. The following examples illustrate the rules of this section:
(ii) Under paragraph (a)(2)(i) of this section, C must file an issuer return with the IRS on or before May 15, 2013 (45 days after the distribution date), reporting the quantitative effect of this distribution on the basis of C's stock. Under paragraph (b)(2) of this section, C must furnish issuer statements to its nominees and certificate holders on or before January 15, 2014.
(iii) Alternatively, under paragraphs (a)(3) and (b)(4) of this section, C may post by May 15, 2013, and maintain for ten years, the return with the required information in a readily accessible format in an area of its primary public Web site dedicated to this purpose.
(ii) Under paragraphs (a)(2)(i) and (b)(2) of this section, D is required to file an issuer return with the IRS and furnish issuer statements to its nominees and certificate holders on or before January 15, 2014.
(iii) On January 15, 2014, D is unsure whether the distribution will exceed its earnings and profits for the fiscal year. For purposes of section 6042(b)(3) and § 1.6042-3(c), D must treat the distribution as a dividend. Therefore, under paragraph (a)(2)(ii) of this section, D is not required to file an issuer return. If D later determines that dividend treatment was incorrect, D must file an issuer return reporting the correct quantitative effect on basis.
(h) Rule for options —(1) In general. For an option granted or acquired on or after January 1, 2014, if the original contract is replaced by a different number of option contracts, the following rules apply:
(i) If the option is an exchange-traded option, any clearinghouse or clearing facility that serves as a counterparty is treated as the issuer of the option for purposes of section 6045B.
(ii) If the option is not an exchange-traded option, the option writer is treated as the issuer of the option for purposes of section 6045B.
(2) Examples. The following examples illustrate the rules of paragraph (h)(1) of this section:
(i) [Reserved]
(j) Effective/applicability dates. This section applies to—
(1) Organizational actions occurring on or after January 1, 2011, that affect the basis of specified securities within the meaning of § 1.6045-1(a)(14)(i) other than stock in a regulated investment company within the meaning of § 1.1012-1(e)(5);
(2) Organizational actions occurring on or after January 1, 2012, that affect the basis of stock in a regulated investment company;
(3) Organizational actions occurring on or after January 1, 2014, that affect the basis of debt instruments described in § 1.6045-1(n)(2)(i) (not including the debt instruments described in § 1.6045-1(n)(2)(ii));
(4) Organizational actions occurring on or after January 1, 2016, that affect the basis of debt instruments described in § 1.6045-1(n)(3);
(5) Organizational actions occurring on or after January 1, 2014, that affect the basis of options described in § 1.6045-1(a)(14)(iii);
(6) Organizational actions occurring on or after January 1, 2014, that affect the basis of securities futures contracts described in § 1.6045-1(a)(14)(iv); and
(7) Organizational actions occurring on or after January 1, 2025, that affect the basis of digital assets described in § 1.6045-1(a)(14)(v) or (vi) that are also described in one or more paragraphs of § 1.6045-1(a)(14)(i) through (iv).
§ 1.6046-1   Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock.
(a) Officers or directors —(1) When liability arises on January 1, 1963. Each U.S. citizen or resident who is on January 1, 1963, an officer or director of a foreign corporation shall make a return on Form 5471 (or subsequent form) showing the name, address, and identifying number of each U.S. person who, on January 1, 1963, owns 5 percent or more in value of the outstanding stock of such foreign corporation.
(2) When liability arises after January 1, 1963 —(i) Requirement of return. Each United States citizen or resident who is at any time after January 1, 1963, an officer or director of a foreign corporation shall make a return on Form 5471 setting forth the information described in paragraph (a)(2)(ii) of this section with respect to each United States person who, during the time such citizen or resident is such an officer or director—
( a ) Acquires (whether in one or more transactions) outstanding stock of such corporation which equals, or which when added to any such stock then owned by him equals, 10 percent or more of the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation;
( b ) Acquires (whether in one or more transactions) an additional 10 percent or more of the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation; or
( c ) Is not described in paragraph (a)(2)(i)( a ) or ( b ) of this section, and who, at any time after January 1, 1987, is treated as a United States shareholder under section 953(c) with respect to such foreign corporation.
(ii) Information required to be shown on return. The return required under subdivision (i) of this subparagraph shall contain the following information:
( a ) Name, address, and identifying number of each shareholder with respect to whom the return is filed;
( b ) A statement showing that the shareholder is either described in subdivision (i)( a ) or (i)( b ) of this subparagraph; and
( c ) The date on which the shareholder became a person described in subdivision (i)( a ) or (i)( b ) of this subparagraph.
(3) Application of rules. The provisions of this paragraph may be illustrated by the following examples:
(ii) Results. The July 1, 2014, transaction does not give rise to liability for A to file a return; however, A must file a return as a result of the September 1, 2014, transaction because X's holdings now exceed 10%.
(ii) Results. The September 15, 2014, transaction does not give rise to liability to file a return since X has not acquired 10% in value of the outstanding stock of M Corporation since A last became liable to file a return. However, A must file a return as a result of the November 1, 2014, transaction because X has now acquired an additional 10% of the outstanding stock of M Corporation.
(ii) Results. B is not required to file a return either as a result of the facts set forth in Example 2 or as a result of the September 15, 2014, transaction described in Example 3. However, B is required to file a return as a result of the November 1, 2014, transaction described in Example 3 because X has acquired an additional 10% in value of the outstanding stock of M Corporation while B is an officer or director.
(b) Returns required of U.S. persons when liability to file arises on January 1, 1963. Each U.S. person who, on January 1, 1963, owns 5 percent or more in value of the outstanding stock of a foreign corporation, shall make a return on Form 959 with respect to such foreign corporation setting forth the following information:
(1) The name, address, and identifying number of the shareholder (or shareholders) filing the return, and the internal revenue district in which such shareholder filed his most recent United States income tax return;
(2) The name, business address, and employer identification number, if any, of the foreign corporation, the name of the country under the laws of which it is incorporated, and the name of the country in which is located its principal place of business;
(3) The date of organization and, if any, of each reorganization of the foreign corporation if such reorganization occurred on or after January 1, 1960, while the shareholder owned 5 percent or more in value of the outstanding stock of such corporation;
(4) The name and address of the foreign corporation's statutory or resident agent in the country of incorporation;
(5) The name, address, and identifying number of any branch office or agent of the foreign corporation located in the United States;
(6) If the foreign corporation has filed a United States income tax return, or participated in the filing of a consolidated return, for any of its last three calendar or fiscal years immediately preceding January 1, 1963, state each year for which a return was filed (including, in the case of a consolidated return, the name of the corporation filing such return), the type of form used, the internal revenue office to which it was sent, and the amount of tax, if any, paid;
(7) The name and address of the person (or persons) having custody of the books of account and records of the foreign corporation, and the location of such books and records if different from such address;
(8) The names, addresses, and identifying numbers of all United States persons who are principal officers (for example, president, vice president, secretary, treasurer, and comptroller) or members of the board of directors of the foreign corporation as of January 1, 1963;
(9) A complete description of the principal business activities in which the foreign corporation is actually engaged and, if the foreign corporation is a member of a group constituting a chain of ownership with respect to each unit of which the shareholder owns 5 percent or more in value of the outstanding stock, a chart showing the foreign corporation's position in the chain of ownership and the percentages of ownership;
(10) The following information prepared in accordance with generally accepted accounting principles and in such detail as is customary for the corporation's accounting records:
(i) The corporation's profit and loss statement for the most recent complete annual accounting period; and
(ii) The corporation's balance sheet as of the end of the most recent complete annual accounting period;
(11) A statement showing as of January 1, 1963, the amount and type of any indebtedness of the foreign corporation:
(i) To any United States person owning 5 percent or more in value of its stock, or
(ii) To any other foreign corporation owning 5 percent or more in value of the outstanding stock of the foreign corporation with respect to which the return is filed provided that the shareholder filing the return owns 5 percent or more in value of the outstanding stock of such other foreign corporation,
(12) A statement, as of January 1, 1963, showing the name, address, and identifying number, if any, of each person who is, on January 1, 1963, a subscriber to the stock of the foreign corporation, and the number of shares subscribed to by each;
(13) A statement showing the number of shares of each class of stock of the foreign corporation owned by each shareholder filing the return and:
(i) If such stock was acquired after December 31, 1953, the dates of acquisition, the amounts paid or value given therefor, the method of acquisition, i.e., by original issue, purchase on open market, direct purchase, gift, inheritance, etc., and from whom acquired; or
(ii) If such stock was acquired before Janaury 1, 1954, a statement that such stock was acquired before such date, and the value at which such stock is carried on the books of such shareholder;
(14) A statement showing as of January 1, 1963, the name, address, and identifying number of each United States person who owns 5 percent or more in value of the outstanding stock of the foreign corporation, the classes of stock held, the number of shares of each class held, including the name, address, and identifying number, if any, of each actual owner if such person is different from the shareholder of record and a statement of the nature and amount of the interests of each such actual owner; and
(15) The total number of shares of each class of outstanding stock of the foreign corporation (or other data indicating the shareholder's percentage of ownership).
(c) Returns required of United States persons when liability to file arises after January 1, 1963 —(1) United States persons required to file. A return on Form 5471, containing the information required by paragraph (c)(4) of this section, shall be made by each United States person when at any time after January 1, 1963:
(i) Such person acquires (whether in one or more transactions) outstanding stock of such foreign corporation which equals, or which when added to any such stock then owned by him equals, 10 percent or more of the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation;
(ii) Such person, having already acquired the interest referred to in paragraph (b) of this section or in paragraph (c)(1)(i) of this section—
( a ) Acquires (whether in one or more transactions) an additional 10 percent or more of the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation;
( b ) Owns 10 percent or more of the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation when such foreign corporation is reorganized (as defined in paragraph (f)); or
( c ) Disposes of sufficient stock in such foreign corporation to reduce his interest to less than 10 percent of the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation; or
(iii) Such person is, at any time after January 1, 1987, treated as a United States shareholder under section 953(c) with respect to a foreign corporation.
(2) Examples. The provisions of paragraph (c)(1) of this section may be illustrated by the following examples:
(ii) Results. A must file a return under the provisions of paragraph (c)(1) of this section.
(ii) Results. B is not required to file a return for 2014 under the provisions of this section because he does not own 10% or more of the outstanding stock of M Corporation. B must file a return for 2015 under the provisions of paragraph (c)(1) of this section.
(ii) Results. C is not required to file a return under the provisions of paragraph (c)(1) of this section with respect to the acquisition of the additional 4% of M Corporation.
(ii) Results. C is not required to file a return under the provisions of paragraph (c)(1) of this section as a result of the April 1, 2014, acquisition because he has not acquired 10% or more of the outstanding stock of M Corporation since he last became liable to file a return. C must file a return under the provisions of paragraph (c)(1) of this section as a result of the May 1, 2014, acquisition because C acquired 10% of the outstanding stock of M Corporation during 2014.
(ii) Results. D must file a return under the provisions of paragraph (c)(1) of this section.
(ii) Results. Since D has disposed of sufficient stock to reduce his interest in M Corporation to less than 10% of the outstanding stock of such corporation, D must file a return under the provisions of paragraph (c)(1) of this section.
(3) Shareholders who become United States persons. A return on Form 5471, containing the information required by paragraph (c)(4) of this section, shall be made by each person who at any time after January 1, 1963, becomes a United States person while owning 10 percent or more of the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation.
(4) Information required to be shown on return —(i) In general. The return on Form 5471, required to be filed by persons described in paragraph (c)(1) or (3) of this section, shall set forth the same information as is required by the provisions of paragraph (b) of this section except that where such provisions require information with respect to January 1, 1963, such information shall be furnished with respect to the date on which liability arises to file the return required under this paragraph.
(ii) Additional information. In addition to the information required under paragraph (c)(4)(i) of this section, the following information shall also be furnished in the return required under this paragraph:
( a ) The date on or after January 1, 1963, if any, on which such shareholder (or shareholders) last filed a return under this section with respect to the corporation;
( b ) If a return is filed by reason of becoming a United States person, the date the shareholder became a United States person;
( c ) If a return is filed by reason of the disposition of stock, the date and method of such disposition and the person to whom such disposition was made; and
( d ) If a return is filed by reason of the organization or reorganization of the foreign corporation on or after January 1, 1963, the following information with respect to such organization or reorganization:
( 1 ) A statement showing a detailed list of the classes and kinds of assets transferred to the foreign corporation including a description of the assets (such as a list of patents, copyrights, stock, securities, etc.), the fair market value of each asset transferred (and, if such asset is transferred by a United States person, its adjusted basis), the date of transfer, the name, address, and identifying number, if any, of the owner immediately prior to the transfer, and the consideration paid by the foreign corporation for such transfer;
( 2 ) A statement showing the assets transferred and the notes or securities issued by the foreign corporation, the name, address, and identifying number, if any, of each person to whom such transfer or issue was made, and the consideration paid to the foreign corporation for such transfer or issue; and
( 3 ) An analysis of the changes in the corporation's surplus accounts occurring on or after January 1, 1963.
(iii) Exclusion of information previously furnished. In any case where any identical item of information required to be filed under this paragraph by a shareholder with respect to a foreign corporation has previously been furnished by such shareholder in any return made in accordance with the provisions of this section, such shareholder may satisfy the requirements of this paragraph by filing Form 5471, identifying such item of information, the date furnished, and stating that it is unchanged.
(d) Associations, etc. Returns are required to be filed in accordance with the provisions of this section with respect to any foreign association, foreign joint-stock company, or foreign insurance company, etc., which would be considered to be a corporation under § 301.7701-2 of this chapter (Regulations on Procedure and Administration). Persons who would qualify by the nature of their functions and ownership in such associations, etc., as officers, directors, or shareholders thereof will be treated as such for purposes of this section without regard to their designations under local law.
(e) Special provisions —(1) Return jointly made. Any two or more persons required under paragraph (a) of this section to make a return with respect to one or more shareholders of the same corporation, or under paragraph (b) or (c) of this section to make a return with respect to the same corporation, may in lieu of making several returns, jointly make one return.
(2) Separate return for each corporation. When returns are required with respect to more than one foreign corporation, a separate return must be made for each corporation.
(3) Use of power of attorney by officers or directors —(i) In general. Any two or more persons required under paragraph (a) of this section to make a return with respect to one or more shareholders of the same corporation may, by means of one or more duly executed powers of attorney, constitute one of their number as attorney in fact for the purpose of making such returns or for the purpose of making a joint return under subparagraph (1) of this paragraph.
(ii) Nature of power of attorney. The power of attorney referred to in subdivision (i) of this subparagraph shall be limited to the making of returns required under paragraph (a) of this section and shall be limited to a single calendar year with respect to which such returns are required.
(iii) Manner of execution of power of attorney. The use of technical language in the preparation of the power of attorney referred to in subdivision (i) of this subparagraph is not necessary. Such power of attorney shall be signed by the individual United States citizen or resident required to file a return or returns under paragraph (a) of this section. Such power of attorney must be acknowledged before a notary public or, in lieu thereof, witnessed by two disinterested persons. The notarial seal must be affixed unless such seal is not required under the laws of the state or country wherein such power of attorney is executed.
(iv) Manner of execution of return under authority of power of attorney. A return made under authority of one or more powers of attorney referred to in subdivision (i) of this subparagraph shall be signed by the attorney in fact for each principal for which such attorney in fact is acting. A copy of such one or more powers of attorney shall be kept at a convenient and safe location accessible to internal revenue officers, and shall at all times be available for inspection by such officers.
(v) Effect on penalties. The fact that a return is made under authority of a power of attorney referred to in subdivision (i) of this subparagraph shall not affect the principal's liability for penalties provided for failure to file a return required under paragraph (a) of this section or for filing a false or fraudulent return.
(4) Persons excepted from filing returns —(i) Return required of officer or director under paragraph (a)(1). Notwithstanding paragraph (a)(1) of this section, any U.S. citizen or resident required to make a return under such paragraph with respect to shareholders of a foreign corporation, need not make such return if, on January 1, 1963, three or fewer U.S. persons own 95 percent or more in value of the outstanding stock of such foreign corporation and file a return or returns with respect to such corporation under paragraph (b) of this section.
(ii) Return required of officer or director under paragraph (a)(2). Notwithstanding paragraph (a)(2) of this section, any U.S. citizen or resident required to make a return under such paragraph with respect to a person acquiring stock of a foreign corporation in an acquisition described in subdivision (i)( a ) or ( b ) of such paragraph need not make such return, if:
( a ) As a result of such acquisition of stock of such foreign corporation, a U.S. person files a return as a shareholder under paragraph (c)(1) of this section, and
( b ) Immediately after such acquisition of stock, three or fewer U.S. persons own 95 percent or more in value of the outstanding stock of such foreign corporation.
(iii) Return required by reason of attribution rules. Notwithstanding paragraph (b) or (c) of this section, any person required to make a return under such paragraph with respect to a foreign corporation need not make such return, if:
( a ) Such person does not directly own an interest in the foreign corporation,
( b ) Such person is required to furnish the information solely by reason of attribution of stock ownership from a U.S. person under paragraph (i) of this section, and
( c ) The person from whom the stock ownership is attributed furnishes all of the information required under paragraph (b) or (c) of this section of the person to whom such stock ownership is attributed.
(iv) Return required of officer or director with respect to person described in subdivision (iii). Notwithstanding paragraph (a) of this section, any U.S citizen or resident required to make a return under such paragraph with respect to a person exempted under subdivision (iii) of this subparagraph from making a return need not make a return with respect to such person.
(5) Persons excepted from furnishing items of information. Any person required to furnish any item of information under paragraph (b) or (c) of this section with respect to a foreign corporation may, if such item of information is furnished by another person having an equal or greater stock interest (measured in terms of either the total combined voting power of all classes of stock of the foreign corporation entitled to vote or the total value of the stock of the foreign corporation) in such foreign corporation, satisfy such requirement by filing a statement with his return on Form 5471 indicating that such requirement has been satisfied and identifying the return in which such item of information was included. This paragraph (e)(5) does not apply to persons excepted from filing a return by reason of the provisions of paragraph (e)(4) of this section.
(f) Meaning of terms. For purposes of this section:
(1) Acquisition. Stock in a foreign corporation shall be considered acquired when a person has an unqualified right to receive such stock even though such stock is not actually issued. For example, when under the law of a foreign country, all the necessary steps for incorporation are completed but stock in the corporation will not be issued within 30 days, every United States citizen or resident who is an officer or a director of such corporation, provided a United States person has an interest of 10 percent or more in such corporation, and every such United States person shall, within 90 days of the date of incorporation, file the returns required under section 6046 and this section. In the case of a reorganization, new stock may be acquired, depending on the type of reorganization, whether or not any stock certificates are surrendered or exchanged or the designation of such stock is altered.
(2) Reorganization. With respect to a foreign corporation, the term “reorganization” shall mean not only a transaction described in section 368(a)(1) and the regulations thereunder but also any other transaction or series of transactions which has the same effect.
(3) U.S. person —(i) In general. For purposes of section 6046 and this section, the term United States person has the meaning assigned to it by section 7701(a)(30), except as provided in paragraphs (f)(3)(ii) and (iii) of this section.
(ii) Special rule for individuals residing in certain possessions. (A) With respect to an individual who is a bona fide resident of Puerto Rico, the term United States person has the meaning assigned to it by § 1.957-3 except that the rules of § 1.937-2(g)(1) will apply.
(B) With respect to individuals who are bona fide residents of any section 931 possession, as defined in § 1.931-1(c)(1), the term United States person has the meaning assigned to it by § 1.957-3.
(iii) Special rule for certain nonresident aliens. An individual for whom an election under section 6013(g) or (h) is in effect will, subject to the exceptions contained in paragraph (f)(3)(ii) of this section, be considered a United States person for purposes of section 6046 and this section.
(4) [Reserved]
(5) Accounting period and taxable year. In the case of a specified foreign corporation (as defined in section 898), the taxable year of such corporation shall be treated as its annual accounting period.
(g) Method of reporting. All amounts furnished in returns prescribed under this section shall be expressed in United States currency with a statement of the exchange rates used. All statements required to be submitted on or with returns under this section shall be rendered in the English language. For taxable years ending after December 31, 1994, with respect to returns filed after December 31, 1995, all amounts furnished under paragraph (c) of this section shall be expressed in United States dollars computed and translated in conformity with United States generally accepted accounting principles. Amounts furnished under paragraph (c)(3)(i) of this section shall also be furnished in the foreign corporation's functional currency as required on the form. Information described in paragraphs (b)(10) and (c)(3) of this section shall be submitted in such form or manner as the form shall prescribe. If an individual who is a United States person required to make a return with respect to a foreign corporation under section 6046 is entitled under a treaty to be treated as a nonresident of the United States, and if the individual claims this treaty benefit, and if there are no other United States persons that are required to furnish information under section 6046 with respect to the foreign corporation, then the individual may satisfy the requirements of paragraphs (b)(10), (11) and (12), (c)(3)(ii)( d ), and (g) of this section by filing the audited foreign financial statements of the foreign corporation with the individual's return required under section 6046.
(h) Actual ownership of stock. If any shareholder, referred to in this section, is not the actual owner of the stock of the foreign corporation, the information required under this section shall be furnished in the name of and by such actual owner. For example, in the case of stock held by a nominee, the information required under this section shall be furnished by the actual owner of such stock.
(i) Constructive ownership of stock —(1) In general. Stock owned directly or indirectly by or for a foreign corporation or a foreign partnership shall be considered as being owned proportionately by its shareholders or partners. Thus, any United States person who is a member of a nonresident foreign partnership which becomes a shareholder in a foreign corporation shall be considered to be a shareholder in such foreign corporation to the extent of his proportionate share in such partnership.
(2) Members of family. An individual shall be considered as owning the stock owned directly or indirectly by or for his brothers and sisters (whether by the whole or half blood), his spouse, his ancestors, and his lineal descendants. However, when stock is treated as owned by an individual under the rule provided in this subparagraph, it shall not be treated as owned by him for the purpose of again applying such rule in order to make another the constructive owner of such stock. The provisions of this subparagraph may be illustrated by the following example:
(j) Time and place for filing return —(1) Time for filing. Any return required by section 6046 and this section shall be filed on or before the 90th day after the date on which a United States citizen, resident, or person becomes liable to file such return under any provision of section 6046(a) and of paragraph (a), (b), or (c) of this section. With respect to returns filed after September 3, 1982, such return shall be filed on or before such later date (if any) as may be authorized by the return form. The Director of the Internal Revenue Service Center where the return is required to be filed is authorized to grant reasonable extensions of time for filing returns under section 6046 and this section in accordance with the applicable provisions of section 6081(a) and § 1.6081-1.
(2) Place for filing. Returns required by section 6046 and this section shall be filed with the Internal Revenue Service Center designated in the instructions of the applicable form.
(k) Penalties. (1) For criminal penalties for failure to file a return and filing a false or fraudulent return, see sections 7203, 7206, and 7207.
(2) For civil penalty for failure to file return, or failure to show information required on a return, under this section, see section 6679.
(l)(1) Effective/applicability date. Paragraph (f)(3) of this section applies to taxable years ending after April 9, 2008.
(2) Paragraph (c)(1)(iii) of this section applies to taxable years ending on or after December 31, 2013.
(3) Paragraph (e)(5) of this section applies to returns filed on or after December 31, 2013. See paragraph (e)(5) of § 1.6046-1, as contained in 26 CFR part 1 revised as of April 1, 2012, for returns filed before December 31, 2013.
§ 1.6046A-1   Return requirement for United States persons who acquire or dispose of an interest in a foreign partnership, or whose proportional interest in a foreign partnership changes substantially.
(a) Return requirement —(1) General rule. If a United States person has a reportable event (as defined in paragraph (b)(1) of this section) during the person's tax year, then, except as provided in paragraph (f) of this section, the United States person is required to complete and file Form 8865, “Return of U.S. Persons With Respect to Certain Foreign Partnerships,” containing the information described in paragraph (c) of this section.
(2) Separate return for each partnership. If a United States person has a reportable event with respect to an interest in more than one foreign partnership, the United States person must file a separate Form 8865 for each foreign partnership.
(b) Definitions —(1) Reportable event. There are three categories of reportable events under section 6046A: acquisitions, dispositions, and changes in proportional interests.
(i) Acquisitions. A United States person that acquires a foreign partnership interest has a reportable event if—
(A) The person did not own a ten-percent or greater direct interest in the partnership and as a result of the acquisition the person owns a ten-percent or greater direct interest in the partnership. For purposes of this paragraph (b)(1)(i)(A), an acquisition includes an increase in a person's direct proportional interest; or
(B) Subject to paragraph (b)(2) of this section, compared to the person's direct interest when the person last had a reportable event, after the acquisition the person's direct interest has increased by at least a ten-percent interest.
(ii) Dispositions. A United States person that disposes of a foreign partnership interest has a reportable event if—
(A) The person owned a ten-percent or greater direct interest in the partnership before the disposition and as a result of the disposition the person owns less than a ten-percent direct interest. For purposes of this paragraph (b)(1)(ii)(A), a disposition includes a decrease in a person's direct proportional interest; or
(B) Subject to paragraph (b)(2) of this section, compared to the person's direct interest when the person last had a reportable event, after the disposition the person's direct interest has decreased by at least a ten-percent interest.
(iii) Changes in proportional interests not otherwise reportable as acquisitions or dispositions under paragraph (b)(1)(i)(A) or (b)(1)(ii)(A) of this section. A United States person has a reportable event if, subject to paragraph (b)(2) of this section, compared to the person's direct proportional interest the last time the person had a reportable event, the person's direct proportional interest has increased or decreased by at least the equivalent of a ten-percent interest.
(2) Special rule for foreign partnership interests owned on December 31, 1999. If a United States person owned a ten-percent or greater direct interest in a foreign partnership on December 31, 1999, then to determine whether the person has a reportable event under paragraph (b)(1)(i)(B), (b)(1)(ii)(B), or (b)(1)(iii) of this section, the comparison should be made to the person's direct interest on December 31, 1999. Once the person has a reportable event after December 31, 1999, future comparisons should be made by reference to the last reportable event.
(3) Change in a proportional interest. A partner's proportional interest in a foreign partnership may change for a number of reasons, for example, the change may be caused by changes in other partners' interests resulting from a partner withdrawing from the partnership. A proportional change may also occur by operation of the partnership agreement, for example, if the partnership agreement provides that a partner's interest in profits will change on a set date or when the partnership has earned a specified amount of profits and one of those events occurs.
(4) Ten-percent interest. Under section 6046A(d) and this section, a ten-percent interest in a foreign partnership, as described in section 6038(e)(3)(C) and the regulations thereunder, means an interest equal to ten percent of the capital interest in such partnership, an interest equal to ten percent of the profits interest in such partnership, or an interest to which ten percent of the deductions or losses of such partnership are allocated.
(5) United States person. United States person means a person described in section 7701(a)(30).
(6) Foreign partnership. Foreign partnership means any partnership that is a foreign partnership under sections 7701(a)(2) and (5).
(7) Examples. The rules of paragraph (a) of this section and this paragraph (b) are illustrated by the following examples:
(ii) On September 1, 2001, US purchases a 7% direct interest in FP from FC1. The September 1, 2001 acquisition constitutes a reportable event under paragraph (b)(1)(i)(A) of this section. Before the September 1 acquisition, US did not own a 10% or greater direct interest in FP. After the September 1 acquisition, US owns a 12% direct interest, and therefore, as a result of the September 1 acquisition, US now owns a 10% or greater direct interest in FP. Consequently, US must report its September 1 acquisition under section 6046A on Form 8865 filed with US's 2001 income tax return.
(iii) On December 1, 2001, US acquires an additional 4% direct interest in FP from FC1, so that US's total direct interest has increased from 12% to 16%. This acquisition does not constitute a reportable event. Compared to US's direct interest when US last had a reportable event (12% on September 1, 2001), after acquiring the 4% interest US's direct interest has not increased by at least a 10% direct interest (i.e., its direct interest increased by only 4%). Therefore, US does not have to report the December 1, 2001, acquisition under section 6046A. On April 1, 2002, FC2 distributes a 6% direct interest in FP to US. US now owns a 22% direct interest in FP. Compared to US's direct interest when US last had a reportable event (12% on September 1, 2001), after the April 1 acquisition US's direct interest has increased by at least a 10% interest (12% to 22%). US must report the April 1, 2002 acquisition on a Form 8865 attached to US's 2002 income tax return.
(c) Content of return. The Form 8865 that must be filed under paragraph (a)(1) of this section must contain the following information in such form and manner and to the extent that Form 8865 and its instructions prescribe—
(1) The name, address, and taxpayer identification number of the United States person required to file the return;
(2) Information about other persons (foreign or domestic) whose interests in the foreign partnership the person reporting under section 6046A is considered to own under section 6038(e)(3)(C) and section 267(c);
(3) Information about all foreign entities that were disregarded as entities separate from their owners under §§ 301.7701-2 and 301.7701-3 of this chapter that were owned by the foreign partnership during the partnership's tax year ending with or within the tax year of the person filing Form 8865 pursuant to section 6046A;
(4) For each reportable event, the date of the event, the type of event (acquisition, disposition, or change in proportional interest), and the United States person's direct percentage interest in the foreign partnership immediately before and immediately after the event;
(5) The fair market value of the interest acquired or disposed of;
(6) Information about partnerships (foreign and domestic) in which the foreign partnership owned a direct interest, or a constructive interest of ten percent or more under sections 267(c)(1) and (5) and the regulations thereunder, during the partnership's tax year ending with or within the tax year of the person filing Form 8865 pursuant to section 6046A; and
(7) Any other information required to be submitted by Form 8865 and its instructions.
(d) Time and manner for filing returns. The Form 8865 must be filed with the timely filed (including extensions) income tax return of the United States person for the tax year in which the reportable event occurs. If the United States person is not required to file an income tax return for its tax year in which the reportable event occurs, but is required to file an information return for that year (for example, Form 1065, “U.S. Partnership Return of Income,” or Form 990, “Return of Organization Exempt from Income Tax”), the United States person should attach the Form 8865 to its information return filed for that tax year.
(e) Duplicate returns. If required by the instructions to Form 8865, a duplicate Form 8865 (including attachments and schedules) must also be filed.
(f) Persons excepted from filing return —(1) Section 6038B overlap. If a United States person acquires an interest in a foreign partnership as a result of a section 721 contribution required to be reported under section 6038B, and the person properly reports the contribution under section 6038B, then the United States person is not required to report the acquisition of the partnership interest under section 6046A(a) should it constitute a reportable event under paragraph (b)(1) of this section. The acquisition will still constitute a reportable event for purposes of making future comparisons pursuant to paragraphs (b)(1)(i)(B), (b)(1)(ii)(B) and (b)(1)(iii) of this section. A person that fails to properly report the section 721 contribution under section 6038B and the regulations thereunder and that fails to properly report the acquisition of the partnership interest under section 6046A may be subject to the penalties applicable to a failure to comply with the requirements of section 6038B, as well as the penalties applicable for a failure to comply with the requirements of section 6046A. See paragraph (h) of this section for more information about the penalties for failure to comply with the requirements of section 6046A.
(2) Trusts relating to state and local government employee retirement plans. The return requirement of section 6046A does not apply to trusts relating to state and local government employee retirement plans, unless the instructions to Form 8865 provide otherwise.
(3) Reporting under this section not required of partnerships excluded from the application of subchapter K. The reporting requirements of this section will not apply to any United States person in respect of an eligible partnership as described in § 1.761-2(a) in which that United States person is a partner, if such partnership has validly elected to be excluded from all of the provisions of subchapter K of chapter 1 of the Internal Revenue Code in the manner specified in § 1.761-2(b)(2)(i), or is deemed to have elected to be excluded from all of the provisions of subchapter K of chapter 1 of the Internal Revenue Code in accordance with the provisions of § 1.761-2(b)(2)(ii).
(4) Exclusion for satellite organizations. The return requirement of section 6046A does not apply to the International Telecommunications Satellite Organization (or a successor organization) or the International Maritime Satellite Organization (or a successor organization).
(g) Method of reporting. Except as otherwise provided on Form 8865, or the accompanying instructions, any amounts required to be reported under section 6046A and this section must be expressed in United States dollars, with a statement of the exchange rates used. All statements required on or with Form 8865 pursuant to this section must be in English.
(h) Penalties for violating section 6046A. For penalties for violating section 6046A, see sections 6679 and 7203.
(i) Statute of limitations. For exceptions to the limitations on assessment in the event of a failure to provide information under section 6046A, see section 6501(c)(8).
(j) Effective date. This section applies to reportable events occurring after December 31, 1999. No reporting under section 6046A is required for reportable events occurring on or before December 31, 1999.
§ 1.6046-2   Returns as to foreign corporations which are created or organized, or reorganized, on or after September 15, 1960, and before January 1, 1963.
(a) Requirement of returns. In the case of any foreign corporation which is created or organized, or reorganized, on or after September 15, 1960, and before January 1, 1963:
(1) Each United States citizen or resident who was an officer or director of such corporation at any time within 60 days after such creation or organization, or reorganization, and
(2) Each United States shareholder of such corporation by or for whom, at any time within 60 days after such creation or organization, or reorganization, 5 percent or more in value of such corporation's then outstanding stock was owned directly or indirectly (including, in the case of an individual stock owned by members of his family),
(b) Information required to be shown on return. The return required by section 6046, prior to its amendment by section 20(b) of the Revenue Act of 1962, and this section shall set forth the following information:
(1) The name and address of the person (or persons) filing the return, and an indication that he is a United States shareholder, officer, or director;
(2) The name and business address of the foreign corporation;
(3) The name of the country under the laws of which the foreign corporation was created or organized, or reorganized;
(4) The name and address of the foreign corporation's statutory or resident agent in the country of incorporation;
(5) The date of the foreign corporation's creation or organization, or reorganization;
(6) A statement of the manner in which the creation or organization, or reorganization, of the foreign corporation was effected;
(7) A complete statement of the reasons for, and the purposes sought to be accomplished by, the creation or organization, or reorganization, of the foreign corporation;
(8) A statement showing the classes and kinds of assets transferred to the foreign corporation in connection with its creation or organization, or reorganization, including a list completely describing each asset or group of assets, its value, date of transfer, and the name and address of person (or persons) owning such asset or group immediately prior to the transfer;
(9) A statement showing the assets transferred and the securities issued by the foreign corporation in its creation or organization or reorganization, as well as the name and address of each person to whom such a transfer or issuance was made;
(10) A statement specifying the amount and type of any indebtedness due from the foreign corporation to each of its shareholders and the name of each such shareholder;
(11) The names and addresses of the shareholders of the foreign corporation at the time of its creation or organization or reorganization, and the classes of stock and number of shares held by each;
(12) The names and addresses of subscribers to the stock of the foreign corporation, and the number of shares subscribed to by each; and
(13) The name and address of the person (or persons) having custody of the books of account and records of the foreign corporation, and the location of such books and records if different from such address.
(c) Time and place for filing return. The return required by section 6046, prior to its amendment by section 20(b) of the Revenue Act of 1962, and this section shall be filed with the Internal Revenue Service Center designated in the instructions of the applicable form. Such return shall be filed on or before the 90th day after the date such foreign corporation is created or organized, or reorganized.
§ 1.6046-3   Returns as to formation or reorganization of foreign corporations prior to September 15, 1960.
(a) Requirement of returns. Every attorney, accountant, fiduciary, bank, trust company, financial institution, or other person, who, on or before September 14, 1960, aids, assists, counsels, or advises in, or with respect to, the formation, organization, or reorganization of any foreign corporation shall file an information return on Form 959 (as in use prior to the October 1960 revision). The return must be filed in every such case regardless of:
(1) The nature of the counsel or advice given, whether for or against the formation, organization, or reorganization of the foreign corporation, or the nature of the aid or assistance rendered, and
(2) The action taken upon the advice or counsel, that is, whether the foreign corporation is actually formed, organized or reorganized.
(b) Special provisions —(1) Employers. In the case of aid, assistance, counsel, or advice in, or with respect to, the formation, organization, or reorganization of a foreign corporation given by a person in whole or in part through the medium of employees (including, in the case of a corporation, the officers thereof), the return made by the employer must set forth in detail the information required by this section including that which, as an incident to such employment, is within the possession or knowledge or under the control of such employees.
(2) Employees. The obligation of an employee (including, in the case of a corporation, the officers thereof) to file a return with respect to any aid, assistance, counsel, or advice in or with respect to the formation, organization, or reorganization of a foreign corporation, given as an incident to his employment, will be satisfied if a return as prescribed by this section is duly filed by the employer. Clerks, stenographers, and other employees rendering aid or assistance solely of a clerical or mechanical character in or with respect to the formation, organization, or reorganization of a foreign corporation are not required to file returns by reason of such services.
(3) Partners. In the case of aid, assistance, counsel, or advice in, or with respect to, the formation, organization, or reorganization of a foreign corporation given by one or more members of a partnership in the course of its business, the obligation of each such individual member to file a return will be satisfied if a return as prescribed by this section is duly filed by the partnership executed by all the members of the firm who gave any such aid, assistance, counsel, or advice. If, however, the partnership has been dissolved at the time the return is due, individual returns must be filed by each member of the former partnership who gave any such aid, assistance, counsel, or advice.
(4) Return jointly made. If two or more persons aid, assist, counsel, or advise in, or with respect to, the formation, organization, or reorganization of a particular foreign corporation, any two or more of such persons may, in lieu of filing several returns, jointly execute and file one return.
(5) Separate return for each corporation. If a person aids, assists, counsels, or advises in, or with respect to, the formation, organization, or reorganization of more than one foreign corporation, a separate return must be filed with respect to each foreign corporation.
(c) Information required to be shown on return. The return required by section 6046, prior to its amendment by section 7(a) of the Act of September 14, 1960, and this section shall set forth the following information to the extent the information is within the possession or knowledge, or under the control, of the person filing the return:
(1) The name and address of the person (or persons) to whom, and the person (or persons) for whom, or on whose behalf, the aid, assistance, counsel, or advice was given;
(2) The name and address of the foreign corporation and the country under the laws of which it was formed, organized, or reorganized;
(3) The month and year when the foreign corporation was formed, organized, or reorganized;
(4) A statement of the manner in which the formation, organization, or reorganization of the foreign corporation was effected;
(5) A complete statement of the reasons for, and the purposes sought to be accomplished by, the formation, organization, or reorganization of the foreign corporation;
(6) A statement showing the classes and kinds of assets transferred to the foreign corporation in connection with its formation, organization, or reorganization, including a detailed list of any stock or securities included in such assets, and a statement showing the names and addresses of the persons who were the owners of such assets immediately prior to the transfer;
(7) The names and addresses of the shareholders of the foreign corporation at the time of the completion of its formation, organization, or reorganization, showing the classes of stock and number of shares held by each and, in the case of Forms 959 filed after December 31, 1958, the names and addresses of the subscribers to the stock of the foreign corporation and the number of shares subscribed to by each;
(8) The name and address of the person (or persons) having custody of the books of account and records of the foreign corporation; and
(9) Such other information as is required by the return form.
(d) Privileged communications. An attorney-at-law is not required to file a return with respect to any advice given or information obtained through the relationship of attorney and client.
(e) Time and place for filing return —(1) Time for filing. Returns required by section 6046, prior to its amendment by section 7(a) of the Act of September 14, 1960, and this section shall be filed within 30 days after the first performance of any of the functions referred to in paragraph (a) of this section. If in a particular case, the aid, assistance, counsel, or advice given by any person extends over a period of more than one day, such person, to avoid multiple filing of returns, shall file a return within 30 days after either of the following events:
(i) The formation, organization, or reorganization of the foreign corporation, or
(ii) The termination of his aid, assistance, counsel, or advice in, or with respect to, the formation, organization, or reorganization of the foreign corporation.
(2) Place for filing. Returns required by section 6046 of the Internal Revenue Code of 1954 and this section shall be filed with the Internal Revenue Service Center designated in the instructions of the applicable form.
(f) Penalties. For criminal penalties for failure to file a return and filing a false or fraudulent return, see sections 7203, 7206, and 7207.
§ 1.6047-1   Information to be furnished with regard to employee retirement plan covering an owner-employee.
(a) Trustees and insurance companies —(1) Requirement of return. (i) Every trustee of a trust described in section 401(a) and exempt from tax under section 501(a) which makes payments of amounts described in subparagraph (2) of this paragraph aggregating $10 or more during any calendar year to an individual (or his beneficiary) who was covered, within the meaning of paragraph (a)(2) of § 1.401-10, as an owner-employee under the plan of which such trust is a part shall make a return on Forms 1096 and 1099 for such year showing the name and address of the person to whom paid, the aggregate amount of such payments, specifically identified as an amount to which this paragraph applies, and such other information as is required by the forms. A separate Form 1099 shall be filed with respect to each payee. The term “owner-employee” means an owner-employee as defined in section 401(c)(3) and paragraph (d) of § 1.401-10. Any custodial account which satisfies the requirements of section 401(f) shall be treated as a qualified trust and the custodian of such a custodial account must comply with the requirements of this section as if he were the trustee.
(ii) Every issuer of a contract which is treated as an annuity contract under sections 401 through 404 purchased by a trust described in section 401(a) and exempt from tax under section 501(a) or under a plan described in section 403(a) which makes payments of amounts described in subparagraph (2) of this paragraph aggregating $10 or more during any calendar year to an individual (or his beneficiary) who was covered, within the meaning of paragraph (a)(2) of § 1.401-10, as an owner-employee under the plan of which such trust is a part or under which such contract was purchased shall make a return on Forms 1096 and 1099 for such year showing the name and address of the person to whom paid, the aggregate amount of such payments, specifically identified as an amount to which this paragraph applies, and such other information as is required by the form. A separate Form 1099 shall be filed with respect to each payee.
(2) Amounts subject to this section. The amounts subject to reporting under subparagraph (1) of this paragraph include all amounts distributed or made available to which section 402(a) (relating to employees' trusts) or section 403(a) (relating to employee annuity plans) applies, whether or not such amounts are includible in gross income and whether or not attributable to contributions made while the individual to whom they relate was an owner-employee. However, amounts subject to reporting do not include any amounts distributed or made available by the trustee of any trust or the issuer of any contract under any plan with respect to which he has not received the notification provided in either subparagraph (3) of this paragraph or paragraph (b) of this section. Amounts distributed or made available under the plan include, for example, amounts received by the individual as loans on contracts purchased under the plan, and payments made to the individual by reason of the surrender of contracts purchased under the plan, whether or not prior to their maturity.
(3) Notification by trustee. The trustee of any trust described in section 401(a) and exempt from tax under section 501(a) who receives notification from any owner-employee that contributions have been made to the trust on behalf of that owner-employee as an owner-employee shall notify in writing the issuer of any contract which is treated as an annuity contract under sections 401 through 404 purchased by the trust for the benefit of that owner-employee that such contributions have been made to such trust. Such notification shall be delivered to such issuer at the time such contract is purchased or within 90 days after the notification required by paragraph (b) of this section is received by the trustee, whichever is later. Only one such notification must be made with respect to any contract.
(4) Record keeping. Any trustee, insurance company, or other person, which is referred to in subparagraph (1) of this paragraph and which is notified under section 6047(b) that contributions to the trust or under the plan have been made on behalf of an owner-employee shall maintain a record of such notification until all funds of the trust or under the plan on behalf of the owner-employee have been distributed.
(5) Inclusion of other payments. The Form 1099 filed under this section by any person with respect to payments to another person during a calendar year may, at the election of the maker, include other payments made by him to such other person during such year which are required to be reported on Form 1099.
(6) Time and place for filing. The return required under this section for any calendar year shall be filed after the close of that year and on or before February 28 (March 31 if filed electronically) of the following year with any of the Internal Revenue Service Centers, the addresses of which are listed in the instructions for Form 1096. For extensions of time for filing returns under this section, see § 1.6081-1.
(b) Notification by owner-employee. Any owner-employee on behalf of whom contributions are made to a trust described in section 401(a) and exempt under section 501(a) or under a plan described in section 403(a) shall notify in writing:
(1) The trustee of such a trust, or
(2) The issuer of any contract which is treated as an annuity contract under sections 401 through 404 under such plan,
(c) Penalties. For civil penalty for failure to file a return required by this section, and for criminal penalty for furnishing fraudulent information under this section, see §§ 301.6652-3 and 301.7207-1 respectively.
(d) Permission to submit information required by Form 1099 on magnetic tape. For rules relating to permission to submit the information required by Form 1099 on magnetic tape or other media, see § 1.9101-1.
§ 1.6047-2   Information relating to qualifying longevity annuity contracts.
(a) Requirement and form of report —(1) In general. Any person issuing any contract that is intended to be a qualifying longevity annuity contract (QLAC), defined in § 1.401(a)(9)-6(q), shall make the report required by this section. This requirement applies only to contracts purchased or held under any plan, annuity, or account described in section 401(a), 403(a), 403(b), or 408 (other than a Roth IRA) or eligible governmental plan under section 457(b).
(2) Annual report. The issuer shall make annual calendar-year reports on the applicable form prescribed by the Commissioner for this purpose concerning the status of the contract. The report shall identify that the contract is intended to be a QLAC and shall contain the following information—
(i) The name, address, and identifying number of the issuer of the contract, along with information on how to contact the issuer for more information about the contract;
(ii) The name, address, and identifying number of the individual in whose name the contract has been purchased;
(iii) If the contract was purchased under a plan, the name of the plan, the plan number, and the Employer Identification Number (EIN) of the plan sponsor;
(iv) If payments have not yet commenced, the annuity starting date on which the annuity is scheduled to commence, the amount of the periodic annuity payable on that date, and whether that date may be accelerated;
(v) For the calendar year, the amount of each premium paid for the contract and the date of the premium payment;
(vi) The total amount of all premiums paid for the contract through the end of the calendar year;
(vii) The fair market value of the QLAC as of the close of the calendar year; and
(viii) Such other information as the Commissioner may require.
(b) Manner and time for filing —(1) Timing. The report required by paragraph (a)(2) of this section shall be filed in accordance with the forms and instructions prescribed by the Commissioner. Such a report must be filed for each calendar year beginning with the year in which premiums for a contract are first paid and ending with the earlier of the year in which the individual in whose name the contract has been purchased attains age 85 (as adjusted pursuant to § 1.401(a)(9)-6(q)(4)(ii)(B)) or dies.
(2) Surviving spouse. If the individual dies and the sole beneficiary under the contract is the individual's spouse (in which case the spouse's annuity would not be required to commence until the individual would have commenced benefits under the contract had the individual survived), the report must continue to be filed for each calendar year until the calendar year in which the distributions to the spouse commence or in which the spouse dies, if earlier.
(c) Issuer statements. Each issuer required to file the annual report required by paragraph (a)(2) of this section shall furnish to the individual in whose name the contract has been purchased a statement containing the information required to be included in the report, except that such statement shall be furnished to a surviving spouse to the extent that the report is required to be filed under paragraph (b)(2) of this section. A copy of the required form may be used to satisfy the statement requirement of this paragraph (c). If a copy of the required form is not used to satisfy the statement requirement of this paragraph (c), the statement shall contain the following language: “This information is being furnished to the Internal Revenue Service.” The statement required by this paragraph (c) shall be furnished on or before January 31 following the calendar year for which the report required by paragraph (a)(2) of this section is required.
(d) Penalty for failure to file report. Section 6652(e) prescribes a penalty for failure to file the report required by paragraph (a)(2) of this section.
(e) Effective/applicability date. This section applies to contracts purchased on or after July 2, 2014.