64072 Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1, 31, 301, and 602 

[TD 9504] 

RIN 1545–BI66 

Basis Reporting by Securities Brokers 

and Basis Determination for Stock 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations on broker reporting of sales 

of securities and on the basis of 

securities. These final regulations reflect 

amendments under the Energy 

Improvement and Extension Act of 2008 

that require brokers to report a 

customer’s adjusted basis in sold 

securities and classify gain or loss as 

long-term or short-term, and that allow 

taxpayers to compute the basis of 

certain stock by averaging. The 

regulations affect brokers and 

custodians that make sales or transfer 

securities on behalf of customers, 

issuers of securities, and taxpayers that 

purchase or sell securities. The 

regulations also reflect amendments that 

provide brokers and others until 

February 15 to furnish certain 

information statements to customers. 

DATES: Effective Date: These regulations 

are effective on October 18, 2010. 

Applicability Date: For dates of 

applicability, see §§ 1.1012–1(c)(10), 

1.1012–1(e)(12), 1.6045A–1(d), and 

1.6045B–1(g). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the regulations under 

sections 408, 6039, 6042, 6044, 6045, 

6045A, 6045B, 6049, 6051, 6721, and 

6722, Stephen Schaeffer of the Office of 

Associate Chief Counsel (Procedure and 

Administration) at (202) 622–4910; 

concerning the regulations under 

section 1012, Edward C. Schwartz of the 

Office of Associate Chief Counsel 

(Income Tax and Accounting) at (202) 

622–4960 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

The collection of information 

contained in these final regulations 

related to the furnishing of information 

in connection with the transfer of 

securities has been reviewed and 

approved by the Office of Management 

and Budget (OMB) in accordance with 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3507(d)) under control 

number 1545–2186. The collection of 

information in these final regulations in 

§§ 1.6045–1(c)(3)(xi)(C) and 1.6045A–1 

is required to comply with the 

provisions of section 403 of the Energy 

Improvement and Extension Act of 

2008, Division B of Public Law 110–343 

(122 Stat. 3765, 3854 (2008)). 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a valid control 

number assigned by the Office of 

Management and Budget. 

Books or records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. 

Background 

This document contains amendments 

to the Income Tax Regulations (26 CFR 

part 1), the Regulations on Employment 

Tax and Collection of Income Tax at the 

Source (26 CFR part 31), and the 

Regulations on Procedure and 

Administration (26 CFR part 301). 

On December 17, 2009, the Treasury 

Department and the IRS published in 

the Federal Register (74 FR 67010) 

proposed regulations (REG–101896–09) 

relating to information reporting by 

brokers, transferors, and issuers of 

securities under sections 6045, 6045A, 

and 6045B of the Internal Revenue Code 

(Code), and the computation of basis 

under section 1012. Written and 

electronic comments responding to the 

notice of proposed rulemaking were 

received, and a public hearing was held 

on February 17, 2010. 

After considering the comments, the 

proposed regulations are adopted as 

amended by this Treasury decision. The 

comments and revisions are discussed 

in the preamble. 

Summary of Comments and 

Explanation of Revisions 

1. Effective Date 

Commentators requested a delay in 

the effective date of the reporting 

requirements to allow adequate time to 

administratively implement the rules. 

The final regulations do not adopt this 

request as inconsistent with the 

statutorily mandated effective dates. 

However, in order to promote industry 

readiness to comply with the reporting 

requirements beginning in 2011, a 

separate notice is being issued with 

these final regulations to provide 

transitional relief from the transfer 

reporting requirements under section 

6045A (discussed in more detail later in 

this preamble). See Notice 2010–67. The 

notice provides that the IRS will not 

assert penalties under section 6722 for 

a failure to furnish a transfer statement 

for any transfer of stock in 2011 that is 

not incidental to the stock’s purchase or 

sale. Further, a receiving broker may 

treat this stock as a noncovered security. 

See § 601.601(d)(2). Additionally, the 

IRS will continue to work closely with 

stakeholders to ensure the smooth 

implementation of the provisions in 

these regulations, including the 

mitigation of penalties in the early 

stages of implementation for all but 

particularly egregious cases. 

2. Basis Determination—Average Basis 

Method 

a. Definition of Dividend Reinvestment 

Plan 

i. Acquisition of Stock 

Consistent with section 1012(d)(4)(B), 

the proposed regulations provided that 

stock is acquired in connection with a 

dividend reinvestment plan (DRP) if the 

stock is acquired under the DRP or if the 

dividends paid on the stock are subject 

to the DRP. A commentator stated that 

DRP classification under the proposed 

regulations is highly factual and brokers 

will have difficulty determining if stock 

is in a DRP. The commentator 

recommended that the final regulations 

provide that a broker should be required 

to treat stock as DRP stock only if the 

broker receives documentation that a 

plan is a DRP and knows or has reason 

to know that the stock is subject to the 

plan. The final regulations do not adopt 

this recommendation as unduly 

restrictive. 

ii. Dividend Reinvestment 

Section 1012(d)(4)(A) defines a 

dividend reinvestment plan as an 

arrangement under which dividends are 

reinvested in identical stock. The 

proposed regulations provided that a 

plan qualifies as a DRP if the written 

plan documents require that at least 10 

percent of every dividend paid on any 

share of stock is reinvested in identical 

stock. 

Several commentators recommended 

eliminating the 10 percent rule because 

it will require many existing plans to 

amend their plan documents at 

considerable expense. The 

commentators suggested that a plan 

should qualify as a DRP if the plan 

documents merely allow the 

reinvestment of dividends. 

The final regulations do not adopt this 

comment, which is inconsistent with 

the legislative intent that basis averaging 

is appropriate when dividends actually 

are reinvested. If a stock pays dividends, 

a plan should be required to reinvest a 

minimum percentage of dividends to 

qualify as a DRP. Ten percent is a 

reasonable minimum percentage. 


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iii. Definition of Dividend 

The proposed regulations did not 

define the term dividend. Commentators 

recommended that the final regulations 

define dividend broadly to include any 

distribution on stock, including 

ordinary dividends, capital gains 

distributions, non-taxable returns of 

capital, and cash in lieu of fractional 

shares. 

The final regulations do not define 

dividend. They provide that only 

dividends within the meaning of section 

316 are subject to the 10 percent 

reinvestment requirement. The final 

regulations also clarify that a DRP may 

average the basis of stock acquired by 

reinvesting distributions that are not 

dividends under section 316. 

b. Definition of Regulated Investment 

Company 

The proposed regulations did not 

address the definition of a regulated 

investment company (RIC). Under 

§ 1.1012–1(e)(5)(ii), a unit investment 

trust (UIT) is treated as a RIC for basis 

averaging purposes only if the UIT 

meets certain requirements. A 

commentator suggested that the 

regulations should delete this provision 

and allow all UITs that elect to be 

treated as RICs to use the average basis 

method. 

The proposed regulations did not 

address this issue. Therefore, the final 

regulations do not adopt this suggestion. 

The treatment of UITs as RICs for 

purposes of allowing basis averaging 

may be considered for future guidance. 

c. Definition of Identical Stock 

The proposed regulations provided 

that stock is identical if it has the same 

Committee on Uniform Security 

Identification Procedures (CUSIP) 

number, except that stock in a DRP is 

not identical to stock not in a DRP. The 

proposed regulations also provided that 

stock acquired in connection with a 

DRP includes transfers of identical stock 

into a DRP. A commentator noted that, 

if stock in a DRP is not identical to stock 

not in a DRP, then a taxpayer could not 

transfer identical stock into a DRP. 

To address this comment, the final 

regulations delete from the definition of 

identical stock the rule that stock in a 

DRP is not identical to stock not in a 

DRP. Because this rule served to limit 

the average basis method to stock in a 

DRP, the final regulations provide that, 

for purposes of computing the average 

basis of identical stock, stock in a DRP 

is not identical to stock with the same 

CUSIP number that is not in a DRP. 

d. Time and Manner of Making the 

Average Basis Method Election 

i. Requirement for Affirmative Election 

A commentator requested clarification 

on whether a taxpayer is treated as 

electing the average basis method if the 

taxpayer fails to affirmatively elect a 

basis determination method and the 

average basis method is the broker’s 

default method. In response to this 

comment, the final regulations clarify 

that a taxpayer’s failure to notify a 

broker that the taxpayer elects a basis 

determination method is not an election 

of a method. Thus, a taxpayer that fails 

to affirmatively elect the average basis 

method has not made an election that 

the taxpayer may revoke. If the average 

basis method is the broker’s default 

method, the taxpayer may change from 

that method prospectively. 

ii. Scope of Average Basis Method 

Election 

The proposed regulations required a 

taxpayer to elect the average basis 

method separately for each account 

holding stock that is a covered security 

for which the method is permissible. A 

commentator suggested that the final 

regulations permit one average basis 

method election to encompass all 

eligible accounts with a custodian or 

agent, as well as future accounts with 

that custodian or agent. The final 

regulations adopt this comment. The 

final regulations also clarify that the 

average basis method election must 

identify each account and the stock in 

the account to which the election 

applies. 

iii. Written Average Basis Method 

Election 

The proposed regulations provided 

that a taxpayer must notify a custodian 

or agent of the average basis method 

election in writing. A commentator 

stated that this requirement should be 

eliminated because it is difficult to 

implement and confusing to taxpayers 

who use the average basis method for 

RIC stock acquired before 2012. The 

commentator opined that the writing 

requirement will prevent brokers from 

using the average basis method as their 

default method. 

The final regulations do not adopt this 

comment. The writing requirement 

ensures that both taxpayers and brokers 

have a record of the fact and scope of 

the election. The requirement applies to 

a taxpayer’s election to use average basis 

and does not prevent a broker from 

selecting average basis as a default 

method. 

Commentators requested that the final 

regulations clarify that a taxpayer may 

make a written average basis election 

electronically. The final regulations 

adopt this comment. 

iv. Transition Rule From DoubleCategory Method 

The proposed regulations provided a 

transition rule effective on the 

publication date of the final regulations 

for stock for which a taxpayer uses the 

double-category method of determining 

average basis. A commentator requested 

that the final regulations delay the 

effective date of the transition rule to 

allow time for programming and 

accounting system changes. The final 

regulations adopt this comment and 

provide an April 1, 2011, effective date 

for the transition rule. 

e. Change in Method of Accounting 

The proposed regulations stated that a 

change in basis determination method is 

a change in method of accounting 

requiring the consent of the 

Commissioner. A commentator opined 

that a change to or from the average 

basis method is not a change in method 

of accounting that requires the consent 

of the Commissioner. Another 

commentator requested that a change to 

or from the average basis method be 

allowed without the Commissioner’s 

consent or that the process be 

simplified. The commentator suggested 

that the final regulations require 

taxpayers to notify their custodians or 

agents of the change. 

The final regulations provide rules 

governing the time and manner of 

electing or changing from the average 

basis method, determining the basis of 

stock following a change between the 

average basis method and a cost basis 

method, and identifying stock sold. The 

regulations permit taxpayers to elect or 

change from the average basis method at 

any time during a taxable year and to 

choose a method to identify stock sold 

on a sale-by-sale basis. These rules do 

not involve the elements of consistency 

and regularity inherent in methods of 

tax accounting, which generally apply 

on the basis of a taxable year. Therefore, 

the final regulations provide that a basis 

determination method for stock is not a 

method of accounting and a change in 

a method of determining basis for stock 

is not a change in method of accounting 

to which sections 446 and 481 apply. 

f. Account by Account Rules 

The proposed regulations provided 

that DRP or RIC stock acquired before 

January 1, 2012, is treated as held in a 

separate account from DRP or RIC stock 

acquired on or after that date. The 

proposed regulations also provided that 


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covered and noncovered securities are 

treated as held in separate accounts. 

The purpose of the separate account 

rule is to ensure that covered securities 

and noncovered securities are treated as 

held in separate accounts. DRP and RIC 

stock acquired before January 1, 2012, 

are noncovered securities. Therefore, 

the two separate account rules are 

duplicative. The final regulations 

eliminate the separate account rule for 

DRP and RIC stock based on the date the 

stock is acquired and retain the separate 

account rule for covered and 

noncovered securities because this rule 

is more precise. 

g. Single-Account Election 

i. Identity of Account Ownership 

A commentator requested clarification 

on whether a single-account election 

may apply to an account owned by a 

taxpayer singly and an account a 

taxpayer owns jointly with another 

party. In response to this comment, the 

final regulations clarify that a singleaccount election applies only to 

accounts with the same ownership. 

ii. Effect on the Single-Account Election 

of Revoking or Changing From the 

Average Basis Method 

The proposed regulations provided 

that a RIC, DRP, or broker may make an 

irrevocable election to treat as held in a 

single account identical RIC stock or 

DRP stock held or treated as held in 

separate accounts for which the 

taxpayer has elected to use the average 

basis method. The proposed regulations 

also allowed a taxpayer to revoke an 

average basis method election by the 

earlier of one year from the date of the 

election or the first disposition of the 

stock. The basis of stock to which a 

revocation applies is its basis before 

averaging. After the revocation period 

expires, a taxpayer may change from the 

average basis method to another method 

prospectively. The basis of stock to 

which a change applies is the basis 

immediately before the change. 

Commentators asked how a taxpayer’s 

revocation of or change from the average 

basis method affects a single-account 

election. In response to this comment, 

the final regulations provide that a 

taxpayer’s revocation of an average basis 

method election for a particular stock 

voids the single-account election for 

that stock. Thus, taxpayers and brokers 

must retain pre-election basis 

information for averaged shares for as 

long as the taxpayer may revoke the 

average basis method election. Stock 

that becomes a covered security only as 

a result of a single-account election no 

longer is a covered security after the 

single-account election is voided. 

After a taxpayer changes from, rather 

than revokes, the average basis method, 

the shares that were treated as held in 

a single account before the change 

continue to be covered securities and 

treated as held in a single account, and 

the basis of each share of stock remains 

the same as the basis immediately 

before the change. 

iii. Accurate Basis Information 

Requirement 

Under the proposed regulations, a 

RIC, DRP, or broker may make a singleaccount election only for stock for 

which it has accurate basis information, 

which is information that the RIC, DRP, 

or broker neither knows nor has reason 

to know is inaccurate. 

Commentators suggested eliminating 

the accuracy requirement for the singleaccount election because it is subjective 

and increases uncertainty. A 

commentator noted that the accuracy 

requirement may deter RICs from 

making a single-account election 

because of uncertainty over whether 

basis determination practices in earlier 

years satisfy the standard. A 

commentator suggested permitting the 

use of any data that has been 

maintained to determine the basis of 

noncovered stock included in the 

single-account election. A commentator 

recommended that brokers be permitted 

to use taxpayer-provided information to 

determine the basis of noncovered stock 

in making the single-account election. A 

commentator requested penalty relief if 

a broker lacks actual knowledge that 

information is inaccurate. 

The final regulations retain the 

accuracy requirement and the ‘‘neither 

knows nor has reason to know’’ standard 

as striking an appropriate balance 

between the need for accuracy and 

flexibility. The ‘‘neither knows nor has 

reason to know’’ test is consistent with 

existing standards familiar to brokers for 

demonstrating reasonable cause for 

penalty relief under section 6724. 

3. Other Basis Determination Issues 

a. Use of Agent To Select Basis 

Determination Method 

Commentators suggested that the final 

regulations explicitly allow a taxpayer’s 

agent, such as an asset manager, 

investment advisor, or introducing 

broker, to select a basis determination 

method for a taxpayer. The final 

regulations do not adopt this comment. 

However, a taxpayer may authorize an 

agent to select a basis determination 

method under general agency 

principles. 

b. Cost Basis of Multiple Lots Purchased 

on One Day 

Commentators suggested that the final 

regulations allow brokers to average the 

basis of identical stock purchased or 

sold on the same day. In response to this 

comment, the final regulations provide 

that a taxpayer must determine the basis 

of identical stock by averaging the basis 

of each share if the stock is purchased 

at separate times on the same calendar 

day in executing a single trade order 

and the broker executing the trade 

provides a single confirmation that 

reports an aggregate total cost or an 

average cost per share. However, a 

taxpayer may determine the basis of the 

stock by the actual cost per share if the 

taxpayer notifies the broker in writing of 

this intent. The taxpayer must notify the 

broker by the earlier of the date of the 

sale of any of the stock for which the 

taxpayer received the confirmation or 

one year after the date of the 

confirmation. A broker may extend the 

one-year period but the taxpayer must 

notify the broker no later than the date 

of sale of any of the stock. 

c. Identification of Securities Sold 

i. Standing Orders 

The proposed regulations stated that a 

standing order for the specific 

identification of stock is treated as an 

adequate identification. A commentator 

suggested that the final regulations 

clarify that brokers are not required to 

accept standing orders. The proposed 

regulations allowed standing orders to 

serve as an adequate identification but 

did not require taxpayers or brokers to 

use or accept them. Therefore, the final 

regulations do not adopt this comment. 

ii. Confirmation of Sales 

The proposed regulations retained the 

rule that brokers or other agents must 

supply written confirmation of a 

taxpayer’s specific identification 

following a sale or transfer. A 

commentator stated that the final 

regulations should eliminate this 

requirement and opined that the Form 

1099–B, ‘‘Proceeds From Broker and 

Barter Exchange Transactions,’’ provides 

a sufficient confirmation of the 

transaction. Alternatively, the 

commentator suggested eliminating the 

confirmation requirement if the stock 

was identified by standing order. 

Another commentator suggested that a 

periodic customer account statement 

should qualify as a written 

confirmation. 

The final regulations retain the 

requirement for written confirmation of 

all sales and transfers of specifically 

identified stock as a reasonable 


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safeguard that specific identification 

orders are properly executed. However, 

in response to these comments, the final 

regulations provide that account 

statements or other documents a broker 

or agent periodically provides to a 

taxpayer may serve as written 

confirmation if provided to the taxpayer 

within a reasonable time after the sale 

or transfer. 

iii. Application of FIFO Rule Account 

by Account 

The proposed regulations provided 

that if a taxpayer sells or transfers stock 

and does not adequately identify the 

stock sold or transferred, the shares of 

stock deemed sold or transferred are the 

earliest acquired shares (FIFO rule). A 

commentator suggested that the final 

regulations clarify that the FIFO rule 

applies on an account by account basis. 

The account by account rule in 

section 1012(c)(1) relates to stock 

eligible for the average basis method. 

This rule overrides the earlier 

requirement that taxpayers must apply 

the average basis method across 

accounts and does not mandate similar 

treatment for cost basis stock. 

Incorporating an account by account 

requirement into the FIFO rule creates 

unnecessary complexity. Therefore, the 

final regulations do not adopt this 

comment. 

4. Returns of Brokers 

a. Form and Manner of Broker Reporting 

Requirements 

The proposed regulations provided 

that brokers must report on Form 1099– 

B adjusted basis and whether any gain 

or loss is long-term or short-term for a 

covered security. A commentator 

suggested that the final regulations 

allow long-term and short-term sales to 

be reported on the same return to 

improve reconciliation between the 

broker’s Form 1099–B and the 

customer’s Schedule D, ‘‘Capital Gains 

and Losses.’’ The final regulations do 

not adopt the suggestion. As noted by 

another commentator, brokers that use 

substitute statements may already 

segregate long-term sales from shortterm sales on the same statement in the 

same manner as on Schedule D, which 

segregates long-term transactions from 

short-term transactions. 

Consistent with the rule for 

aggregating the cost basis of multiple 

lots purchased on one day (discussed 

earlier in this preamble), the final 

regulations provide that a broker must 

report the basis of purchased stock and 

the gross proceeds of sold stock by 

averaging the basis or proceeds of each 

share if the stock is purchased or sold 

at separate times on the same calendar 

day in executing a single trade order 

and the broker executing the trade 

provides a single confirmation to the 

taxpayer that reports an aggregate total 

price or an average price per share. 

However, the final regulations do not 

permit a broker to average the basis or 

proceeds of stock if the customer timely 

notifies the broker in writing of an 

intent to determine the basis or 

proceeds by the actual cost or proceeds 

per share. A notification of an intent to 

determine the basis by the actual cost 

per share is timely if made in 

accordance with § 1.1012–1(c)(1)(ii). A 

notification of an intent to determine 

the proceeds by the actual proceeds per 

share is timely if the broker receives the 

notification by January 15 of the 

calendar year following the year of the 

sale. A broker may extend the January 

15 deadline but not beyond the due date 

for filing Form 1099–B. 

The proposed regulations moved the 

modifier ‘‘for cash’’ in the definition of 

sale to clarify that Form 1099–B 

reporting is required under section 6045 

for a sale only when and to the extent 

cash proceeds are paid to the seller. 

Commentators suggested further 

clarifying that this limitation applied to 

all disposition events listed in the 

definition. The final regulations adopt 

this request. 

Currently, sales of fractional shares of 

less than $20 are exempted from broker 

reporting. Commentators recommended 

expanding this exception to sales of 

fractional shares of less than $100. The 

final regulations do not adopt this 

request. 

b. Identification of a Security as Stock 

Under section 6045(g)(3)(C), the 

reporting requirements before 2013 

apply only to stock. The proposed 

regulations provided that, for basis 

reporting purposes, any security an 

issuer classifies solely as stock is treated 

as stock. If an issuer has not classified 

the security, the security is not treated 

as stock unless the broker knows, or has 

reason to know, that the security 

reasonably is classified as stock under 

general tax principles. 

Commentators suggested that issuers 

should be required to classify securities 

and that a security should be classified 

as stock only if the issuer has classified 

it as stock. The final regulations do not 

adopt these suggestions. It is 

appropriate to require a broker to report 

basis if the broker knows the security is 

stock for Federal tax purposes even if 

the issuer has not classified the security. 

Commentators suggested that the IRS 

create and maintain a list of every 

security classified as stock. The final 

regulations do not adopt this comment. 

Commentators requested that brokers 

only treat securities as stock if they 

know that the security is reasonably 

classified as stock under general tax 

principles instead of when they have 

reason to know. The final regulations 

adopt this comment. 

Commentators requested guidance 

addressing when an issuer fails to 

classify a security and brokers disagree 

whether the security is stock for Federal 

tax purposes. The final regulations 

clarify that a broker is not bound by 

another broker’s classification. As long 

as the issuer has not classified the 

security as stock, a broker is not 

required to treat a security as stock 

despite another broker’s classification 

unless the broker knows that the 

security is stock for Federal tax 

purposes. 

The proposed regulations treated any 

share of stock in a corporation described 

in § 301.7701–2(b) as stock for basis 

reporting purposes. Commentators 

asked whether interests in a real estate 

investment trust (REIT) or exchangetraded fund (ETF) are treated as stock 

under that definition. The final 

regulations clarify that any share of 

stock or any interest treated as stock in 

an entity organized as, or treated for 

Federal tax purposes as, a corporation 

(foreign or domestic) is stock for basis 

reporting purposes. Therefore, interests 

treated as stock in REITs and ETFs are 

treated as stock for basis reporting 

purposes if the issuers are taxable as 

corporations under the Code. 

Commentators also asked whether a 

depositary receipt representing shares of 

stock in a foreign corporation (an ADR) 

is treated as stock. The final regulations 

clarify that an ADR is stock for basis 

reporting purposes. 

c. Covered Securities 

The proposed regulations defined 

covered security to include a specified 

security acquired through a sale 

transaction. Commentators asked 

whether stock acquired through a stock 

split, the exercise of rights distributed 

by an issuer, the grant of restricted stock 

by an employer, and other scenarios 

constituted acquisitions through sale 

transactions. In response to these 

comments, the final regulations 

eliminate the sale-transaction rule and 

define covered security to include a 

specified security acquired for cash. 

Therefore, stock acquired through the 

exercise of rights distributed by an 

issuer is a covered security while 

restricted stock granted by an employer 

is not a covered security because the 

former is acquired for cash and the latter 


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is not. The final regulations also treat a 

security acquired due to a stock 

dividend, stock split, reorganization, 

redemption, stock conversion, 

recapitalization, corporate division, or 

other similar action as if it were 

acquired for cash and, therefore, as a 

covered security if the basis of the new 

security is determined from the basis of 

a covered security. 

The proposed regulations treated all 

stock acquired in 2011 as covered 

securities except RIC stock and DRP 

stock, which are not covered securities 

unless acquired in 2012 or later. 

Commentators suggested that stock 

acquired in 2011 no longer be a covered 

security if placed into a DRP. In 

response to this comment, the final 

regulations provide that stock acquired 

in 2011 no longer is a covered security 

if transferred to a DRP in 2011, but 

remains a covered security if transferred 

to a DRP after 2011. 

The final regulations also clarify that 

a security acquired by a foreign person 

that § 1.6045–1(g)(1)(i) exempts from 

Form 1099–B reporting at the time of 

acquisition is not a covered security 

even if the customer later loses this 

exemption, unless the broker knows or 

should have known (including by 

reason of information that the broker is 

required to collect under section 1471 or 

1472) that the customer is not a foreign 

person when the security is acquired. 

A commentator requested that a 

broker selling stock owned by a 

domestic partnership be exempted from 

basis reporting if the broker also 

prepared the customer’s Form 1065, 

‘‘U.S. Return of Partnership Income,’’ 

because the partnership return also 

reports the basis of securities sold by the 

partnership. The final regulations do not 

adopt this request. The commentator 

also requested that a broker selling stock 

owned by a foreign partnership be 

exempted from basis reporting when 

reporting the sale directly to U.S. 

partners under § 1.6049–5(d)(3)(ii) 

because any cost basis information 

reported by the broker would be 

erroneous. The final regulations adopt 

this request. 

d. Foreign Intermediaries 

The proposed regulations included in 

the definition of broker non-U.S. payors 

and non-U.S. middlemen to the extent 

provided in a withholding agreement 

described in § 1.1441–1(e)(5)(iii) 

between a qualified intermediary and 

the IRS. Commentators requested that 

the regulations instead exempt all 

foreign qualified intermediaries from 

basis reporting. In response to these 

comments, the final regulations do not 

adopt the proposed changes to the 

definition of broker. Thus, a qualified 

intermediary that is not a U.S. payor or 

U.S. middleman as described in 

§ 1.6049–5(c)(5) will not be treated as a 

broker with respect to sales effected at 

an office outside the United States. The 

Treasury Department and the IRS also 

note that the recently enacted 

provisions of chapter 4 of Subtitle A of 

the Code will impose certain 

information reporting requirements on 

foreign financial institutions that enter 

into an agreement with the IRS under 

section 1471(b). The Treasury 

Department and the IRS intend to issue 

future guidance coordinating the 

reporting requirements under section 

6045 with the reporting requirements 

under section 1471. In addition, section 

1471 allows a person who has entered 

into an agreement under section 1471(b) 

to elect to report certain information 

required under sections 6041, 6042, 

6045, and 6049. The Treasury 

Department and IRS anticipate that, if a 

foreign financial institution that has 

entered into an agreement under section 

1471(b) makes such an election, the 

agreement would specify the extent of 

such person’s reporting obligations with 

respect to information required to be 

reported under section 6045. 

Commentators requested that the 

regulations also exempt nonqualified 

intermediaries from basis reporting, 

even if the nonqualified intermediary is 

treated as a broker under § 1.6045–1 (for 

example, where the nonqualified 

intermediary effects the sale within the 

United States). The regulations do not 

adopt this request as contrary to the 

purposes of the statute. 

e. Treatment of Foreign Securities 

Commentators requested that a 

security issued by a non-U.S. issuer be 

excluded from the definition of a 

covered security. The commentators 

questioned whether foreign issuers will 

comply with section 6045B and report 

the U.S. tax consequences of their 

corporate actions. The final regulations 

do not adopt this comment because 

section 6045 does not distinguish 

between U.S. and non-U.S. issuers of 

securities. The regulations permit but do 

not require a broker to adjust basis for 

unreported corporate actions. 

f. Determination of Basis and Whether 

Gain or Loss on the Sale Is Long-Term 

or Short-Term 

The proposed regulations required 

brokers to adjust the reported basis to 

reflect information received on a 

transfer statement or issuer return 

(discussed in more detail later in this 

preamble) but otherwise do not require 

brokers to consider transactions, 

elections, or events occurring outside 

the account. Commentators asked 

whether brokers must apply certain 

Code provisions in determining 

reported basis. 

i. Regulated Investment Companies and 

Real Estate Investment Trusts 

Under sections 852(b)(4)(A) and 

857(b)(8), a loss on the sale of RIC or 

REIT shares held 6 months or less is 

long-term to the extent of capital gain 

dividends (distributed and 

undistributed) on the shares. One 

commentator asked whether brokers are 

required to adjust the character of the 

loss for the effects of sections 

852(b)(4)(A) or 857(b)(8). Under section 

852(b)(4)(B), if a shareholder in a RIC 

sells shares at a loss and held the shares 

for six months or less, the loss is 

disallowed to the extent the shareholder 

received a tax-exempt dividend. One 

commentator asked whether brokers are 

required to adjust the amount of the loss 

for the effects of section 852(b)(4)(B). 

The final regulations clarify that 

adjustments under sections 852(b)(4)(A), 

857(b)(8), and 852(b)(4)(B) are not 

required because the payment of taxexempt dividends and the existence of 

capital gain dividends (distributed and 

undistributed) may or may not occur in 

the same account as the sale. Further, 

requiring adjustments would also 

necessitate requiring brokers to include 

information on transfer statements about 

whether and when these types of 

dividends have been received or 

reported. 

A commentator requested the IRS to 

exercise its authority under section 

852(b)(4)(E) to shorten the holding 

period under section 852(b)(4) to 31 

days. This request is outside the scope 

of the current project and may be 

considered for future guidance. 

A commentator requested limiting the 

application of section 852(f), relating to 

load charges on the purchase of RIC 

stock, to reinvestments in securities 

with the same CUSIP consistent with 

proposed legislation that would limit 

section 852(f) to reinvestments by 

January 31st of the year following the 

disposition of the load-paying shares. 

The final regulations do not adopt this 

suggestion. 

ii. Straddles and Hedging Transactions 

Several commentators asked whether 

brokers are required to adjust their 

determination of holding period for 

securities in a single account if the 

securities are part of a hedging 

transaction, as defined in § 1.1221–2(b), 

or a straddle, as defined in section 1092. 

They also asked whether the provisions 

of section 1233(b) must be applied to 


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adjust the holding period or character of 

gain of a security when a customer has, 

in a single account, sold short some 

securities and holds or later acquires 

substantially identical securities. The 

fact patterns that fall under sections 

1092 and 1233(b) and § 1.1221–2(b) 

include situations when the CUSIPs of 

the positions may not be identical as 

well as situations when the CUSIPs of 

the positions are identical. Regardless, 

under the final regulations, brokers are 

not required to adjust the holding 

period or character of gain under 

sections 1092 and 1233(b) and § 1.1221– 

2(b). 

iii. Events Occurring Outside the 

Account 

The proposed regulations required a 

broker to take into account in 

determining basis any corporate action 

reported by an issuer of the security. 

Commentators requested clarification on 

how to determine basis after a corporate 

action that results in different treatment 

for minority shareholders than for a 

majority shareholder. The final 

regulations permit a broker to treat all 

customers after a corporate action as 

minority shareholders of the corporation 

unless the broker knows that the 

customer is a majority shareholder and 

the issuer reports the action’s effect on 

the basis of majority shareholders. 

The proposed regulations did not 

permit brokers to apply section 1259 

(regarding constructive sales) and 

section 475 (regarding the mark-tomarket method of accounting) when 

reporting adjusted basis and whether 

any gain or loss on the sale of a security 

is long-term or short-term. A 

commentator requested that reporting 

adjustments be permitted under these 

sections even if not required. The final 

regulations adopt this request. Another 

commentator asked whether brokers 

must apply section 1296 (regarding 

mark-to-market accounting for 

marketable stock in a passive foreign 

investment company). The final 

regulations provide that these 

adjustments are not required. A broker 

should inform customers of any nonrequired adjustments so that customers 

will not duplicate these adjustments. 

iv. Basis Determination Method 

The proposed regulations required 

brokers to report basis using the basis 

determination method a customer 

elects. Commentators requested that 

brokers be permitted to offer limited 

basis reporting methods even if this 

practice would force a customer that 

wanted a different method to move his 

or her account to a broker that offered 

reporting under that method. The final 

regulations do not adopt this request 

because section 1012 permits customers 

to report basis by a different permissible 

method than the default method 

selected by the broker and section 6045 

requires brokers to follow instructions 

from customers regarding this selection. 

v. Long-Term or Short-Term Gain or 

Loss 

Section 1222 defines long-term or 

short-term gain or loss by reference to 

whether a taxpayer has held a capital 

asset for more than one year. A 

commentator noted that accounting 

standards may define a year in different 

ways and requested that the final 

regulations adopt a uniform definition 

of a year for reporting purposes, such as 

360 or 365 days. The final regulations 

do not adopt this comment. The rules 

for determining whether a taxpayer has 

held an asset for more than one year are 

well established. No good justification 

exists for adopting a different rule solely 

for broker reporting purposes. 

vi. Commissions and Options Proceeds 

The proposed regulations required 

brokers to adjust basis for commissions 

and transfer taxes incurred from a 

purchase and, if not subtracted from 

gross proceeds, commissions charged 

for a sale and transfer taxes incurred on 

a sale. Commentators requested that the 

final regulations expand the definition 

of gross proceeds to explicitly permit 

adjustments for transfer taxes incurred 

on sale. The final regulations 

incorporate this suggestion. 

The proposed regulations did not alter 

the current rule under which some 

brokers report proceeds reduced by 

sales commissions and inform 

customers of this fact through a flag in 

Box 2 on Form 1099–B. Instead, in 

requiring brokers to account for sales 

commissions, the proposed regulations 

permitted brokers to either reduce the 

reported proceeds or increase the 

reported basis by the amount of the 

sales commissions. Commentators 

requested that all brokers be required to 

reduce the reported proceeds for 

commissions and transfer taxes from the 

sale. This suggestion is not adopted but 

may be considered in future guidance. 

Commentators requested that brokers 

be permitted to adjust basis for option 

premiums when an option is exercised 

in purchasing or selling a security even 

though this reporting is not mandatory 

until 2013. The proposed regulations 

permitted this treatment, which is also 

permitted under the final regulations. 

vii. Employee Compensation-Related 

Issues 

Section 6045(h) requires certain basis 

reporting adjustments to account for 

income recognized on options granted 

or acquired beginning in 2013. Because 

the option reporting requirements do 

not take effect until 2013, the proposed 

regulations provided that, for stock 

acquired in 2011 and 2012 in 

connection with employee stock 

purchase plans and incentive stock 

options, brokers did not need to adjust 

basis to account for the income 

recognized by the purchaser. 

Commentators suggested that this stock 

be excluded from basis reporting until 

2013 because purchasers may 

improperly rely on the reported basis. 

The final regulations do not adopt this 

suggestion. Purchasers will be assisted 

by IRS forms and publications, 

including Form 3921, ‘‘Exercise of an 

Incentive Stock Option Under Section 

422(b)’’ (in development), and Form 

3922, ‘‘Transfer of Stock Acquired 

Through an Employee Stock Purchase 

Plan Under Section 423(c)’’ (in 

development), in determining basis for 

stock acquired in 2011 and 2012. 

Commentators also requested that the 

final regulations not require basis 

reporting for stock acquired through an 

employee stock purchase plan because 

Form 3922 will report the exercise price 

per share and the fair market value of 

the stock on both the grant date and the 

exercise date. The final regulations do 

not adopt this comment because Form 

3922 must be filed when a purchaser 

first transfers legal title to the stock, not 

necessarily when the purchaser sells the 

stock, and these events may occur many 

years apart. Further, Form 3922 will not 

identify which shares are sold and will 

not reflect stock splits or other corporate 

actions between the date of reporting on 

Form 3922 and the date of sale. 

viii. Payments in a Foreign Currency 

The proposed regulations provided 

that brokers receiving payments made in 

foreign currency should report the 

amounts paid by converting each 

payment to a U.S. dollar amount using 

a spot rate or spot rate convention 

determined at the time the broker 

receives the payment. Commentators 

expressed the concern that determining 

the spot rate on the payment receipt 

date treats all sales as if the customer 

had elected under section 988 to 

incorporate the amount of gain or loss 

on the currency into the gain or loss on 

the sale of the security. However, the 

section 988(d) election is only relevant 

in the context of certain hedges. In the 

non-hedging context, long-standing 


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rules provide that investors must always 

compute gain or loss by determining 

adjusted basis using the spot rate as of 

the payment receipt date. See Rev. Rul. 

54–105 (1954–1 CB 12). Even in the 

hedging context, investors must 

compute gain or loss under these same 

rules unless they make the election 

under section 988. The final regulations 

therefore adopt the proposed rule. See 

§ 601.601(d)(2). 

Commentators asked whether the 

payment receipt date is the date the 

broker receives payment from the 

customer or the settlement date of the 

purchase. The final regulations continue 

to treat the payment receipt date as the 

date the broker receives payment but 

clarify that, for securities traded on an 

established securities market, the 

payment receipt date is the settlement 

date of the purchase. See § 1.988– 

2(a)(2)(iv). The final regulations also 

clarify that the same foreign currency 

reporting rules apply to transfer 

statements. 

g. Customer Identification of Securities 

The proposed regulations required 

brokers to report the sales of securities 

on a first-in, first-out basis within an 

account unless the customer notified the 

broker by means of making an adequate 

and timely identification of the 

securities to be sold. Commentators 

asked that, for reporting purposes, 

brokers be permitted to rely on 

customers’ standing orders or 

instructions for the sale or transfer of 

shares of stock. The proposed rule by 

cross reference to § 1.1012–1(c) already 

permitted standing orders to serve as an 

adequate identification for both sales 

and transfers of stock. Therefore, the 

final regulations adopt the proposed 

rule. 

Commentators asked how to apply the 

first-in, first-out reporting rule when the 

broker does not know the acquisition 

date of some shares of the security 

within the account. The final 

regulations clarify that brokers must 

report the sale of any shares or units of 

a security in the account with unknown 

acquisition dates first. Customers are 

expected to report basis consistently 

with broker reporting. 

h. Reporting of Wash Sales 

Section 6045(g)(2)(B)(ii) requires that, 

except as otherwise provided by the 

Secretary, a broker must apply the wash 

sale rules of section 1091 when 

reporting the adjusted basis of a covered 

security if the purchase and sale 

transactions resulting in a wash sale 

occur in the same account and are for 

identical securities (rather than 

substantially identical securities). A 

commentator objected to limiting broker 

reporting of wash sales to instances in 

which the purchase and sale 

transactions occur in the same account 

and are for identical securities. The final 

regulations retain these two statutory 

limitations but do not prohibit brokers 

from reporting wash sales across 

accounts or for substantially identical 

securities. 

A commentator asked whether 

brokers must report wash sales when 

the purchase and sale transactions are 

initiated in different accounts but the 

purchased shares are later transferred 

into the account of the sold shares. The 

final regulations clarify that brokers 

need not report wash sales in these 

circumstances because the purchase and 

sale transactions do not occur in the 

same account. 

Another commentator asked whether 

brokers must report wash sales when 

the purchase and sale transactions occur 

in the same account but the purchased 

security is transferred out of the account 

prior to the wash sale. The commentator 

opposed applying the wash sale 

reporting rules in this scenario because 

the rules would require a broker to 

adjust basis for a security no longer in 

the broker’s custody. The final 

regulations clarify that brokers do not 

need to report a wash sale if the 

purchased security is transferred to 

another account before the wash sale. 

Commentators asked whether brokers 

must report wash sales when stock is 

treated as held in a separate account 

under the basis method determination 

rules of § 1.1012–1. The final 

regulations clarify that the account 

limitation for wash sale reporting 

applies to stock treated as held in 

separate accounts. Thus, a broker is not 

required to report a wash sale involving 

a covered security and a noncovered 

security unless a single-account election 

is in effect. Similarly, a broker is not 

required to report a wash sale involving 

stock in a DRP and identical stock that 

is not in a DRP. 

Commentators requested exclusions 

from broker reporting of wash sales for 

de minimis amounts, sales of fractional 

shares, automatic dividend 

reinvestments, or compensation-related 

acquisitions. The final regulations do 

not adopt these proposals because, as 

other commentators noted, the 

substantive wash sale rules under 

section 1091 do not exclude these items. 

Creating additional exclusions solely for 

broker reporting purposes would 

introduce further discrepancies between 

broker reporting and customer reporting 

of wash sales. 

Commentators requested an exclusion 

from broker reporting of wash sales for 

customers that have made valid and 

timely mark-to-market accounting 

method elections under section 475 or, 

in the alternative, for customers that 

execute 10,000 trades in a single year. 

Other commentators stated that 

excluding these customers may be more 

burdensome than reporting wash sales 

for these accounts. The final regulations 

permit brokers to exclude from wash 

sales reporting a customer that has 

informed the broker in writing that the 

customer has made an election under 

section 475(f)(1). The exclusion only 

applies to the accounts identified by the 

customer as solely containing securities 

subject to the election. The final 

regulations also clarify that a taxpayer 

that is not a trader in securities within 

the meaning of section 475(f)(1) does 

not become a trader in securities, or 

create an inference that it is a trader in 

securities, by notifying a broker that it 

has made a valid and timely election 

under section 475(f)(1). 

Commentators asked that Form 1099– 

B and the transfer statement indicate 

whether the holding period of a security 

has been adjusted to reflect a wash sale. 

The final regulations do not adopt this 

suggestion. The rules require the 

holding period reported on Form 1099– 

B and transfer statements to reflect any 

wash sale adjustments. 

Commentators asked how the holding 

period rules such as section 1223(3) 

apply to wash sales. One commentator 

asked about the proper treatment of a 

wash sale when the sale and purchase 

transactions occur over a period of time 

and a corporate event occurs during that 

period that causes one pre-event share 

to not be economically equivalent to one 

post-event share. These and other 

comments requesting guidance on how 

the wash sale reporting rule applies to 

various types of activity within an 

account relate to the substantive rules 

under section 1091 and are outside the 

scope of these regulations. 

i. Reporting of Short Sales 

Beginning in 2011, section 6045(g)(5) 

requires gross proceeds and basis 

reporting for short sales for the year in 

which the short sale is closed rather 

than, as under the present law rule for 

gross proceeds reporting, the year in 

which the short sale is opened. The 

proposed regulations included a 

transition rule requiring brokers to 

report all short sales opened on or after 

January 1, 2010, for the year in which 

the short sale is closed. Commentators 

asked that this transition rule be 

modified to permit 2010 reporting of all 

short sales opened in 2010 even if the 

short sale remained open at the end of 


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2010. The final regulations adopt this 

request. 

Commentators requested that, for 

short sales opened before 2011 and 

closed in 2011 or later years, the 

regulations permit brokers to report the 

short sale for both the year the short sale 

is opened and the year the short sale is 

closed. The final regulations do not 

adopt this suggestion because no 

penalty is imposed for filing a 

nonrequired return. 

Reportable payments on securities 

sales under section 6045 are subject to 

backup withholding as provided in 

section 3406(b)(3)(C). When backup 

withholding applies to a short sale, 

current regulations at § 31.3406(b)(3)– 

2(b)(4) require backup withholding 

when the short sale is opened but 

permit a broker to delay withholding 

until the short sale is closed if, at the 

time the short sale is opened, the broker 

expects that the amount of gain realized 

upon the closing of the short sale will 

be determinable from the broker’s 

records. The proposed regulations 

required backup withholding only when 

the short sale was closed and the short 

sale became subject to reporting under 

section 6045(g)(5). Commentators asked 

that backup withholding on short sales 

continue to be permitted when the short 

sale is opened because the broker has 

cash proceeds from the sale on which to 

withhold. The final regulations adopt 

this comment and leave in place the 

current rule permitting a broker to 

perform backup withholding when the 

short sale is opened or closed. The 

proposed amendment to 

§ 31.3406(b)(3)–2(b)(4) is therefore not 

adopted. 

As a result of retaining the current 

backup withholding rule, a broker may 

perform backup withholding in a year 

before the short sale is closed. Current 

regulations at § 31.6051–4 require the 

broker to report the withholding on a 

Form 1099–B for the year of the 

withholding in addition to reporting the 

sale for the year the short sale is closed. 

The final regulations amend § 31.6051– 

4 to permit the IRS to determine 

whether to require gross proceeds to be 

reported only when the short sale is 

closed. 

j. Reporting of Sales by S Corporations 

Currently, no broker reporting on 

Form 1099–B is required for customers 

that are corporations, including S 

corporations. Section 6045(g)(4) requires 

brokers to begin Form 1099–B reporting 

for S corporations (other than a financial 

institution) for sales of covered 

securities acquired on or after January 1, 

2012. The proposed regulations 

accordingly removed corporations for 

which an election under section 1362(a) 

is in effect from the list of exempt Form 

1099–B recipients for sales of covered 

securities acquired beginning in 2012. 

Commentators requested that the 

regulations instead refer to the 

definition of S corporation at section 

1361(a). The final regulations adopt this 

comment for all references to an S 

corporation. 

Also, for sales of covered securities 

acquired beginning in 2012, the 

proposed regulations eliminated the socalled ‘‘eyeball test’’ allowing brokers to 

rely solely on the name of the customer 

to determine whether the customer is a 

corporation exempt from reporting. The 

proposed regulations retained the actual 

knowledge rule so that a broker does not 

need to obtain an exemption certificate 

for a customer that the broker knows is 

exempt. Commentators asked that the 

final regulations retain the eyeball test 

because brokers otherwise may be 

required to seek a certification from all 

corporate customers. The regulations do 

not adopt this comment because brokers 

generally cannot determine from a 

customer’s name alone whether the 

customer is taxed as an S corporation or 

C corporation. The final regulations 

retain a limited eyeball test for 

insurance companies and foreign 

corporations, however, because 

insurance companies and foreign 

corporations are ineligible to be S 

corporations. 

Commentators requested that the final 

regulations retain current rules that 

allow brokers to determine that a 

customer is a foreign corporation by 

relying upon the name of the customer 

or upon a certification on a Form W–8 

such as Form W–8BEN, ‘‘Certificate of 

Foreign Status of Beneficial Owner for 

United States Tax Withholding.’’ These 

current rules were not retained in the 

proposed regulations. The final 

regulations adopt the suggestion to 

retain these current rules. 

A commentator requested that brokers 

be permitted to rely on Form 8832, 

‘‘Entity Classification Election,’’ to 

determine that a customer is a C 

corporation if the customer has elected 

on Form 8832 to be classified as an 

association taxable as a corporation. 

According to the commentator, reliance 

on Form 8832 is appropriate because the 

form’s instructions provide that an 

entity that is separately filing an 

election to be classified as an S 

corporation need not file Form 8832. 

The final regulations do not adopt the 

suggestion because an S corporation 

may still file Form 8832 or may have 

filed Form 8832 before electing to be 

classified as an S corporation. 

Commentators requested that 

accounts opened by S corporations 

before 2012 be excepted from reporting. 

The regulations do not adopt this 

request as contrary to the statute. 

k. Reporting to Trust Interest Holders in 

a WHFIT 

The proposed regulations provided 

that, with respect to a widely held fixed 

investment trust (WHFIT), the 

requirements of section 6045(g), to the 

extent applicable, are met by 

compliance with the WHFIT reporting 

rules in § 1.671–5. One commentator 

noted that § 1.671–5(d)(2)(ii)(H) requires 

that a trustee or middleman filing a 

Form 1099 for an interest in a WHFIT 

provide, in addition to the items listed 

in § 1.671–5(d)(2)(ii), any other 

information required by the Form 1099. 

The commentator noted that this 

requirement could create confusion for 

reporting basis information to the extent 

the Form 1099–B is modified to require 

basis information. In response, the final 

regulations continue to provide that the 

requirements of section 6045(g) are met 

by compliance with the WHFIT rules. 

The IRS intends to address the 

commentator’s concern in the 

instructions to the Form 1099–B. 

l. Due Date for Payee Statements 

Furnished in a Consolidated Reporting 

Statement 

Section 6045(b) extended the due date 

to furnish payee statements to 

customers from January 31 to February 

15, effective for statements required to 

be furnished after December 31, 2008. 

Section 6045(b) also provides that this 

February 15 due date applies to any 

other statement required to be furnished 

on or before January 31 of the same year 

if furnished in a consolidated reporting 

statement with a statement required 

under section 6045. 

The proposed regulations defined 

consolidated reporting statement as a 

grouping of statements that includes a 

required section 6045 statement and is 

furnished to the same customer or group 

of customers on the same date. The 

proposed regulations also permitted a 

broker to treat any customer as receiving 

a required section 6045 statement if the 

customer had an account for which 

section 6045 would require a statement 

if a sale occurred during the year. In 

response to a request from a 

commentator, the final regulations 

clarify that a customer may be treated as 

receiving a required section 6045 

statement under this rule even if the 

customer’s account holds only cash or 

shares of money market funds. 

Commentators requested that the 

definition of consolidated reporting 


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statement include all statements a 

broker sends to a customer, whether or 

not the broker includes a required 

section 6045 statement to that customer, 

if the broker includes a required section 

6045 statement to one of its customers. 

Other commentators supported the rule 

in the proposed regulations requiring 

brokers to continue to furnish in January 

pension statements and other statements 

to customers that hold only nontaxable 

accounts. The final regulations do not 

adopt the suggestion to broaden the 

definition of consolidated reporting 

statement. The suggested definition is 

inconsistent with statutory intent to 

limit the extended due date to 

statements that are or can be provided 

with other required section 6045 

reporting. 

A commentator also requested that 

the rules for consolidated reporting by 

brokers refer to ‘‘reporting entities’’ 

instead of ‘‘brokers’’ because custodians 

for individual retirement accounts 

(IRAs) may not stand ready to effect 

sales to be made by others and, 

therefore, may not be considered 

brokers under section 6045. The final 

regulations do not adopt this comment 

because an entity that is not considered 

a broker under section 6045 may not 

furnish a consolidated reporting 

statement. 

5. Reporting Required in Connection 

With Transfers of Securities 

a. Scope of Transfer Reporting 

The proposed regulations identified 

brokers, persons acting as custodians of 

securities in the ordinary course of a 

trade or business, issuers of securities, 

and their agents as applicable persons 

required to furnish a transfer statement. 

Commentators asked whether agents of 

an issuer such as a transfer agent or 

administrator of an employee stock 

purchase plan are applicable persons. 

The final regulations clarify that agents 

of an issuer are applicable persons 

required to furnish transfer statements 

and provide additional examples to 

illustrate these agency arrangements. 

A commentator requested that stock 

transfer agents that do not file Form 

1099–B be excluded from transfer 

reporting. The final regulations do not 

adopt this comment as inconsistent with 

the statutory purpose of transfer 

reporting. A broker selling a transferred 

security is only able to report basis if 

informed of the basis. The regulations 

properly place the duty to furnish the 

transfer statement to the selling broker 

on the person transferring custody of the 

security. 

Commentators requested an exclusion 

for transfers excepted from all section 

6045 reporting (including gross 

proceeds reporting) at the time of the 

transfer. The final regulations adopt this 

suggestion. Commentators also 

requested exclusions for transfers to or 

from a nontaxable account. Sales of 

securities in nontaxable accounts are 

always excepted from all reporting 

under section 6045. The final 

regulations accordingly provide an 

exclusion for transfers to trustees and 

custodians of individual retirement 

plans. However, the exclusion does not 

apply to transfers from these accounts to 

a customer subject to reporting under 

section 6045(a). 

Commentators requested that transfer 

statements for securities distributed 

from a nontaxable account to an owner 

or an heir report the new owner’s basis 

as the fair market value of the security 

as of the date of distribution or date of 

death, whichever applies. The final 

regulations do not adopt this comment 

because securities held in individual 

retirement plans generally are treated as 

noncovered securities. Transferors of 

securities from nontaxable accounts 

need not report basis although they may 

choose to do so. 

Commentators requested that all 

trustees or fiduciaries of a trust or estate 

be required to furnish transfer 

statements when assets are distributed 

to the beneficiaries or heirs. The final 

regulations do not adopt this suggestion. 

A trustee or fiduciary must furnish a 

transfer statement if the trustee is also 

the broker effecting the transfer. If a 

trustee merely distributes securities in a 

transfer effected by a separate broker, 

then the broker must furnish the transfer 

statement. 

Commentators requested an exclusion 

for securities transferred in connection 

with a loan or under a repurchase 

agreement or securities collateral 

agreement because the lender’s basis in 

the securities is not relevant to the 

borrower. The final regulations adopt 

this request only to the extent that the 

transferor lends or borrows securities as 

a principal (for example, when a 

customer opens or closes a short sale). 

When a transferor otherwise lends or 

borrows securities for a customer whose 

transfers are not otherwise exempt from 

transfer reporting, transfer statements 

will ensure that securities returned to 

the lender or collateral provider remain 

covered securities even if the securities 

are returned to a different account. 

Further, the broker for the borrower or 

secured party may not know that the 

securities it receives are exempted from 

reporting under the proposed exclusion 

and would be compelled to ask for a 

transfer statement if none were 

provided. 

Commentators requested an exclusion 

for money market funds because brokers 

do not currently report their sales on 

Form 1099–B. The final regulations 

adopt this comment and also exempt 

money market funds from issuer 

reporting under section 6045B. 

b. Information Furnished on a Transfer 

Statement 

The proposed regulations required 

transfer statements to include 

information regarding the ‘‘beneficial 

owner’’ of securities. Commentators 

suggested that ‘‘beneficial owner’’ is not 

an appropriate term because securities 

are often transferred for accounts titled 

in the name of someone other than a 

beneficial owner, such as an agent of an 

undisclosed principal. Accordingly, the 

final regulations use the designation 

‘‘customer’’ instead of ‘‘beneficial 

owner.’’ 

Commentators asked whether separate 

transfer statements must be furnished to 

identify noncovered securities at the lot 

level. The final regulations clarify that 

the transfer statement need not identify 

noncovered securities at the lot level 

and that a single transfer statement may 

report the transfer of multiple 

noncovered securities. 

Commentators requested that transfer 

statements exclude sensitive customer 

information due to privacy concerns. 

Commentators also suggested that 

transfer statements not include the 

security symbol and lot number of the 

transferred security or the date of any 

previous transfer statement for the same 

transfer. In response to these comments, 

the final regulations provide that a 

transfer statement need not include the 

taxpayer identification number, address, 

or phone number of the customer; the 

security symbol or lot number of the 

transferred security; or the date of any 

previous transfer statement. Although 

the transfer statement must include the 

customer’s name and account number, 

this information may be reported in 

coded format. 

Commentators requested that transfer 

statements not include the transferor’s 

classification of the security (for 

example, as stock or debt) because the 

receiving broker might classify the 

security differently. The final 

regulations do not adopt this suggestion. 

The receiving broker need not accept 

the transferor’s classification unless it is 

the same as the issuer’s classification. 

Nonetheless, the transferor’s 

classification may clarify how the 

transferor computed adjustments to the 

security’s basis. 

Commentators asked whether the 

parties to a transfer statement could 

agree to substitute a security identifier 


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Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Rules and Regulations 64081 

for the CUSIP. The final regulations 

clarify that the parties may use codes to 

substitute for other information, 

including a security symbol or other 

identification number or scheme to 

substitute for the CUSIP. 

Section 1012(c)(2)(B)(ii) provides that 

all stock for which a broker or fund has 

made a single-account election shall be 

treated as covered securities regardless 

of the date of the acquisition of the 

stock. Commentators asked whether preeffective date stock for which a broker 

or fund has made the single-account 

election remains a covered security 

when transferred to another broker. 

Because stock subject to the singleaccount election must be treated as a 

covered security and reported as a 

covered security on the transfer 

statement, it remains a covered security 

after the transfer under section 

6045(g)(3)(A)(ii), provided the receiving 

broker receives a transfer statement. 

c. Reporting of Transfers of Gifted and 

Inherited Securities 

Under the proposed regulations, 

gifted and inherited securities that were 

covered securities in the account of the 

donor or decedent remained covered 

securities when transferred to the 

recipient’s account and accompanied by 

a transfer statement. Commentators 

recommended that transfers of gifted 

and inherited securities be excluded 

from the transfer statement requirement 

because these transfers are outside the 

scope of the statute. Section 

6045(g)(3)(A)(ii) provides that the term 

‘‘covered security’’ includes all 

transferred securities that are covered 

securities in the account from which 

transferred, provided the receiving 

broker receives a transfer statement. 

Therefore, the final regulations do not 

adopt this recommendation. 

The proposed regulations required 

that a transfer statement for gifted 

securities indicate that the transfer 

consists of gifted securities and state the 

adjusted basis of the securities in the 

hands of the donor (carryover basis) and 

the donor’s original acquisition date of 

the securities. The proposed regulations 

also required that the transfer statement 

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). The 

proposed regulations required that, 

upon the subsequent sale or other 

disposition of these securities, the 

selling broker apply the relevant basis 

rules for gifts, such as rules disallowing 

loss on the sale of gifted securities to the 

extent of built-in loss at the time of the 

gift. 

Commentators requested simplified 

conventions for reporting the basis of 

gifted securities. They asked that the 

rules require reporting of carryover basis 

without regard to rules disallowing loss 

to the extent of built-in loss at the time 

of the gift. They stated that gifts of 

depreciated securities were rare and did 

not justify the burden of obtaining the 

fair market value of the securities as of 

the date of the gift. They suggested 

instead that a subsequent sale be 

identified as a sale of gifted securities 

on Form 1099–B to alert the seller that 

the reported basis may not be correct. 

The final regulations do not adopt these 

suggestions. The burden on brokers to 

determine fair market value in applying 

the gift basis rules is not excessive. If 

fair market value as of the date of the 

gift is not readily ascertainable, a broker 

may substitute gross proceeds on a 

subsequent sale for this amount in 

determining the initial basis and the 

gain or loss on the subsequent sale. 

Commentators also requested 

simplified conventions for reporting the 

basis of inherited securities. The 

proposed regulations required that basis 

be reported on the transfer statement in 

accordance with the instructions and 

valuations furnished by an authorized 

representative of the estate, which the 

transferor must request before reporting. 

Commentators asked that the rules 

require only reporting of basis equal to 

the fair market value of the security on 

the date of death and eliminate the 

requirement to request instructions from 

the estate representative. This 

suggestion was adopted. The final 

regulations provide that the transferor 

must report adjusted basis equal to the 

fair market value of the security on the 

date of death unless the broker receives 

different instructions from the estate 

representative. If the transferor neither 

knows nor can readily ascertain the fair 

market value of a security on the date 

of death, the final regulations provide 

that the transferor may treat the security 

as noncovered. If the transferor cannot 

identify which securities in a joint 

account have been transferred from the 

decedent, the final regulations require 

the transferor to treat each security in 

the account as if it were a noncovered 

security. 

A commentator requested that the 

transfer statement for a subsequent 

transfer of an inherited security include 

the information necessary to apply 

section 1223(9), relating to the holding 

period of property acquired from a 

decedent that is sold or otherwise 

disposed of within one year after the 

decedent’s death. This suggestion was 

adopted. The final regulations require 

transfer statements for both initial and 

subsequent transfers of an inherited 

security to indicate that the security is 

inherited. 

d. Other Transfer Reporting Issues 

The proposed regulations permitted 

combined transfer reporting of a 

security acquired on different dates or at 

different prices when the security’s 

basis is determined using an average 

basis method and the security has been 

held for more than five years. 

Commentators requested that combined 

transfer reporting be permitted for 

averaged securities held for more than 

one year consistent with the two 

categories of capital gain (long term and 

short term). The final regulations do not 

adopt this comment. In 2011, absent a 

statutory change, lower income tax rates 

will apply to securities held more than 

five years. 

Commentators asked how a broker 

determines if a transfer statement is 

complete. The final regulations clarify 

that a statement is complete if, in the 

view of the receiving broker, it provides 

sufficient information to report the sale 

of the transferred security as a covered 

security (or states that the security is a 

noncovered security). For example, if 

the transfer statement fails to specify 

whether the security is stock, the 

receiving broker may treat the transfer 

statement as complete if the receiving 

broker otherwise has sufficient 

information to report the sale of the 

security as a covered security (or the 

transfer statement states that the 

security is a noncovered security). 

Commentators asked how transfer 

reporting applies to purchases and sales 

of securities involving multiple brokers 

or to a cash-on-delivery account. The 

final regulations clarify that, for a 

transfer in connection with a sale, a 

custodian or other transferor that 

transfers custody of a security to a 

broker in order 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 on Form 

1099–B. The final regulations also 

provide that, for a transfer in connection 

with a purchase, a broker that effects a 

purchase but does not receive custody 

of the purchased security must furnish 

a transfer statement to the broker that 

receives custody. However, no transfer 

statement is required if the broker 

effects a purchase solely at the 

instruction of the broker receiving 

custody. 

The proposed regulations proposed to 

exclude ‘‘any person acting solely as a 

clearing organization with respect to the 

transfer’’ from the transfer reporting 


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64082 Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Rules and Regulations 

requirements. Commentators asked that 

the final regulations clarify what it 

means to act ‘‘solely as a clearing 

organization.’’ The final regulations 

clarify that the exception applies to an 

organization that holds and transfers 

obligations among its members as a 

service to its members. 

Commentators requested a 

requirement that all transfer statements 

for covered securities reflect the 

quantitative effect of any organizational 

actions on basis reported by issuers 

under section 6045B while the 

transferor holds custody instead of 

identifying which corporate action 

statements are reflected on the transfer 

statement. The final regulations adopt 

this comment. 

Commentators requested a default 

rule requiring transferors to furnish the 

transfer statement electronically unless 

the parties agree to a different method. 

The final regulations do not adopt this 

suggestion. A consent requirement 

ensures that both parties have the ability 

to submit and receive transfer 

statements electronically. 

6. Reporting by Issuers of Actions 

Affecting Basis of Securities 

Under section 6045B, if an 

organizational action (such as a stock 

split or a merger or acquisition) by an 

issuer affects the basis of a specified 

security, the issuer must file a return 

with the IRS and furnish an information 

statement to each certificate holder or 

nominee reporting the quantitative 

effect on basis. The proposed 

regulations required the issuer to assign 

a sequential number determined 

separately by security for each 

organizational action reported. Several 

commentators requested that the final 

regulations delete the sequential 

number requirement. Another 

commentator requested that the rules 

create a standardized number system. 

The purpose of the sequential number 

requirement was to indicate which basis 

adjustments for organizational actions 

are reflected on the transfer statement. 

The final regulations require transfer 

statements to reflect all organizational 

actions that occur while the transferor 

holds custody. Therefore, the final 

regulations eliminate the sequential 

number requirement. 

A commentator asked that a RIC be 

deemed to comply with issuer reporting 

of an organizational action if it follows 

existing industry procedures for 

transmitting information to brokers. The 

commentator asserted that reporting 

under section 6045B would be 

duplicative and unnecessary. The final 

regulations do not adopt this comment 

as inconsistent with the statutory 

reporting requirement. 

A commentator asked whether a RIC 

or REIT must file an issuer return under 

section 6045B for undistributed capital 

gains reported under section 

852(b)(3)(D) or 857(b)(3)(D) on Form 

2438, ‘‘Undistributed Capital Gain Tax 

Return,’’ and Form 2439, ‘‘Notice to 

Shareholder of Undistributed LongTerm Capital Gains.’’ Because these 

forms report the information required 

under § 1.6045B–1, the final regulations 

provide that an issuer that files and 

furnishes both forms is deemed to meet 

the requirements under section 6045B 

for undistributed capital gains affecting 

the basis of its stock reported on the 

forms. The final regulations also provide 

that RICs, REITs, and brokers holding 

custody of RIC and REIT stock must 

adjust basis in accordance with the 

information reported on the forms. 

Commentators asked whether an ADR 

is subject to issuer reporting under 

section 6045B. Because an ADR is a 

specified security, a foreign corporation 

that takes an organizational action that 

affects the basis of an ADR that 

represents stock in the foreign 

corporation must file an issuer return. 

The final regulations clarify that an 

issuer may use an agent, including a 

depositary, to satisfy the requirements 

of this section. Nonetheless, the issuer 

remains liable for penalty for any failure 

to comply unless, as under current law, 

the failure is due to reasonable cause 

and not willful neglect. 

The proposed regulations permitted 

issuers to make reasonable assumptions 

about facts having a quantitative effect 

on basis that could not be determined 

before the reporting due date and 

required corrected reporting within 

forty-five days of determining the 

necessary facts. A commentator asked to 

what extent an issuer is required to 

amend a return with additional facts 

that may affect taxability once the facts 

are known. The final regulations clarify 

that corrected reporting is required 

whenever an issuer determines 

additional facts that result in a different 

quantitative effect on basis from what 

the issuer previously reported. 

Commentators requested that issuer 

reporting under section 6045B be 

coordinated with reporting under 

section 6043(c) for certain changes in 

corporate control and capital structure. 

One commentator requested relief from 

duplicate reporting of a corporate action 

under section 6043(c) when reporting 

the action under section 6045B. This 

request was not adopted. Reporting on 

Form 1099–CAP, ‘‘Changes in Corporate 

Control and Capital Structure,’’ is 

specific to each shareholder and 

includes each shareholder’s name and 

aggregate value of cash and other 

property received by each shareholder. 

Similarly, reporting on Form 8806, 

‘‘Information Return for Acquisition of 

Control or Substantial Change in Capital 

Structure,’’ while not shareholderspecific, includes information not 

required under section 6045B and 

permits the issuer to consent to IRS 

disclosure of some of the contents of the 

return. 

Section 6045B(e) waives the 

requirements to file issuer returns and 

furnish issuer statements if the issuer 

makes the information about the 

organizational action publicly available 

in the form and manner determined by 

the Secretary. The proposed regulations 

provided that an issuer may publicly 

report by posting a statement with the 

required information in a readily 

accessible format in an area of its 

primary public Web site dedicated to 

this purpose by the same due date for 

reporting the organizational action to 

the IRS and keeps the form accessible to 

the public. 

Some commentators objected to the 

public reporting method in the 

proposed regulations on the ground that 

it would be too burdensome for brokers 

to monitor issuer Web sites. 

Commentators suggested that the IRS 

permit issuers to consent to public 

disclosure by the IRS and that the IRS 

establish a central repository on its Web 

site for posting information statements 

from issuers that wish to report 

publicly. Commentators also suggested 

that the IRS formally recognize a 

clearing facility to serve as a central 

repository. Other commentators 

suggested that the final regulations 

require issuers to send their public 

reports or copies of their returns to 

clearing organizations, which will 

disseminate the information to brokers, 

holders, and their nominees. 

Commentators also suggested that 

issuers should be required to furnish a 

copy of their public report or issuer 

return to any entity that requests it. 

Other commentators supported the 

public reporting method in the 

proposed regulations. The final 

regulations adopt the public reporting 

method in the proposed regulations and 

do not adopt any of the suggested 

changes. 

Commentators requested that the 

regulations limit the time period for 

which issuers must keep the public 

report posted on their Web site. The 

final regulations limit the required 

period to 10 years. 


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Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Rules and Regulations 64083 

7. Penalty Provisions 

The proposed regulations generally 

required brokers to adjust basis of 

covered securities reported on Form 

1099–B to reflect information from any 

transfer statement received as well as 

any issuer reporting through the date of 

sale. The proposed regulations provided 

that any failure to report correct 

information that arises solely from 

reliance on transfer statements and 

issuer reporting is deemed to be due to 

reasonable cause for purposes of 

penalties under sections 6721 and 6722. 

The proposed regulations permitted, but 

did not require, a broker to further 

adjust the reported basis for information 

not reflected on one of these sources, 

including any information the broker 

has about securities held by the same 

customer in other accounts with the 

broker. The proposed regulations further 

provided that a broker that takes into 

account additional information received 

from a customer or third party is 

deemed to have relied upon this 

information in good faith in accordance 

with current rules in § 301.6724–1(c)(6) 

for purposes of penalty relief under 

sections 6721 and 6722 if the broker 

neither knows nor has reason to know 

that the information is incorrect. 

Commentators expressed concern that 

a ‘‘know or reason to know’’ standard 

would require an excessive level of due 

diligence and asked that brokers be 

subject to penalties only if they have 

actual knowledge that the information is 

incorrect, the same standard for reliance 

on transfer statements and issuer 

statements. The final regulations do not 

adopt this suggestion. A ‘‘know or 

reason to know’’ standard is consistent 

with the existing standard for penalty 

relief and better ensures the integrity of 

the information reported on the return. 

The proposed regulations provided 

that brokers and transferors must correct 

their Form 1099–B or transfer statement 

to account for late or corrected transfer 

statements or issuer reports. 

Commentators requested time limits on 

the correction requirement. This 

suggestion was adopted. The final 

regulations require corrected reporting 

only when brokers receive corrected 

information within 3 years after issuing 

a Form 1099–B or 18 months after 

issuing a transfer statement. 

Commentators also suggested that 

corrected Forms 1099–B or transfer 

statements not be required for de 

minimis changes or for closed accounts. 

The final regulations do not adopt this 

suggestion. 

A commentator also asked about the 

interaction of the basis reporting rules 

with the requirements for tax return 

preparers under section 6694. The 

commentator expressed concern that a 

duly diligent preparer could be subject 

to penalties under section 6694 for 

preparing a return or claim for refund 

that reports (1) information that the 

preparer believes to be accurate after 

exercising due diligence but that differs 

from the information reported on Form 

1099–B or (2) inaccurate information 

from Form 1099–B that the preparer 

does not know (or have reason to know) 

is incorrect. 

In many cases, basis reported on Form 

1099–B may not reflect the taxpayer’s 

correct basis. For example, brokers need 

not adjust basis for wash sales unless 

the transactions that trigger the wash 

sale occur in the same account with 

respect to identical securities. 

Additionally, brokers are permitted, but 

not required, to report basis for 

noncovered securities. Taxpayers are 

expected to report the correct basis on 

Schedule D regardless of the amount 

reported on Form 1099–B. The IRS is 

currently revising Schedule D and the 

related instructions and publications to 

facilitate reconciliation. 

With respect to tax return preparer 

penalties under section 6694, these 

regulations do not alter current rules 

governing preparer reliance on client 

information. Generally, § 1.6694–1(e)(1) 

permits tax return preparers to rely in 

good faith upon information furnished 

by a client taxpayer or another party so 

long as the preparer does not ignore 

other information furnished to or 

actually known by the preparer and 

makes reasonable inquiries if the 

furnished information appears to be 

incorrect or incomplete. This same 

standard applies to information 

furnished on Form 1099–B. 

Effective/Applicability Dates 

The regulations on broker basis 

reporting under section 6045(g) apply 

to: (1) Any share of stock or any interest 

treated as stock in an entity organized 

as, or treated for Federal tax purposes 

as, a corporation (foreign or domestic) 

acquired on or after January 1, 2011, 

other than RIC stock or DRP stock; and 

(2) any share of RIC stock or DRP stock 

acquired on or after January 1, 2012. 

The regulations regarding the timing for 

reporting short sales of securities under 

section 6045 apply to short sales opened 

on or after January 1, 2011. 

These regulations regarding the 

determination of basis under section 

1012 apply for taxable years beginning 

after October 18, 2010. However, the 

rules in § 1.1012–1(e)(1)(i), in part, 

apply to stock acquired on or after 

January 1, 2011; the rules in § 1.1012– 

1(e)(2) apply to stock acquired on or 

after January 1, 2012; the rules in 

§ 1.1012–1(e)(7)(iii) apply to stock 

acquired before and sold, exchanged, or 

disposed of on or after April 1, 2011; 

and the rules in § 1.1012–1(e)(7)(i), in 

part, § 1.1012–1(e)(9), in part, and in 

§ 1.1012–1(e)(10), in part, apply to sales, 

exchanges, or other dispositions of stock 

on or after January 1, 2012. 

The regulations regarding transfer 

statement reporting under section 

6045A apply to: (1) Transfers of stock 

other than RIC stock on or after January 

1, 2011; and (2) transfers of RIC stock on 

or after January 1, 2012. The regulations 

regarding issuer reporting under section 

6045B apply to: (1) Organizational 

actions affecting basis of stock in an 

entity organized as, or treated for 

Federal tax purposes as, a corporation 

(foreign or domestic) other than RIC 

stock on or after January 1, 2011; and (2) 

organizational actions affecting basis of 

RIC stock on or after January 1, 2012. 

Effect on Other Documents 

As of October 18, 2010, Rev. Rul. 67– 

436 (1967–2 CB 266) is obsoleted and 

Rev. Proc. 2008–52 (2008–2 CB 587), as 

modified, amplified, and clarified by 

Rev. Proc. 2009–39 (2009–38 IRB 371), 

is modified by deleting Section 30 of the 

Appendix. See § 601.601(d)(2). 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply. 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6), it is hereby 

certified that these regulations will not 

have a significant economic impact on 

a substantial number of small entities. 

Any effect on small entities by these 

regulations flows from section 403 of 

the Energy Improvement and Extension 

Act of 2008, Division B of Public Law 

110–343 (122 Stat. 3765, 3854 (2008)) 

(the Act). 

Section 403(a) of the Act requires that 

brokers reporting the sale of a covered 

security report the adjusted basis of the 

security and whether any gain or loss is 

long-term or short-term. It is anticipated 

that this statutory requirement will 

affect only financial services firms with 

annual receipts greater than $7 million 

that, therefore, are not small entities. 

Further, the regulations under this 

section impose no reporting 

requirements not found in the Act. 

Section 403(c) of the Act requires 

applicable persons to furnish a transfer 

statement in connection with the 


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64084 Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Rules and Regulations 

transfer of custody of a covered security. 

The regulations define applicable 

person to include brokers, professional 

custodians of securities, issuers of 

securities, and trustee and custodians of 

individual retirement plans. This 

definition effectuates the Act by giving 

the broker that receives the transfer 

statement the information necessary to 

accurately report the sale of the security 

regardless of how the owner previously 

held its custody. The regulations limit 

the impact on small entities by limiting 

reporting to necessary entities and 

information. 

Section 403(d) of the Act requires 

reporting by all issuers of specified 

securities regardless of size or whether 

the securities are publicly traded. The 

regulations limit the reporting burden 

by requiring only necessary information 

and by permitting issuers to report 

actions publicly instead of by furnishing 

a statement to each nominee or holder. 

The regulations therefore mitigate the 

statutory impact on small entities. 

Therefore, because this regulation will 

not have a significant economic impact 

on a substantial number of small 

entities, a regulatory flexibility analysis 

is not required. Pursuant to section 

7805(f) of the Code, the notice of 

proposed rulemaking preceding this 

regulation has been submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

Drafting Information 

The principal authors of these 

proposed regulations are Edward C. 

Schwartz, Amy J. Pfalzgraf, and William 

L. Candler, Office of Associate Chief 

Counsel (Income Tax and Accounting), 

and Stephen Schaeffer, Office of 

Associate Chief Counsel (Procedure and 

Administration). However, other 

personnel from the IRS and the Treasury 

Department participated in their 

development. 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 31 

Employment taxes, Income taxes, 

Penalties, Pensions, Railroad retirement, 

Reporting and recordkeeping 

requirements, Social security, 

Unemployment compensation. 

26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

26 CFR Part 602 

Reporting and recordkeeping 

requirements. 

Adoption of Amendments to the 

Regulations 

■ Accordingly, 26 CFR parts 1, 31, 301, 

and 602 are amended as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 is amended by adding entries 

in numerical order to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * *. 

Section 1.6045A–1 also issued under 26 

U.S.C. 6045A(a), (b), (c). 

Section 1.6045B–1 also issued under 26 

U.S.C. 6045B(a), (c), (e). * * * 

■ Par. 2. Section 1.408–7 is amended by 

adding two new sentences at the end of 

paragraph (d)(2) to read as follows: 

§ 1.408–7 Reports on distributions from 

individual retirement plans. 

* * * * * 

(d) * * * 

(2) * * * However, for a distribution 

after December 31, 2008, the February 

15 due date under section 6045 applies 

to the statement if the statement is 

furnished in a consolidated reporting 

statement under section 6045. See 

§§ 1.6045–1(k)(3), 1.6045–2(d)(2), 

1.6045–3(e)(2), 1.6045–4(m)(3), and 

1.6045–5(a)(3)(ii). 

* * * * * 

■ Par. 3. Section 1.1012–1 is amended 

by: 

■ 1. Revising paragraphs (c)(1), (c)(4), 

(c)(6), (c)(7)(ii), (c)(7)(iii) introductory 

text, and (c)(7)(iii)(a). 

■ 2. Adding new paragraphs (c)(8), 

(c)(9), (c)(10), and (c)(11). 

■ 3. Revising the heading of paragraphs 

(e) and (e)(5). 

■ 4. Revising paragraphs (e)(1), (e)(2), 

(e)(3), (e)(4), (e)(6), and (e)(7). 

■ 5. Adding new paragraphs (e)(8), 

(e)(9), (e)(10), (e)(11), and (e)(12). 

The additions and revisions read as 

follows: 

§ 1.1012–1 Basis of property. 

* * * * * 

(c) Sale of stock—(1) In general. (i) 

Except as provided in paragraph (e)(2) 

of this section (dealing with stock for 

which the average basis method is 

permitted), if a taxpayer sells or 

transfers shares of stock in a corporation 

that the taxpayer purchased or acquired 

on different dates or at different prices 

and the taxpayer does not adequately 

identify the lot from which the stock is 

sold or transferred, the stock sold or 

transferred is charged against the 

earliest lot the taxpayer purchased or 

acquired to determine the basis and 

holding period of the stock. If the 

earliest lot purchased or acquired is 

held in a stock certificate that represents 

multiple lots of stock, and the taxpayer 

does not adequately identify the lot 

from which the stock is sold or 

transferred, the stock sold or transferred 

is charged against the earliest lot 

included in the certificate. See 

paragraphs (c)(2), (c)(3), and (c)(4) of 

this section for rules on what constitutes 

an adequate identification. 

(ii) A taxpayer must determine the 

basis of identical stock (within the 

meaning of paragraph (e)(4) of this 

section) by averaging the cost of each 

share if the stock is purchased at 

separate times on the same calendar day 

in executing a single trade order and the 

broker executing the trade provides a 

single confirmation that reports an 

aggregate total cost or an average cost 

per share. However, the taxpayer may 

determine the basis of the stock by the 

actual cost per share if the taxpayer 

notifies the broker in writing of this 

intent. The taxpayer must notify the 

broker by the earlier of the date of the 

sale of any of the stock for which the 

taxpayer received the confirmation or 

one year after the date of the 

confirmation. A broker may extend the 

one-year period but the taxpayer must 

notify the broker no later than the date 

of sale of any of the stock. 

* * * * * 

(4) Stock held by a trustee, executor, 

or administrator. (i) A trustee or 

executor or administrator of an estate 

holding stock (not left in the custody of 

a broker) makes an adequate 

identification if the trustee, executor, or 

administrator— 

(a) Specifies in writing in the books 

and records of the trust or estate the 

particular stock to be sold, transferred, 

or distributed; 

(b) In the case of a distribution, 

furnishes the distributee with a written 

document identifying the particular 

stock distributed; and 

(c) In the case of a sale or transfer 

through a broker or other agent, 

specifies to the broker or agent the 

particular stock to be sold or transferred, 

and within a reasonable time thereafter 

the broker or agent confirms the 

specification in a written document. 

(ii) The stock the trust or estate 

identifies under paragraph (c)(4)(i) of 

this section is the stock treated as sold, 

transferred, or distributed, even if the 

trustee, executor, or administrator 

delivers stock certificates from a 

different lot. 

* * * * * 


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(6) Bonds. Paragraphs (1) through (5), 

(8), and (9) of this section apply to the 

sale or transfer of bonds. 

(7) * * * 

(ii) In applying paragraph (c)(3)(i)(b) 

of this section to a sale or transfer of a 

book-entry security pursuant to a 

taxpayer’s written instruction, a 

confirmation is made by furnishing to 

the taxpayer a written advice of 

transaction from the Reserve Bank or 

other person through whom the 

taxpayer sells or transfers the securities. 

The confirmation document must 

describe the securities and specify the 

date of the transaction and amount of 

securities sold or transferred. 

(iii) For purposes of this paragraph 

(c)(7): 

(a) The term book-entry security 

means a transferable Treasury bond, 

note, certificate of indebtedness, or bill 

issued under the Second Liberty Bond 

Act (31 U.S.C. 774(2)), as amended, or 

other security of the United States (as 

defined in paragraph (c)(7)(iii)(b) of this 

section) in the form of an entry made as 

prescribed in 31 CFR Part 306, or other 

comparable Federal regulations, on the 

records of a Reserve Bank. 

* * * * * 

(8) Time for making identification. 

For purposes of this paragraph (c), an 

adequate identification of stock is made 

at the time of sale, transfer, delivery, or 

distribution if the identification is made 

no later than the earlier of the 

settlement date or the time for 

settlement required by Rule 15c6–1 

under the Securities Exchange Act of 

1934, 17 CFR 240.15c6–1 (or its 

successor). A standing order or 

instruction for the specific identification 

of stock is treated as an adequate 

identification made at the time of sale, 

transfer, delivery, or distribution. 

(9) Method of writing. (i) A written 

confirmation, record, document, 

instruction, notification, or advice 

includes a writing in electronic format. 

(ii) A broker or agent may include the 

written confirmation required under 

this paragraph (c) in an account 

statement or other document the broker 

or agent periodically provides to the 

taxpayer if the broker or agent provides 

the statement or other document within 

a reasonable time after the sale or 

transfer. 

(10) Method for determining basis of 

stock. A method of determining the 

basis of stock, including a method of 

identifying stock sold under this 

paragraph (c) and the average basis 

method described in paragraph (e) of 

this section, is not a method of 

accounting. Therefore, a change in a 

method of determining the basis of stock 

is not a change in method of accounting 

to which sections 446 and 481 apply. 

(11) Effective/applicability date. 

Paragraphs (c)(1), (c)(4), (c)(6), (c)(7)(ii), 

(c)(7)(iii)(a), (c)(8), (c)(9), and (c)(10) of 

this section apply for taxable years 

beginning after October 18, 2010. 

* * * * * 

(e) Election to use average basis 

method—(1) In general. 

Notwithstanding paragraph (c) of this 

section, and except as provided in 

paragraph (e)(8) of this section, a 

taxpayer may use the average basis 

method described in paragraph (e)(7) of 

this section to determine the cost or 

other basis of identical shares of stock 

if— 

(i) The taxpayer leaves shares of stock 

in a regulated investment company (as 

defined in paragraph (e)(5) of this 

section) or shares of stock acquired after 

December 31, 2010, in connection with 

a dividend reinvestment plan (as 

defined in paragraph (e)(6) of this 

section) with a custodian or agent in an 

account maintained for the acquisition 

or redemption, sale, or other disposition 

of shares of the stock; and 

(ii) The taxpayer acquires identical 

shares of stock at different prices or 

bases in the account. 

(2) Determination of method. (i) If a 

taxpayer places shares of stock 

described in paragraph (e)(1)(i) of this 

section acquired on or after January 1, 

2012, in the custody of a broker (as 

defined by section 6045(c)(1)), including 

by transfer from an account with 

another broker, the basis of the shares is 

determined in accordance with the 

broker’s default method, unless the 

taxpayer notifies the broker that the 

taxpayer elects another permitted 

method. The taxpayer must report gain 

or loss using the method the taxpayer 

elects or, if the taxpayer fails to make an 

election, the broker’s default method. 

See paragraphs (e)(9)(i) and (e)(9)(v), 

Example 2, of this section. 

(ii) The provisions of this paragraph 

(e)(2) are illustrated by the following 

example: 

Example. (i) In connection with a 

dividend reinvestment plan, Taxpayer B 

acquires 100 shares of G Company in 2012 

and 100 shares of G Company in 2013, in an 

account B maintains with R Broker. B notifies 

R in writing that B elects to use the average 

basis method to compute the basis of the 

shares of G Company. In 2014, B transfers the 

shares of G Company to an account with S 

Broker. B does not notify S of the basis 

determination method B chooses to use for 

the shares of G Company, and S’s default 

method is first-in, first-out. In 2015, B 

purchases 200 shares of G Company in the 

account with S. In 2016, B instructs S to sell 

150 shares of G Company. 

(ii) Because B does not notify S of a basis 

determination method for the shares of G 

Company, under paragraph (e)(2)(i) of this 

section, the basis of the 150 shares of G 

Company S sells for B in 2016 must be 

determined under S’s default method, firstin, first-out. 

(3) Shares of stock. For purposes of 

this paragraph (e), securities issued by 

unit investment trusts described in 

paragraph (e)(5) of this section are 

treated as shares of stock and the term 

share or shares includes fractions of a 

share. 

(4) Identical stock. For purposes of 

this paragraph (e), identical shares of 

stock means stock with the same 

Committee on Uniform Security 

Identification Procedures (CUSIP) 

number or other security identifier 

number as permitted in published 

guidance of general applicability, see 

§ 601.601(d)(2) of this chapter. 

(5) Regulated investment company. 

* * * 

(6) Dividend reinvestment plan—(i) In 

general. For purposes of this paragraph 

(e), the term dividend reinvestment plan 

means any written plan, arrangement, or 

program under which at least 10 percent 

of every dividend (within the meaning 

of section 316) on any share of stock is 

reinvested in stock identical to the stock 

on which the dividend is paid. A plan 

is a dividend reinvestment plan if the 

plan documents require that at least 10 

percent of any dividend paid is 

reinvested in identical stock even if the 

plan includes stock on which no 

dividends have ever been declared or 

paid or on which an issuer ceases 

paying dividends. A plan that holds one 

or more different stocks may permit a 

taxpayer to reinvest a different 

percentage of dividends in the stocks 

held. A dividend reinvestment plan may 

reinvest other distributions on stock, 

such as capital gain distributions, nontaxable returns of capital, and cash in 

lieu of fractional shares. The term 

dividend reinvestment plan includes 

both issuer administered dividend 

reinvestment plans and non-issuer 

administered dividend reinvestment 

plans. 

(ii) Acquisition of stock. Stock is 

acquired in connection with a dividend 

reinvestment plan if the stock is 

acquired under that plan, arrangement, 

or program, or if the dividends and 

other distributions paid on the stock are 

subject to that plan, arrangement, or 

program. Shares of stock acquired in 

connection with a dividend 

reinvestment plan include the initial 

purchase of stock in the dividend 

reinvestment plan, transfers of identical 

stock into the dividend reinvestment 

plan, additional periodic purchases of 


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identical stock in the dividend 

reinvestment plan, and identical stock 

acquired through reinvestment of the 

dividends or other distributions paid on 

the stock held in the plan. 

(iii) Dividends and other distributions 

paid after reorganization. For purposes 

of this paragraph (e)(6), dividends and 

other distributions declared or 

announced before or pending a 

corporate action (such as a merger, 

consolidation, acquisition, split-off, or 

spin-off) involving the issuer and 

subsequently paid and reinvested in 

shares of stock in the successor entity or 

entities are treated as reinvested in 

shares of stock identical to the shares of 

stock of the issuer. 

(iv) Withdrawal from or termination 

of plan. If a taxpayer withdraws stock 

from a dividend reinvestment plan or 

the plan administrator terminates the 

dividend reinvestment plan, the shares 

of identical stock the taxpayer acquires 

after the withdrawal or termination are 

not acquired in connection with a 

dividend reinvestment plan. The 

taxpayer may not use the average basis 

method after the withdrawal or 

termination but may use any other 

permissible basis determination 

method. See paragraph (e)(7)(v) of this 

section for the basis of the shares after 

withdrawal or termination. 

(7) Computation of average basis—(i) 

In general. Average basis is determined 

by averaging the basis of all shares of 

identical stock in an account regardless 

of holding period. However, for this 

purpose, shares of stock in a dividend 

reinvestment plan are not identical to 

shares of stock with the same CUSIP 

number that are not in a dividend 

reinvestment plan. The basis of each 

share of identical stock in the account 

is the aggregate basis of all shares of that 

stock in the account divided by the 

aggregate number of shares. Unless a 

single-account election is in effect, see 

paragraph (e)(11) of this section, a 

taxpayer may not average together the 

basis of identical stock held in separate 

accounts that the taxpayer sells, 

exchanges, or otherwise disposes of on 

or after January 1, 2012. 

(ii) Order of disposition of shares sold 

or transferred. In the case of the sale or 

transfer of shares of stock to which the 

average basis method election applies, 

shares sold or transferred are deemed to 

be the shares first acquired. Thus, the 

first shares sold or transferred are those 

with a holding period of more than 1 

year (long-term shares) to the extent that 

the account contains long-term shares. If 

the number of shares sold or transferred 

exceeds the number of long-term shares 

in the account, the excess shares sold or 

transferred are deemed to be shares with 

a holding period of 1 year or less (shortterm shares). Any gain or loss 

attributable to shares held for more than 

1 year constitutes long-term gain or loss, 

and any gain or loss attributable to 

shares held for 1 year or less constitutes 

short-term gain or loss. For example, if 

a taxpayer sells 50 shares from an 

account containing 100 long-term shares 

and 100 short-term shares, the shares 

sold or transferred are all long-term 

shares. If, however, the account contains 

40 long-term shares and 100 short-term 

shares, the taxpayer has sold 40 longterm shares and 10 short-term shares. 

(iii) Transition rule from doublecategory method. This paragraph 

(e)(7)(iii) applies to stock for which a 

taxpayer uses the double-category 

method under § 1.1012–1(e)(3) (April 1, 

2010), that the taxpayer acquired before 

April 1, 2011, and that the taxpayer 

sells, exchanges, or otherwise disposes 

of on or after that date. The taxpayer 

must calculate the average basis of this 

stock by averaging together all identical 

shares of stock in the account on April 

1, 2011, regardless of holding period. 

(iv) Wash sales. A taxpayer must 

apply section 1091 and the associated 

regulations (dealing with wash sales of 

substantially identical securities) in 

computing average basis regardless of 

whether the stock or security sold or 

otherwise disposed of and the stock 

acquired are in the same account or in 

different accounts. 

(v) Basis after change from average 

basis method. Unless a taxpayer revokes 

an average basis method election under 

paragraph (e)(9)(iii) of this section, if a 

taxpayer changes from the average basis 

method to another basis determination 

method (including a change resulting 

from a withdrawal from or termination 

of a dividend reinvestment plan), the 

basis of each share of stock immediately 

after the change is the same as the basis 

immediately before the change. See 

paragraph (e)(9)(iv) of this section for 

rules for changing from the average 

basis method. 

(vi) The provisions of this paragraph 

(e)(7) are illustrated by the following 

examples: 

Example 1. (i) In 2011, Taxpayer C 

acquires 100 shares of H Company and 

enrolls them in a dividend reinvestment plan 

administered by T Custodian. C elects to use 

the average basis method for the shares of H 

Company enrolled in the dividend 

reinvestment plan. T also acquires for C’s 

account 50 shares of H Company and does 

not enroll these shares in the dividend 

reinvestment plan. 

(ii) Under paragraph (e)(7)(i) of this 

section, the 50 shares of H Company not in 

the dividend reinvestment plan are not 

identical to the 100 shares of H Company 

enrolled in the dividend reinvestment plan, 

even if they have the same CUSIP number. 

Accordingly, under paragraphs (e)(1) and 

(e)(7)(i) of this section, C may not average the 

basis of the 50 shares of H Company with the 

basis of the 100 shares of H Company. Under 

paragraph (e)(1)(i) of this section, C may not 

use the average basis method for the 50 

shares of H Company because the shares are 

not acquired in connection with a dividend 

reinvestment plan. 

Example 2. (i) Taxpayer D enters into an 

agreement with W Custodian establishing an 

account for the periodic acquisition of shares 

of L Company, a regulated investment 

company. W acquires for D’s account shares 

of L Company stock on the following dates 

and amounts: 

Date Number 

of shares Cost 

January 8, 2010 ........ 25 $200 

February 8, 2010 ...... 24 200 

March 8, 2010 .......... 20 200 

April 8, 2010 ............. 20 200 

(ii) At D’s direction, W sells 40 shares from 

the account on January 15, 2011, for $10 per 

share or a total of $400. D elects to use the 

average basis method for the shares of L 

Company. The average basis for the shares 

sold on January 15, 2011, is $8.99 (total cost 

of shares, $800, divided by the total number 

of shares, 89). 

(iii) Under paragraph (e)(7)(ii) of this 

section, the shares sold are the shares first 

acquired. Thus, D realizes $25.25 ($1.01 * 25) 

long-term capital gain for the 25 shares 

acquired on January 8, 2010, and $15.15 

($1.01 * 15) short-term capital gain for 15 of 

the shares acquired on February 8, 2010. 

Example 3. (i) The facts are the same as 

in Example 2, except that on February 8, 

2011, D changes to the first-in, first-out basis 

determination method. W purchases 25 

shares of L Company for D on March 8, 2011, 

at $12 per share. D sells 40 shares on May 

8, 2011, and 34 shares on July 8, 2012. 

(ii) Because D uses the first-in, first-out 

method, the 40 shares sold on May 8, 2011 

are 9 shares purchased on February 8, 2010, 

20 shares purchased on March 8, 2010, and 

11 shares purchased on April 8, 2010. 

Because, under paragraph (e)(7)(v) of this 

section, the basis of the shares D owns when 

D changes from the average basis method 

remains the same, the basis of the shares sold 

on May 8, 2011, is $8.99 per share, not the 

original cost of $8.33 per share for the shares 

purchased on February 8, 2010, or $10 per 

share for the shares purchased on March 8, 

2010, and April 8, 2010. The basis of the 

shares sold on July 8, 2012, is $8.99 per share 

for 9 shares purchased on April 8, 2010, and 

$12 per share for 25 shares purchased on 

March 8, 2011. 

Example 4. (i) The facts are the same as 

in Example 2, except that D uses the first-in, 

first-out method for the 40 shares sold on 

January 15, 2011. W purchases 25 shares of 

L Company for D on March 8, 2011, at $12 

per share. D sells 40 shares on May 8, 2011, 

and elects the average basis method. 

(ii) Because D uses the first-in, first-out 

method for the sale on January 15, 2011, the 

40 shares sold are the 25 shares acquired on 


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January 8, 2010, for $200 (basis $8 per share) 

and 15 of the 24 shares purchased on 

February 8, 2010, for $200 (basis $8.33 per 

share). 

(iii) Under paragraph (e)(7)(i) of this 

section, under the average basis method, the 

basis of all of the shares of identical stock in 

D’s account is averaged. Thus, the basis of 

each share D sells on May 8, 2011, after 

electing the average basis method, is $10.47. 

This figure is the total cost of the shares in 

D’s account ($74.97 for the 9 shares acquired 

on February 8, 2010, $200 for the 20 shares 

acquired on March 8, 2010, $200 for the 20 

shares acquired on April 8, 2010, and $300 

for the 25 shares acquired on March 8, 2011) 

divided by 74, the total number of shares 

($774.97/74). 

(8) Limitation on use of average basis 

method for certain gift shares. (i) Except 

as provided in paragraph (e)(8)(ii) of this 

section, a taxpayer may not use the 

average basis method for shares of stock 

a taxpayer acquires by gift after 

December 31, 1920, if the basis of the 

shares (adjusted for the period before 

the date of the gift as provided in 

section 1016) in the hands of the donor 

or the last preceding owner by whom 

the shares were not acquired by gift was 

greater than the fair market value of the 

shares at the time of the gift. This 

paragraph (e)(8)(i) does not apply to 

shares the taxpayer acquires as a result 

of a taxable dividend or capital gain 

distribution on the gift shares. 

(ii) Notwithstanding paragraph 

(e)(8)(i) of this section, a taxpayer may 

use the average basis method if the 

taxpayer states in writing that the 

taxpayer will treat the basis of the gift 

shares as the fair market value of the 

shares at the time the taxpayer acquires 

the shares. The taxpayer must provide 

this statement when the taxpayer makes 

the election under paragraph (e)(9) of 

this section or when transferring the 

shares to an account for which the 

taxpayer has made this election, 

whichever occurs later. The statement 

must be effective for any gift shares 

identical to the gift shares to which the 

average basis method election applies 

that the taxpayer acquires at any time 

and must remain in effect as long as the 

election remains in effect. 

(iii) The provisions of this paragraph 

(e)(8) are illustrated by the following 

examples: 

Example 1. (i) Taxpayer E owns an 

account for the periodic acquisition of shares 

of M Company, a regulated investment 

company. On April 15, 2010, E acquires 

identical shares of M Company by gift and 

transfers those shares into the account. These 

shares had an adjusted basis in the hands of 

the donor that was greater than the fair 

market value of the shares on that date. On 

June 15, 2010, E sells shares from the account 

and elects to use the average basis method. 

(ii) Under paragraph (e)(8)(ii) of this 

section, E may elect to use the average basis 

method for shares sold or transferred from 

the account if E includes a statement with E’s 

election that E will treat the basis of the gift 

shares in the account as the fair market value 

of the shares at the time E acquired them. See 

paragraph (e)(9)(ii) of this section. 

Example 2. (i) The facts are the same as 

in Example 1, except E acquires the gift 

shares on April 15, 2012, transfers those 

shares into the account, and used the average 

basis method for sales of shares of M 

Company before acquiring the gift shares. E 

sells shares of M Company on June 15, 2012. 

(ii) Under paragraph (e)(8)(ii) of this 

section, the basis of the gift shares may be 

averaged with the basis of the other shares of 

M Company in E’s account if, when E 

transfers the gift shares to the account, E 

provides a statement to E’s broker that E will 

treat the basis of the gift shares in the account 

as the fair market value of the shares at the 

time E acquired them. See paragraph (e)(9)(i) 

of this section. 

(9) Time and manner for making the 

average basis method election—(i) In 

general. A taxpayer makes an election to 

use the average basis method for shares 

of stock described in paragraph (e)(1)(i) 

of this section that are covered 

securities (within the meaning of 

section 6045(g)(3)) by notifying the 

custodian or agent in writing by any 

reasonable means. For purposes of this 

paragraph (e), a writing may be in 

electronic format. A taxpayer has not 

made an election within the meaning of 

this section if the taxpayer fails to notify 

a broker of the taxpayer’s basis 

determination method and basis is 

determined by the broker’s default 

method under paragraph (e)(2) of this 

section. A taxpayer may make the 

average basis method election at any 

time, effective for sales or other 

dispositions of stock occurring after the 

taxpayer notifies the custodian or agent. 

The election must identify each account 

with that custodian or agent and each 

stock in that account to which the 

election applies. The election may 

specify that it applies to all accounts 

with a custodian or agent, including 

accounts the taxpayer later establishes 

with the custodian or agent. If the 

election applies to gift shares, the 

taxpayer must provide the statement 

required by paragraph (e)(8)(ii) of this 

section, if applicable, to the custodian 

or agent with the taxpayer’s election. 

(ii) Average basis method election for 

securities that are noncovered 

securities. A taxpayer makes an election 

to use the average basis method for 

shares of stock described in paragraph 

(e)(1)(i) of this section that are 

noncovered securities (as described in 

§ 1.6045–1(a)(16)) on the taxpayer’s 

income tax return for the first taxable 

year for which the election applies. A 

taxpayer may make the election on an 

amended return filed no later than the 

time prescribed (including extensions) 

for filing the original return for the 

taxable year for which the election 

applies. The taxpayer must indicate on 

the return that the taxpayer used the 

average basis method in reporting gain 

or loss on the sale or other disposition. 

A taxpayer must attach to the return the 

statement described in paragraph 

(e)(8)(ii) of this section, if applicable. A 

taxpayer making the election must 

maintain records necessary to 

substantiate the average basis reported. 

(iii) Revocation of election. A taxpayer 

may revoke an election under paragraph 

(e)(9)(i) of this section by the earlier of 

one year after the taxpayer makes the 

election or the date of the first sale, 

transfer, or disposition of that stock 

following the election. A custodian or 

agent may extend the one-year period 

but a taxpayer may not revoke an 

election after the first sale, transfer, or 

disposition of the stock. A revocation 

applies to all stock the taxpayer holds 

in an account that is identical to the 

shares of stock for which the taxpayer 

revokes the election. A revocation is 

effective when the taxpayer notifies, in 

writing by any reasonable means, the 

custodian or agent holding the stock to 

which the revocation applies. After 

revocation, the taxpayer’s basis in the 

shares of stock to which the revocation 

applies is the basis before averaging. 

(iv) Change from average basis 

method. A taxpayer may change basis 

determination methods from the average 

basis method to another method 

prospectively at any time. A change 

from the average basis method applies 

to all identical stock the taxpayer sells 

or otherwise disposes of before January 

1, 2012, that was held in any account. 

A change from the average basis method 

applies on an account by account basis 

(within the meaning of paragraph (e)(10) 

of this section) to all identical stock the 

taxpayer sells or otherwise disposes of 

on or after January 1, 2012. The taxpayer 

must notify, in writing by any 

reasonable means, the custodian or 

agent holding the stock to which the 

change applies. Unless paragraph 

(e)(9)(iii) of this section applies, the 

basis of each share of stock to which the 

change applies remains the same as the 

basis immediately before the change. 

See paragraph (e)(7)(v) of this section. 

(v) Examples. The provisions of this 

paragraph (e)(9) are illustrated by the 

following examples: 

Example 1. (i) Taxpayer F enters into an 

agreement with W Custodian establishing an 

account for the periodic acquisition of shares 

of N Company, a regulated investment 

company. W acquires for F’s account shares 


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of N Company on the following dates and 

amounts: 

Date Number 

of shares Cost 

January 8, 2012 ........ 25 $200 

February 8, 2012 ...... 24 200 

March 8, 2012 .......... 20 200 

(ii) F notifies W that F elects, under 

paragraph (e)(9)(i) of this section, to use the 

average basis method for the shares of N 

Company. On May 8, 2012, under paragraph 

(e)(9)(iii) of this section, F notifies W that F 

revokes the average basis method election. 

On June 1, 2012, F sells 60 shares of N 

Company using the first-in, first-out basis 

determination method. 

(iii) Under paragraph (e)(9)(iii) of this 

section, the basis of the N Company shares 

upon revocation, and for purposes of 

determining gain on the sale, is $8.00 per 

share for each of the 25 shares purchased on 

January 8, 2012, $8.34 per share for each of 

the 24 shares purchased on February 8, 2012, 

and $10 per share for the remaining 11 shares 

purchased on March 8, 2012. 

Example 2. (i) The facts are the same as in 

Example 1, except that F does not notify W 

that F elects a basis determination method. 

W’s default basis determination method is 

the average basis method and W maintains an 

averaged basis for F’s shares of N Company 

on W’s books and records. 

(ii) F has not elected the average basis 

method under paragraph (e)(9)(i) of this 

section. Therefore, F’s notification to W on 

May 8, 2012, is not an effective revocation 

under paragraph (e)(9)(iii) of this section. F’s 

attempted revocation is, instead, notification 

of a change from the average basis method 

under paragraph (e)(9)(iv) of this section. 

Accordingly, the basis of each share of stock 

F sells on June 1, 2012, is the basis 

immediately before the change, $8.70 (total 

cost of shares, $600, divided by the total 

number of shares, 69). 

(10) Application of average basis 

method account by account—(i) In 

general. For sales, exchanges, or other 

dispositions on or after January 1, 2012, 

of stock described in paragraph (e)(1)(i) 

of this section, the average basis method 

applies on an account by account basis. 

A taxpayer may use the average basis 

method for stock in a regulated 

investment company or stock acquired 

in connection with a dividend 

reinvestment plan in one account but 

use a different basis determination 

method for identical stock in a different 

account. If a taxpayer uses the average 

basis method for a stock described in 

paragraph (e)(1)(i) of this section, the 

taxpayer must use the average basis 

method for all identical stock within 

that account. The taxpayer may use 

different basis determination methods 

for stock within an account that is not 

identical. Except as provided in 

paragraph (e)(10)(ii) of this section, a 

taxpayer must make separate elections 

to use the average basis method for 

stock held in separate accounts. 

(ii) Account rule for stock sold before 

2012. A taxpayer’s election to use the 

average basis method for shares of stock 

described in paragraph (e)(1)(i) of this 

section that a taxpayer sells, exchanges, 

or otherwise disposes of before January 

1, 2012, applies to all identical shares of 

stock the taxpayer holds in any account. 

(iii) Separate account. Unless the 

single-account election described in 

paragraph (e)(11)(i) of this section 

applies, stock described in paragraph 

(e)(1)(i) of this section that is a covered 

security (within the meaning of section 

6045(g)(3)) is treated as held in a 

separate account from stock that is a 

noncovered security (as described in 

§ 1.6045–1(a)(16)), regardless of when 

acquired. 

(iv) Examples. The provisions of this 

paragraph (e)(10) are illustrated by the 

following examples: 

Example 1. (i) In 2012, Taxpayer G enters 

into an agreement with Y Broker establishing 

three accounts (G–1, G–2, and G–3) for the 

periodic acquisition of shares of P Company, 

a regulated investment company. Y makes 

periodic purchases of P Company for each of 

G’s accounts. G elects to use the average basis 

method for account G–1. On July 1, 2013, G 

sells shares of P Company from account G– 

1. 

(ii) G is not required to use the average 

basis method for the shares of P Company 

that G holds in accounts G–2 and G–3 

because, under paragraph (e)(10)(i) of this 

section, the average basis method election 

applies to shares sold after 2011 on an 

account by account basis. 

Example 2. The facts are the same as in 

Example 1, except that G also instructs Y to 

acquire shares of Q Company, a regulated 

investment company, for account G–1. Under 

paragraph (e)(10)(i) of this section, G may use 

any permissible basis determination method 

for the shares of Q Company because, under 

paragraph (e)(4) of this section, the shares of 

Q Company are not identical to the shares of 

P Company. 

Example 3. (i) The facts are the same as in 

Example 1, except that G establishes the 

accounts in 2011 and Y sells shares of P 

Company from account G–1 on July 1, 2011. 

(ii) For sales before 2012, under paragraph 

(e)(10)(ii) of this section, G’s election applies 

to all accounts in which G holds identical 

stock. G must average together the basis of 

the shares in all accounts to determine the 

basis of the shares sold from account G–1. 

Example 4. (i) In 2011, Taxpayer H 

acquires 80 shares of R Company and enrolls 

them in R Company’s dividend reinvestment 

plan. In 2012, H acquires 50 shares of R 

Company in the dividend reinvestment plan. 

H elects to use the average basis method for 

the shares of R Company in the dividend 

reinvestment plan. R Company does not 

make the single-account election under 

paragraph (e)(11)(i) of this section. 

(ii) Under section 6045(g)(3) and § 1.6045– 

1(a)(16), the 80 shares acquired in 2011 are 

noncovered securities and the 50 shares 

acquired in 2012 are covered securities. 

Therefore, under paragraph (e)(10)(iii) of this 

section, the 80 shares are treated as held in 

a separate account from the 50 shares. H 

must make a separate average basis method 

election for each account and must average 

the basis of the shares in each account 

separately from the shares in the other 

account. 

Example 5. (i) B Broker maintains an 

account for Taxpayer J for the periodic 

acquisition of shares of S Company, a 

regulated investment company. In 2013, B 

purchases shares of S Company for J’s 

account that are covered securities within the 

meaning of section 6045(g)(3). On April 15, 

2014, J inherits shares of S Company that are 

noncovered securities and transfers the 

shares into the account with B. 

(ii) Under paragraph (e)(10)(iii) of this 

section, J must treat the purchased shares and 

the inherited shares of S Company as held in 

separate accounts. J may elect to apply the 

average basis method to all the shares of S 

Company, but must make a separate election 

for each account, and must average the basis 

of the shares in each account separately from 

the shares in the other account. 

Example 6. (i) In 2010, Taxpayer K 

purchases stock in T Company in an account 

with C Broker. In 2012, K purchases 

additional T Company stock and enrolls that 

stock in a dividend reinvestment plan 

maintained by C. K elects the average basis 

method for the T Company stock. In 2013, K 

transfers the T Company stock purchased in 

2010 into the dividend reinvestment plan. 

(ii) Under paragraphs (e)(1)(i) and (e)(6)(ii) 

of this section, the stock purchased in 2010 

is not stock acquired after December 31, 

2010, in connection with a dividend 

reinvestment plan before transfer into the 

dividend reinvestment plan. Therefore, the 

stock is not eligible for the average basis 

method at that time. 

(iii) Once transferred into the dividend 

reinvestment plan in 2013, the stock K 

purchased in 2010 is acquired after December 

31, 2010, in connection with a dividend 

reinvestment plan within the meaning of 

paragraph (e)(6)(ii) of this section and is 

eligible for the average basis method. Because 

stock purchased in 2010 is a noncovered 

security under § 1.6045–1(a)(16), under 

paragraph (e)(10)(iii) of this section, the 2010 

stock and the 2012 stock must be treated as 

held in separate accounts. Under paragraph 

(e)(7)(i) of this section, the basis of the 2010 

shares may not be averaged with the basis of 

the 2012 shares. 

Example 7. The facts are the same as in 

Example 6, except that K purchases the 

initial T Company stock in January 2011. 

Because this stock is a covered security 

under section 6045(g)(3) and § 1.6045– 

1(a)(15)(iv)(A), the 2011 stock and the 2012 

stock are not required under paragraph 

(e)(10)(iii) of this section to be treated as held 

in separate accounts. Under paragraph 

(e)(7)(i) of this section, the basis of the 2011 

shares must be averaged with the basis of the 

2012 shares. 

Example 8. (i) The facts are the same as in 

Example 7, except that K purchases the 

additional T Company stock and enrolls in 


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the dividend reinvestment plan in March 

2011. In September 2011, K transfers the T 

Company stock purchased in January 2011 

into the dividend reinvestment plan. K sells 

some of the T Company stock in 2012. 

(ii) Under section 6045(g)(3) and § 1.6045– 

1(a)(16), the stock K purchases in January 

2011 is a covered security at the time of 

purchase but the stock K purchases and 

enrolls in the dividend reinvestment plan in 

March 2011 is a noncovered security. 

However, under § 1.6045–1(a)(15)(iv)(A), the 

stock purchased in January 2011 becomes a 

noncovered security after it is transferred to 

the dividend reinvestment plan. Because all 

the shares in the dividend reinvestment plan 

in September 2011 are noncovered securities, 

when K sells stock in 2012, the January 2011 

stock and the March 2011 stock are not 

required under paragraph (e)(10)(iii) of this 

section to be treated as held in separate 

accounts. Under paragraph (e)(7)(i) of this 

section, the basis of the January 2011 shares 

must be averaged with the basis of the March 

2011 shares. 

(11) Single-account election—(i) In 

general. Paragraph (e)(10)(iii) of this 

section does not apply if a regulated 

investment company or dividend 

reinvestment plan elects to treat all 

identical shares of stock described in 

paragraph (e)(1)(i) of this section as held 

in a single account (single-account 

election). The single-account election 

applies only to stock for which a 

taxpayer elects to use the average basis 

method that is held in separate accounts 

or treated as held in separate accounts 

maintained for the taxpayer and only to 

accounts with the same ownership. If a 

broker (as defined by section 6045(c)(1)) 

holds the stock as a nominee, the 

broker, and not the regulated investment 

company or dividend reinvestment 

plan, makes the election. The singleaccount election is irrevocable, but is 

void if the taxpayer revokes the average 

basis election under paragraph (e)(9)(iii) 

of this section. 

(ii) Scope of election. A company, 

plan, or broker may make a singleaccount election for one or more 

taxpayers for which it maintains an 

account, and for one or more stocks it 

holds for a taxpayer. The company, 

plan, or broker may make the election 

only for the shares of stock for which it 

has accurate basis information. A 

company, plan, or broker has accurate 

basis information if the company, plan, 

or broker neither knows nor has reason 

to know that the basis information is 

inaccurate. See also section 6724 and 

the associated regulations regarding 

standards for relief from information 

reporting penalties. Stock for which 

accurate basis information is 

unavailable may not be included in the 

single-account election and must be 

treated as held in a separate account. 

(iii) Effect of single-account election. 

If a company, plan, or broker makes the 

single-account election, the basis of all 

identical shares of stock to which the 

election applies must be averaged 

together regardless of when the taxpayer 

acquires the shares, and all the shares 

are treated as covered securities. The 

single-account election applies to all 

identical stock a taxpayer later acquires 

in the account that is a covered security 

(within the meaning of section 

6045(g)(3)). A company, plan, or broker 

may make another single-account 

election if, for example, the broker later 

acquires accurate basis information for a 

stock, or a taxpayer acquires identical 

stock in the account that is a 

noncovered security (as described in 

§ 1.6045–1(a)(16)) for which the 

company, plan, or broker has accurate 

basis information. 

(iv) Time and manner for making the 

single-account election. A company, 

plan, or broker makes the single-account 

election by clearly noting it on its books 

and records. The books and records 

must reflect the date of the election; the 

taxpayer’s name, account number, and 

taxpayer identification number; the 

stock subject to the election; and the 

taxpayer’s basis in the stock. The 

company, plan, or broker must provide 

copies of the books and records 

regarding the election to the taxpayer 

upon request. A company, plan, or 

broker may make the single-account 

election at any time. 

(v) Notification to taxpayer. A 

company, plan, or broker making the 

single-account election must use 

reasonable means to notify the taxpayer 

of the election. Reasonable means 

include mailings, circulars, or electronic 

mail sent separately to the taxpayer or 

included with the taxpayer’s account 

statement, or other means reasonably 

calculated to provide actual notice to 

the taxpayer. The notice must identify 

the securities subject to the election and 

advise the taxpayer that the securities 

will be treated as covered securities 

regardless of when acquired. 

(vi) Examples. The provisions of this 

paragraph (e)(11) are illustrated by the 

following examples: 

Example 1. (i) E Broker maintains 

Accounts A and B for Taxpayer M for the 

acquisition and disposition of shares of T 

Company, a regulated investment company. 

In 2011, E purchases 100 shares of T 

Company for M’s Account A. E has accurate 

basis information for these shares. In 2012, E 

purchases 150 shares of T Company for M’s 

Account A and 80 shares of T Company for 

M’s Account B. M elects to use the average 

basis method for all shares of T Company. E 

makes a single-account election for M’s T 

Company stock. 

(ii) The shares of T Company in Accounts 

A and B are held in separate accounts. Under 

section 6045(g)(3) and § 1.6045–1(a)(16), of 

the shares purchased in Account A, the 100 

shares purchased in 2011 are noncovered 

securities and the 150 shares purchased in 

2012 are covered securities. Under paragraph 

(e)(10)(iii) of this section, the 100 shares are 

treated as held in a separate account from the 

150 shares. Under paragraph (e)(11)(i) of this 

section, the single-account election applies to 

all 330 shares of T Company in Accounts A 

and B. Thus, under paragraph (e)(11)(iii) of 

this section, the basis of the 330 shares of 

stock is averaged together and all the shares 

are treated as covered securities. 

Example 2. The facts are the same as in 

Example 1, except that M owns Account B 

jointly with Taxpayer N. E may make a 

single-account election for the 250 shares of 

stock in M’s Account A. However, under 

paragraph (e)(11)(i) of this section, E may not 

make a single-account election for Accounts 

A and B because the accounts do not have 

the same ownership. 

Example 3. (i) C Broker maintains an 

account for Taxpayer K for the acquisition 

and disposition of shares of T Company, a 

regulated investment company, and shares of 

V Company that K enrolls in C’s dividend 

reinvestment plan. In 2011, C purchases for 

K’s account 100 shares of T Company in 

multiple lots and 80 shares of V Company in 

multiple lots that are enrolled in the 

dividend reinvestment plan. C has accurate 

basis information for all 100 shares of T 

Company and 80 shares of V Company. In 

2012, C acquires for K’s account 150 shares 

of T Company and 160 shares of V Company 

that are enrolled in the dividend 

reinvestment plan. K elects to use the average 

basis method for all the shares of T Company 

and V Company. 

(ii) Under paragraphs (e)(11)(i) and (ii) of 

this section, C may make a single-account 

election for the T Company stock or the V 

Company stock, or both. After making a 

single-account election for each stock, under 

paragraph (e)(11)(iii) of this section, the basis 

of all T Company stock is averaged together 

and the basis of all V Company stock is 

averaged together, regardless of when 

acquired, and all the shares of T Company 

and V Company are treated as covered 

securities. 

Example 4. The facts are the same as in 

Example 3, except that K transfers the 100 

shares of T Company acquired in 2011 from 

an account with another broker into K’s 

account with C. C does not have accurate 

basis information for 30 of the 100 shares of 

T Company, which K had acquired in two 

lots. Under paragraph (e)(11)(ii) of this 

section, C may make the single-account 

election only for the 70 shares of T Company 

stock for which C has accurate basis 

information. C must treat the 30 shares of T 

Company for which C does not have accurate 

basis information as held in a separate 

account. K may use the average basis method 

for the 30 shares of T Company, but must 

make a separate average basis method 

election for these shares and must average 

the basis of these shares separately from the 

70 shares subject to C’s single-account 

election. 


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Example 5. The facts are the same as in 

Example 3, except that C has made the 

single-account election and in 2013 K 

acquires additional shares of T Company that 

are covered securities in K’s account with C. 

Under paragraph (e)(11)(iii) of this section, 

these shares of T Company are subject to C’s 

single-account election. 

Example 6. The facts are the same as in 

Example 3, except that C has made the 

single-account election and in 2013 K 

inherits shares of T Company that are 

noncovered securities and transfers the 

shares into the account with C. C has 

accurate basis information for these shares. 

Under paragraph (e)(11)(iii) of this section, C 

may make a second single-account election to 

include the inherited T Company shares. 

Example 7. (i) Between 2002 and 2011, 

Taxpayer L acquires 1,500 shares of W 

Company, a regulated investment company, 

in an account with D Broker, for which L 

uses the average basis method, and sells 500 

shares. On January 5, 2012, based on accurate 

basis information, the averaged basis of L’s 

remaining 1,000 shares of W Company is $24 

per share. On January 5, 2012, L acquires 100 

shares of W Company for $28 per share and 

makes an average basis election for those 

shares under paragraph (e)(9)(i) of this 

section. 

(ii) On February 1, 2012, D makes a singleaccount election that includes all 1,100 of L’s 

shares in W Company. Thereafter, the basis 

of L’s shares of W Company is $24.36 per 

share (($24,000 + $2,800)/1,100). On 

September 12, 2012, under paragraph 

(e)(9)(iii) of this section, L revokes the 

average basis election for the 100 shares 

acquired on January 5, 2012. 

(iii) Under paragraph (e)(11)(i) of this 

section, D’s single-account election is void. 

Therefore, the basis of the 1,000 shares of W 

Company that L acquires before 2012 is $24 

per share and the basis of the 100 shares of 

W Company that L acquires in 2012 is $28 

per share. 

(12) Effective/applicability date. 

Except as otherwise provided in 

paragraphs (e)(1), (e)(2), (e)(7), (e)(9), 

and (e)(10) of this section, this 

paragraph (e) applies for taxable years 

beginning after October 18, 2010. 

* * * * * 

■ Par. 4. Section 1.6039–2 is amended 

by adding two new sentences at the end 

of paragraph (c)(1) to read as follows: 

§ 1.6039–2 Statements to persons with 

respect to whom information is reported. 

* * * * * 

(c) * * * 

(1) * * * However, for a statement 

required to be furnished after December 

31, 2008, the February 15 due date 

under section 6045 applies to the 

statement if the statement is furnished 

in a consolidated reporting statement 

under section 6045. See §§ 1.6045– 

1(k)(3), 1.6045–2(d)(2), 1.6045–3(e)(2), 

1.6045–4(m)(3), and 1.6045–5(a)(3)(ii). 

* * * * * 

■ Par. 5. Section 1.6042–4 is amended 

by adding two new sentences at the end 

of paragraph (e)(1) to read as follows: 

§ 1.6042–4 Statements to recipients of 

dividend payments. 

* * * * * 

(e) * * * 

(1) * * * For a statement required to 

be furnished after December 31, 2008, 

the February 15 due date under section 

6045 applies to the statement if the 

statement is furnished in a consolidated 

reporting statement under section 6045. 

See §§ 1.6045–1(k)(3), 1.6045–2(d)(2), 

1.6045–3(e)(2), 1.6045–4(m)(3), and 

1.6045–5(a)(3)(ii). 

* * * * * 

■ Par. 6. Section 1.6044–5 is amended 

by adding two new sentences at the end 

of paragraph (b) to read as follows: 

§ 1.6044–5 Statements to recipients of 

patronage dividends. 

* * * * * 

(b) * * * For a statement required to 

be furnished after December 31, 2008, 

the February 15 due date under section 

6045 applies to the statement if the 

statement is furnished in a consolidated 

reporting statement under section 6045. 

See §§ 1.6045–1(k)(3), 1.6045–2(d)(2), 

1.6045–3(e)(2), 1.6045–4(m)(3), and 

1.6045–5(a)(3)(ii). 

* * * * * 

■ Par. 7. Section 1.6045–1 is amended 

by: 

■ 1. Revising paragraph (a)(9) and 

adding paragraphs (a)(14), (a)(15), and 

(a)(16). 

■ 2. Adding Examples 9, 10, and 11 to 

paragraph (b). 

■ 3. Revising paragraphs (c)(2), 

(c)(3)(i)(B)(1), and (c)(3)(i)(C). 

■ 4. Removing paragraph (c)(3)(xii) and 

redesignating paragraph (c)(3)(xi) as 

(c)(3)(xii) and adding a new paragraph 

(c)(3)(xi). 

■ 5. Adding Examples 7, 8, and 9 to 

paragraph (c)(4). 

■ 6. Revising paragraphs (d)(1), (d)(2), 

and (d)(5). 

■ 7. Redesignating paragraphs (d)(6) and 

(d)(7) as (d)(8) and (d)(9) respectively 

and adding new paragraphs (d)(6) and 

(d)(7). 

■ 8. Revising newly designated 

paragraphs (d)(8) and (d)(9). 

■ 9. Revising paragraphs (e)(2)(i), 

(f)(2)(i), (k)(1), and (k)(2). 

■ 10. Redesignating paragraph (k)(3) as 

(k)(4) and adding a new paragraph 

(k)(3). 

■ 11. Removing paragraphs (p) and (q) 

and redesignating paragraph (r) as (p). 

The additions and revisions read as 

follows: 

§ 1.6045–1 Returns of information of 

brokers and barter exchanges. 

(a) * * * 

(9) The term sale means any 

disposition of securities, commodities, 

regulated futures contracts, or forward 

contracts, and includes redemptions of 

stock, retirements of indebtedness, and 

enterings into short sales, but only to 

the extent any of these actions are 

conducted for cash. In the case of a 

regulated futures contract or a forward 

contract, a sale is any closing 

transaction. When a closing transaction 

in a regulated futures contract involves 

making or taking delivery, the profit or 

loss on the contract is a sale and the 

delivery is a separate sale. When a 

closing transaction in a forward contract 

involves making or taking delivery, the 

delivery is a sale without separating the 

profit or loss on the contract from the 

profit or loss on the delivery, except that 

taking delivery for United States dollars 

is not a sale. Grants or purchases of 

options, exercises of call options, and 

enterings into contracts that require 

delivery of personal property or an 

interest therein are not sales. For 

purposes of this section only, a 

constructive sale under section 1259 

and a mark to fair market value under 

sections 475 or 1296 are not sales. 

* * * * * 

(14) The term specified security 

means any share of stock (or any interest 

treated as stock, including, for example, 

an American Depositary Receipt) in an 

entity organized as, or treated for 

Federal tax purposes as, a corporation 

(foreign or domestic). Solely for 

purposes of this paragraph (a)(14), a 

security classified as stock by the issuer 

is treated as stock. If the issuer has not 

classified the security, the security is 

not treated as stock unless the broker 

knows that the security is reasonably 

classified as stock under general Federal 

tax principles. 

(15) The term covered security means 

a specified security described in this 

paragraph (a)(15). 

(i) In general. Except as provided in 

paragraph (a)(15)(iv) of this section, the 

following securities are covered 

securities: 

(A) A specified security acquired for 

cash in an account on or after January 

1, 2011, except stock for which the 

average basis method is available under 

§ 1.1012–1(e). 

(B) Stock for which the average basis 

method is available under § 1.1012–1(e) 

acquired for cash in an account on or 

after January 1, 2012. 

(C) A specified security transferred to 

an account if the broker or other 

custodian of the account receives a 


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transfer statement (as described in 

§ 1.6045A–1) reporting the security as a 

covered security. 

(ii) Acquired in an account. For 

purposes of this paragraph (a)(15), a 

security is considered acquired in a 

customer’s account at a broker or 

custodian if the security is acquired by 

the customer’s broker or custodian or 

acquired by another broker and 

delivered to the customer’s broker or 

custodian. 

(iii) Corporate actions and other 

events. For purposes of this paragraph 

(a)(15), a security acquired due to a 

stock dividend, stock split, 

reorganization, redemption, stock 

conversion, recapitalization, corporate 

division, or other similar action is 

considered acquired for cash in an 

account. 

(iv) Exceptions. Notwithstanding 

paragraph (a)(15)(i) of this section, the 

following securities are not covered 

securities: 

(A) Stock acquired in 2011 that is 

transferred to a dividend reinvestment 

plan (as described in § 1.1012–1(e)(6)) in 

2011. However, a covered security 

acquired in 2011 that is transferred to a 

dividend reinvestment plan after 2011 

remains a covered security. 

(B) A security acquired through an 

event described in paragraph (a)(15)(iii) 

of this section if the basis of the 

acquired security is determined from 

the basis of a noncovered security. 

(C) A security that is excepted at the 

time of its acquisition from reporting 

under paragraph (c)(3) or (g) of this 

section. However, a broker cannot treat 

a security as acquired by an exempt 

foreign person under paragraph (g)(1)(i) 

of this section at the time of acquisition 

if, at that time, the broker knows or 

should have known (including by 

reason of information that the broker is 

required to collect under section 1471 or 

1472) that the customer is not a foreign 

person. 

(D) A security for which reporting 

under this section is required by 

§ 1.6049–5(d)(3)(ii) (certain securities 

owned by a foreign intermediary or 

flow-through entity). 

(16) The term noncovered security 

means any security that is not a covered 

security. 

(b) * * * 

* * * * * 

Example 9. E, an individual not otherwise 

exempt from reporting, maintains an account 

with S, a broker. On June 1, 2012, E instructs 

S to purchase stock that is a specified 

security for cash. S places an order to 

purchase the stock with T, another broker. E 

does not maintain an account with T. T 

executes the purchase. Custody of the 

purchased stock is transferred to E’s account 

at S. Under paragraph (a)(15)(ii) of this 

section, the stock is considered acquired for 

cash in E’s account at S. Because the stock 

is acquired on or after January 1, 2012, under 

paragraph (a)(15)(i) of this section, it is a 

covered security. 

Example 10. F, an individual not otherwise 

exempt from reporting, is granted 100 shares 

of stock in F’s employer by F’s employer. 

Because F does not acquire the stock for cash 

or through a transfer to an account with a 

transfer statement (as described in 

§ 1.6045A–1), under paragraph (a)(15) of this 

section, the stock is not a covered security. 

Example 11. G, an individual not 

otherwise exempt from reporting, owns 400 

shares of stock in Q, a corporation, in an 

account with U, a broker. Of the 400 shares, 

100 are covered securities and 300 are 

noncovered securities. Q takes a corporate 

action to split its stock in a 2-for-1 split. After 

the stock split, G owns 800 shares of stock. 

Because the adjusted basis of 600 of the 800 

shares that G owns is determined from the 

basis of noncovered securities, under 

paragraphs (a)(15)(iii) and (a)(15)(iv)(B) of 

this section, these 600 shares are not covered 

securities and the remaining 200 shares are 

covered securities. 

(c) * * * 

(2) Sales required to be reported. 

Except as provided in paragraphs (c)(3), 

(c)(5), and (g) of this section, a broker is 

required to make a return of information 

for each sale by a customer of the broker 

if, in the ordinary course of a trade or 

business in which the broker stands 

ready to effect sales to be made by 

others, the broker effects the sale or 

closes the short position opened by the 

sale. 

(3) * * * 

(i) * * * 

(B) * * * 

(1) A corporation as defined in section 

7701(a)(3), whether domestic or foreign, 

except that this exclusion does not 

apply to sales of covered securities 

acquired on or after January 1, 2012, by 

an S corporation as defined in section 

1361(a); 

* * * * * 

(C) Exemption certificate—(1) In 

general. Except as provided in 

paragraph (c)(3)(i)(C)(2) of this section, 

a broker may treat a person described in 

paragraph (c)(3)(i)(B) of this section as 

an exempt recipient based on a properly 

completed exemption certificate (as 

provided in § 31.3406(h)–3 of this 

chapter); the broker’s actual knowledge 

that the customer is a person described 

in paragraph (c)(3)(i)(B) of this section; 

or the applicable indicators described in 

§ 1.6049–4(c)(1)(ii)(A) through (M). A 

broker may require an exempt recipient 

to file a properly completed exemption 

certificate and may treat an exempt 

recipient that fails to do so as a recipient 

that is not exempt. 

(2) Limitation for corporate 

customers. For sales of covered 

securities acquired on or after January 1, 

2012, a broker may not treat a customer 

as an exempt recipient described in 

paragraph (c)(3)(i)(B)(1) of this section 

based on the indicators of corporate 

status described in § 1.6049– 

4(c)(1)(ii)(A). However, for sales of all 

securities, a broker may treat a customer 

as an exempt recipient if one of the 

following applies: 

(i) The name of the customer contains 

the term ‘‘insurance company,’’ 

‘‘indemnity company,’’ ‘‘reinsurance 

company,’’ or ‘‘assurance company.’’ 

(ii) The name of the customer 

indicates that it is an entity listed as a 

per se corporation under § 301.7701– 

2(b)(8)(i) of this chapter. 

(iii) The broker receives a properly 

completed exemption certificate (as 

provided in § 31.3406(h)–3 of this 

chapter) that asserts that the customer is 

not an S corporation as defined in 

section 1361(a). 

(iv) The broker 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. 

* * * * * 

(xi) Short sales—(A) In general. A 

broker may not make a return of 

information under this section for a 

short sale of a security entered into on 

or after January 1, 2011, until the year 

a customer delivers a security to satisfy 

the short sale obligation. The return 

must be made without regard to the 

constructive sale rule in section 1259 or 

to section 1233(h). In general, the broker 

must report on a single return the 

information required by paragraph 

(d)(2)(i) of this section for the short sale 

except that the broker must report the 

date the short sale was closed in lieu of 

the sale date. In applying paragraph 

(d)(2)(i) of this section, the broker must 

report the relevant information 

regarding the security sold to open the 

short sale and the adjusted basis of the 

security delivered to close the short sale 

and whether any gain or loss on the 

closing of the short sale is long-term or 

short-term (within the meaning of 

section 1222). 

(B) Short sale closed by delivery of a 

noncovered security. A broker is not 

required to report adjusted basis and 

whether any gain or loss on the closing 

of the short sale is long-term or shortterm if the short sale is closed by 

delivery of a noncovered security and 

the return so indicates. A broker that 

chooses to report this information is not 

subject to penalties under section 6721 

or 6722 for failure to report this 

information correctly if the broker 

indicates on the return that the short 


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sale was closed by delivery of a 

noncovered security. 

(C) Short sale obligation transferred to 

another account. If a short sale 

obligation is satisfied by delivery of a 

security transferred into a customer’s 

account accompanied by a transfer 

statement (as described in § 1.6045A– 

1(b)(4)) indicating that the security was 

borrowed, the broker receiving custody 

of the security may not file a return of 

information under this section. The 

receiving broker must furnish a 

statement to the transferor that reports 

the amount of gross proceeds received 

from the short sale, the date of the sale, 

the quantity of shares or units sold, and 

the Committee on Uniform Security 

Identification Procedures (CUSIP) 

number of the sold security (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). The statement to the transferor 

also must include the transfer date, the 

name and contact information of the 

receiving broker, the name and contact 

information of the transferor, and 

sufficient information to identify the 

customer. If the customer subsequently 

closes the short sale obligation in the 

transferor’s account with non-borrowed 

securities, the transferor must make the 

return of information required by this 

section. In that event, the transferor 

must take into account the information 

furnished under this paragraph 

(c)(3)(xi)(C) on the return unless the 

transferor knows that the information 

furnished under this paragraph is 

incorrect or incomplete. A failure to 

report correct information that arises 

solely from this reliance is deemed to be 

due to reasonable cause for purposes of 

penalties under sections 6721 and 6722. 

See § 301.6724–1(a)(1) of this chapter. 

* * * * * 

(4) * * * 

* * * * * 

Example 7. On June 24, 2010, H, an 

individual who is not an exempt recipient, 

opens a short sale of stock in an account with 

M, a broker. Because the short sale is entered 

into before January 1, 2011, paragraph 

(c)(3)(xi) of this section does not apply. 

Under paragraphs (c)(2) and (j) of this 

section, M must make a return of information 

for the year of the sale regardless of when the 

short sale is closed. 

Example 8. (i) On August 25, 2011, H 

opens a short sale of stock in an account with 

M, a broker. H closes the short sale with M 

on January 25, 2012, by purchasing stock of 

the same corporation in the account in which 

H opened the short sale and delivering the 

stock to satisfy H’s short sale obligation. The 

stock H purchased is a covered security. 

(ii) Because the short sale is entered into 

on or after January 1, 2011, under paragraphs 

(c)(2) and (c)(3)(xi) of this section, the broker 

closing the short sale must make a return of 

information reporting the sale for the year in 

which the short sale is closed. Thus, M is 

required to report the sale for 2012. M must 

report on a single return the relevant 

information for the sold stock, the adjusted 

basis of the purchased stock, and whether 

any gain or loss on the closing of the short 

sale is long-term or short-term (within the 

meaning of section 1222). Thus, M must 

report the information about the short sale 

opening and closing transactions on a single 

return for taxable year 2012. 

Example 9. (i) Assume the same facts as 

in Example 8 except that H also has an 

account with N, a broker, and satisfies the 

short sale obligation with M by borrowing 

stock of the same corporation from N and 

transferring custody of the borrowed stock 

from N to M. N indicates on the transfer 

statement that the transferred stock was 

borrowed in accordance with § 1.6045A– 

1(b)(4). 

(ii) Under paragraph (c)(3)(xi)(C) of this 

section, M may not file the return of 

information required under this section. M 

must furnish a statement to N that reports the 

gross proceeds from the short sale on August 

25, 2011, the date of the sale, the quantity of 

shares sold, the CUSIP number or other 

security identifier number of the sold stock, 

the transfer date, the name and contact 

information of M and N, and information 

identifying H such as H’s name and the 

account number from which H transferred 

the borrowed stock. 

(iii) N must report the gross proceeds from 

the short sale, the date the short sale was 

closed, the adjusted basis of the stock 

acquired to close the short sale, and whether 

any gain or loss on the closing of the short 

sale is long-term or short-term (within the 

meaning of section 1222) on the return of 

information N is required to file under 

paragraph (c)(2) of this section when H closes 

the short sale in the account with N. 

* * * * * 

(d) * * * (1) In general. A broker that 

is required to make a return of 

information under paragraph (c) of this 

section during a reporting period is 

required to report for each filing group 

on a separate Form 1096, ‘‘Annual 

Summary and Transmittal of U.S. 

Information Returns,’’ or any successor 

form, the information required by the 

form in the manner and number of 

copies required by the form. 

(2) Transactional reporting—(i) 

Required information. Except as 

provided in paragraph (c)(5) of this 

section, for each sale for which a broker 

is required to make a return of 

information under this section, the 

broker must report on Form 1099–B, 

‘‘Proceeds From Broker and Barter 

Exchange Transactions,’’ or any 

successor form the name, address, and 

taxpayer identification number of the 

customer, the property sold, the CUSIP 

number of the security sold (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), the adjusted basis of the 

security sold, whether any gain or loss 

with respect to the security sold is longterm or short-term (within the meaning 

of section 1222), the gross proceeds of 

the sale, the sale date, and other 

information required by the form in the 

manner and number of copies required 

by the form. 

(ii) Specific identification of 

securities. Except as provided in 

§ 1.1012–1(e)(7)(ii), a broker must report 

a sale on or after January 1, 2011, of less 

than the entire position in an account of 

a specified 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 sold. See § 1.1012–1(c). If the 

customer does not provide an adequate 

and timely identification for the sale, 

the broker must first report the sale of 

any shares or units in the account for 

which the broker does not know the 

acquisition or purchase date followed 

by the earliest shares or units purchased 

or acquired, whether covered securities 

or noncovered securities. 

(iii) Sales of noncovered securities. A 

broker is not required to report adjusted 

basis and whether any gain or loss on 

the sale is long-term or short-term for 

the sale of a noncovered security if the 

return identifies the sale as a sale of a 

noncovered security. A broker that 

chooses to report this information for a 

noncovered security is not subject to 

penalties under section 6721 or 6722 for 

failure to report this information 

correctly if the return identifies the sale 

as a sale of a noncovered security. For 

purposes of this paragraph (d)(2)(iii), a 

broker must treat a security for which a 

broker makes the single-account 

election described in § 1.1012– 

1(e)(11)(i) as a covered security. 

(iv) Information from other parties 

and other accounts—(A) Transfer and 

issuer statements. When reporting a sale 

of a covered security, a broker must take 

into account all information, other than 

the classification of the security (such as 

stock), furnished on a transfer statement 

(as described in § 1.6045A–1) and all 

information furnished or deemed 

furnished on an issuer statement (as 

described in § 1.6045B–1), unless the 

statement is incomplete or the broker 

has actual knowledge that it is incorrect. 

A broker may treat a customer as a 

minority shareholder when taking the 

information on an issuer statement into 

account unless the broker knows that 


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the customer is a majority shareholder 

and the issuer statement reports the 

action’s effect on the basis of majority 

shareholders. A failure to report correct 

information that arises solely from 

reliance on information furnished on a 

transfer statement or issuer statement is 

deemed to be due to reasonable cause 

for purposes of penalties under sections 

6721 and 6722. See § 301.6724–1(a)(1) 

of this chapter. 

(B) Other information. A broker 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, 

including any information the broker 

has about securities held by the same 

customer in other accounts with the 

broker. For purposes of penalties under 

sections 6721 and 6722, a broker that 

takes into account information received 

from a customer or third party other 

than information furnished on a transfer 

statement or issuer statement is deemed 

to have relied upon this information in 

good faith if the broker neither knows 

nor has reason to know that the 

information is incorrect. See 

§ 301.6724–1(c)(6) of this chapter. 

(v) Failure to receive a complete 

transfer statement. A broker that has not 

received a complete transfer statement 

as required under § 1.6045A–1(a)(3) for 

a transfer of a specified security must 

request a complete statement from the 

applicable person effecting the transfer 

unless, under § 1.6045A–1(a), the 

transferor has no duty to furnish a 

transfer statement for the transfer. The 

broker is only required to make this 

request once. If the broker does not 

receive a complete transfer statement 

after requesting it, the 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 this section 

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. 

(vi) Reporting by other parties after a 

sale—(A) Transfer statements. If a 

broker receives a transfer statement 

indicating that a security is a covered 

security after the broker reports the sale 

of the security, the broker must file a 

corrected return within thirty days of 

receiving the statement unless the 

broker reported the required 

information on the original return 

consistently with the transfer statement. 

(B) Issuer statements. If a broker 

receives or is deemed to receive an 

issuer statement after the broker reports 

the sale of a covered security, the broker 

must file a corrected return within thirty 

days of receiving the issuer statement 

unless the broker reported the required 

information on the original return 

consistently with the issuer statement. 

(C) Exception. A broker is not 

required to file a corrected return under 

this paragraph (d)(2)(vi) if the broker 

receives the transfer statement or issuer 

statement more than three years after 

the broker filed the return. 

(vii) Examples. The following 

examples illustrate the rules of this 

paragraph (d)(2): 

Example 1. (i) On February 22, 2012, K 

sells 100 shares of stock of C, a corporation, 

at a loss in an account held with F, a broker. 

On March 15, 2012, K purchases 100 shares 

of C stock for cash in an account with G, a 

different broker. Because K acquires the stock 

purchased on March 15, 2012, for cash in an 

account after January 1, 2012, under 

paragraph (a)(15) of this section, the stock is 

a covered security. K asks G to increase K’s 

adjusted basis in the stock to account for the 

application of the wash sale rules under 

section 1091 to the loss transaction in the 

account held with F. 

(ii) Under paragraph (d)(2)(iv)(B) of this 

section, G is not required to take into account 

the information provided by K when 

subsequently reporting the adjusted basis and 

whether any gain or loss on the sale is longterm or short-term. If G chooses to take this 

information into account, under paragraph 

(d)(2)(iv)(B) of this section, G is deemed to 

have relied upon the information received 

from K in good faith for purposes of penalties 

under sections 6721 and 6722 if G neither 

knows nor has reason to know that the 

information provided by K is incorrect. 

Example 2. (i) L purchases shares of stock 

of a single corporation in an account with F, 

a broker, on April 17, 1969, April 17, 2012, 

April 17, 2013, and April 17, 2014. In 

January 2015, L sells all the stock. 

(ii) Under paragraph (d)(2)(i) of this 

section, F must separately report the gross 

proceeds and adjusted basis attributable to 

the stock purchased in 2014, for which the 

gain or loss on the sale is short-term, and the 

combined gross proceeds and adjusted basis 

attributable to the stock purchased in 2012 

and 2013, for which the gain or loss on the 

sale is long-term. Under paragraph (d)(2)(iii) 

of this section, F must also separately report 

the gross proceeds attributable to the stock 

purchased in 1969 as the sale of noncovered 

securities in order to avoid treatment of this 

sale as the sale of covered securities. 

* * * * * 

(5) Gross proceeds. For purposes of 

this section, gross proceeds on a sale are 

the total amount paid to the customer or 

credited to the customer’s account as a 

result of the sale reduced by the amount 

of any interest reported under paragraph 

(d)(3) of this section and increased by 

any amount not paid or credited by 

reason of repayment of margin loans. In 

the case of a closing transaction that 

results in a loss, gross proceeds are the 

amount debited from the customer’s 

account. A broker may, but is not 

required to, reduce gross proceeds by 

the amount of commissions and transfer 

taxes, provided the treatment chosen is 

consistent with the books of the broker. 

For securities sold pursuant to the 

exercise of an option granted or 

acquired before January 1, 2013, a 

broker may, but is not required to, take 

the option premiums into account in 

determining the gross proceeds of the 

securities sold, provided the treatment 

chosen is consistent with the books of 

the broker. A broker must report the 

gross proceeds of identical stock (within 

the meaning of § 1.1012–1(e)(4)) by 

averaging the proceeds of each share if 

the stock is sold at separate times on the 

same calendar day in executing a single 

trade order and the broker executing the 

trade provides a single confirmation to 

the customer that reports an aggregate 

total price or an average price per share. 

However, a broker may not average the 

proceeds if the customer notifies the 

broker in writing of an intent to 

determine the proceeds of the stock by 

the actual proceeds per share and the 

broker receives the notification by 

January 15 of the calendar year 

following the year of the sale. A broker 

may extend the January 15 deadline but 

not beyond the due date for filing the 

return required under this section. 

(6) Adjusted basis—(i) In general. For 

purposes of this section, the adjusted 

basis of a security is determined from 

the initial basis under paragraph 

(d)(6)(ii) of this section as of the date the 

security is acquired in an account, 

increased by the commissions and 

transfer taxes related to its sale to the 

extent not accounted for in gross 

proceeds as described in paragraph 

(d)(5) of this section. A broker is not 

required to consider transactions, 

elections, or events occurring outside 

the account except for an organizational 

action taken by an issuer during the 

period the broker holds custody of the 

security (not including the transfer 

settlement date if the security was 

transferred) reported on an issuer 

statement (as described in § 1.6045B–1) 

furnished or deemed furnished to the 

broker. 

(ii) Initial basis—(A) Cost basis. For a 

security acquired for cash, the initial 

basis is the total amount of cash paid by 

the customer or credited against the 

customer’s account for the security, 

increased by the commissions and 

transfer taxes related to its acquisition. 

A broker may, but is not required to, 

take option premiums into account in 

determining the initial basis of 

securities purchased or acquired 

pursuant to the exercise of an option 

granted or acquired before January 1, 


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2013. A broker may, but is not required 

to, increase initial basis for income 

recognized upon the exercise of a 

compensatory option or the vesting or 

exercise of other equity-based 

compensation arrangements, granted or 

acquired before January 1, 2013. A 

broker must report the basis of identical 

stock (within the meaning of § 1.1012– 

1(e)(4)) by averaging the basis of each 

share if the stock is purchased at 

separate times on the same calendar day 

in executing a single trade order and the 

broker executing the trade provides a 

single confirmation to the customer that 

reports an aggregate total price or an 

average price per share. However, a 

broker may not average the basis if the 

customer timely notifies the broker in 

writing of an intent to determine the 

basis of the stock by the actual cost per 

share in accordance with § 1.1012– 

1(c)(1)(ii). 

(B) Transferred basis—(1) In general. 

The initial basis of a security transferred 

to an account is generally the basis 

reported on the transfer statement (as 

described in § 1.6045A–1). 

(2) Securities acquired by gift. If a 

transfer statement indicates that the 

security is acquired as a gift, a broker 

must apply the relevant basis rules for 

property acquired by gift in determining 

the initial basis, but is not required to 

adjust basis for gift tax. A broker must 

treat the initial basis as equal to the 

gross proceeds from the sale determined 

under paragraph (d)(5) of this section if 

the relevant basis rules for property 

acquired by gift prevent recognizing 

both gain and loss, or if the relevant 

basis rules treat the initial basis of the 

security as its fair market value as of the 

date of the gift and the broker neither 

knows nor can readily ascertain this 

value. If the transfer statement did not 

report a date for the gift, the broker must 

treat the settlement date for the transfer 

as the date of the gift. 

(iii) Adjustments for wash sales—(A) 

In general. A broker must apply the 

wash sale rules under section 1091 if 

both the sale and purchase transactions 

are of covered securities with the same 

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). When reporting the sale 

transaction that triggered the wash sale, 

the broker must report the amount of 

loss that is disallowed by section 1091 

in addition to gross proceeds and 

adjusted basis. The broker must increase 

the adjusted basis of the purchased 

security by the amount of loss 

disallowed on the sale transaction. 

(B) Securities in different accounts. A 

broker is not required to apply 

paragraph (d)(6)(iii)(A) of this section if 

the securities are purchased and sold 

from different accounts, if the 

purchased security is transferred to 

another account before the wash sale, or 

if the securities are treated as held in 

separate accounts under § 1.1012–1(e). 

A security is not purchased in an 

account if it is purchased in another 

account and transferred into the 

account. 

(C) Effect of election under section 

475(f)(1). A broker is not required to 

apply paragraph (d)(6)(iii)(A) of this 

section to securities in an account if a 

customer has in writing both informed 

the broker that the customer has made 

a valid and timely election under 

section 475(f)(1) and identified the 

account as solely containing securities 

subject to the election. For purposes of 

this paragraph (d)(6)(iii)(C), a writing 

may be in electronic format. If a 

customer subsequently informs a broker 

that the election no longer applies to the 

customer or the account, the broker 

must prospectively apply paragraph 

(d)(6)(iii)(A) of this section but is not 

required to apply paragraph 

(d)(6)(iii)(A) of this section for the 

period covered by the customer’s prior 

instruction to the broker. A taxpayer 

that is not a trader in securities within 

the meaning of section 475(f)(1) does 

not become a trader in securities, or 

create an inference that it is a trader in 

securities, by notifying a broker that it 

has made a valid and timely election 

under section 475(f)(1). 

(D) Reporting at or near the time of 

sale. If a wash sale occurs after a broker 

has completed a return or statement 

reporting a sale of a covered security, 

the broker must redetermine adjusted 

basis under this paragraph (d)(6)(iii) 

and, if the return or statement included 

information inconsistent with this 

redetermination, correct the return or 

statement by the applicable original due 

date set forth in this section for the 

return or statement. 

(iv) Constructive sale and mark-tomarket adjustments. A broker is not 

required to apply section 1259 

(regarding constructive sales), section 

475 (regarding the mark-to-market 

method of accounting), or section 1296 

(regarding the mark-to-market method of 

accounting for marketable stock in a 

passive foreign investment company) 

when reporting adjusted basis. 

(v) Average basis method 

adjustments. For a covered security for 

which basis may be determined by the 

average basis method, a broker must 

compute basis using the average basis 

method if a customer validly elects that 

method for the securities sold or, in the 

absence of any instruction from the 

customer, if the broker chooses that 

method as its default basis 

determination method. See § 1.1012– 

1(e). 

(vi) Regulated investment company 

and real estate investment trust 

adjustments. A broker must adjust the 

basis of a covered security issued by a 

regulated investment company or real 

estate investment trust for the effects of 

undistributed capital gains reported to 

or by the broker under section 

852(b)(3)(D) or section 857(b)(3)(D). 

(vii) Examples. The following 

examples, in which all the securities are 

covered securities, illustrate the rules of 

this paragraph (d)(6): 

Example 1. (i) On September 21, 2012, P 

purchases 100 shares of stock in an account 

with J, a broker. On December 14, 2012, P 

purchases 100 shares of stock with the same 

CUSIP number in the same account. On 

January 4, 2013, P sells the 100 shares 

purchased on September 21, 2012, at a loss. 

(ii) Because the sale of stock on January 4, 

2013, and the purchase of stock on December 

14, 2012, are of covered securities with the 

same CUSIP number, under paragraph 

(d)(6)(iii)(A) of this section, J must report the 

amount of loss disallowed by section 1091 in 

addition to the gross proceeds of the sale and 

the adjusted basis of the September 21, 2012, 

stock. 

(iii) P later sells the stock acquired on 

December 14, 2012. When reporting the sale 

of the stock, under paragraph (d)(6)(iii)(A) of 

this section, J must increase the adjusted 

basis of the stock acquired on December 14, 

2012, by the amount of loss disallowed on 

the January 4, 2013, sale. 

Example 2. Assume the same facts as in 

Example 1 except that the December 14, 

2012, purchase occurs in another account P 

maintains with J. Because the December 14, 

2012, purchase does not occur in the same 

account as the sale of the September 21, 

2012, stock, under paragraph (d)(6)(iii)(B) of 

this section, J is not required to apply the 

wash sale rules in reporting the sale of stock 

acquired on September 21, 2012, or 

December 14, 2012. Under paragraphs 

(d)(2)(iii) and (d)(2)(iv)(B) of this section, J 

may choose to apply the wash sale rules as 

if the transactions occurred in the same 

account. The result is the same whether P 

keeps the stock purchased on December 14, 

2012, in the other account or transfers the 

stock into the account from which P sells the 

stock sold on January 4, 2013. 

Example 3. (i) K, a regulated investment 

company, offers two funds for sale, Fund D 

and Fund E. On April 22, 2012, Q purchases 

shares of Fund D and pays a separate load 

charge. By paying the load charge, Q acquires 

a reinvestment right in shares of Fund E. On 

April 23, 2012, at the request of Q, Fund D 

redeems the shares. Q uses the proceeds to 

purchase shares of Fund E in a separate 

account. As a result of the reinvestment right, 

Q pays no load charge in purchasing the 

Fund E shares. 


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(ii) Under paragraph (d)(6)(i) of this 

section, when reporting adjusted basis of the 

Fund D and Fund E shares at the time of their 

redemption, K is not required to adjust basis 

for any deferral of the load charge under 

section 852(f), because the transactions 

concerning Fund D and Fund E occur in 

separate accounts. Under paragraph 

(d)(2)(iv)(B) of this section, K may choose to 

apply the provisions of section 852(f). 

Example 4. R, an employee of C, a 

corporation, participates in C’s stock option 

plan. On April 2, 2012, C grants R a 

nonstatutory option under the plan to buy 

100 shares of stock. The option becomes 

substantially vested on April 2, 2013. On 

October 2, 2013, R exercises the option and 

purchases 100 shares. On December 2, 2013, 

R sells the 100 shares. Under paragraph 

(d)(6)(ii)(A) of this section, C is required to 

determine adjusted basis from the amount R 

pays under the terms of the option. Because 

C grants the option to R before January 1, 

2013, under paragraph (d)(6)(ii)(A) of this 

section, C is not required to adjust basis for 

any amount R must include as wage income 

with respect to the October 2, 2013, stock 

purchase. The result is the same if C grants 

R a statutory option. 

(7) Long-term or short-term gain or 

loss—(i) In general. In determining 

whether any gain or loss on the sale of 

a security is long-term or short-term 

within the meaning of section 1222 for 

purposes of this section, a broker must 

consider the information reported on a 

transfer statement (as described in 

§ 1.6045A–1) and apply the relevant 

rules for property acquired from a 

decedent or by gift. A broker is not 

required to consider transactions, 

elections, or events occurring outside 

the account except for an organizational 

action taken by an issuer during the 

period the broker holds custody of the 

security (not including the transfer 

settlement date if the security was 

transferred) reported on an issuer 

statement (as described in § 1.6045B–1) 

furnished or deemed furnished to the 

broker. 

(ii) Adjustments for wash sales—(A) 

In general. A broker must apply the 

wash sale rules under section 1091 if 

both the sale and purchase transactions 

are of covered securities with the same 

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). 

(B) Securities in different accounts. A 

broker is not required to apply 

paragraph (d)(7)(ii)(A) of this section if 

the securities are purchased and sold 

from different accounts, if the 

purchased security is transferred to 

another account before the wash sale, or 

if the securities are treated as held in 

separate accounts under § 1.1012–1(e). 

A security is not purchased in an 

account if it is purchased in another 

account and transferred into the 

account. 

(C) Effect of election under section 

475(f)(1). A broker is not required to 

apply paragraph (d)(7)(ii)(A) of this 

section to securities in an account if a 

customer has in writing both informed 

the broker that the customer has made 

a valid and timely election under 

section 475(f)(1) and identified the 

account as solely containing securities 

subject to the election. For purposes of 

this paragraph (d)(7)(ii)(C), a writing 

may be in electronic format. If a 

customer subsequently informs a broker 

that the election no longer applies to the 

customer or the account, the broker 

must prospectively apply paragraph 

(d)(7)(ii)(A) of this section but is not 

required to apply paragraph (d)(7)(ii)(A) 

of this section for the period covered by 

the customer’s prior instruction to the 

broker. A taxpayer that is not a trader 

in securities within the meaning of 

section 475(f)(1) does not become a 

trader in securities, or create an 

inference that it is a trader in securities, 

by notifying a broker that it has made 

a valid and timely election under 

section 475(f)(1). 

(D) Reporting at or near the time of 

sale. If a wash sale occurs after a broker 

has completed a return or statement 

reporting a sale of a covered security, 

the broker must redetermine whether 

gain or loss on the sale is long-term or 

short-term under this paragraph 

(d)(7)(ii) and, if the return or statement 

included information inconsistent with 

this redetermination, correct the return 

or statement by the applicable original 

due date set forth in this section for the 

return or statement. 

(iii) Constructive sale and mark-tomarket adjustments. A broker is not 

required to apply section 1259 

(regarding constructive sales), section 

475 (regarding the mark-to-market 

method of accounting), or section 1296 

(regarding the mark-to-market method of 

accounting for marketable stock in a 

passive foreign investment company) 

when determining whether any gain or 

loss on the sale of a security is long-term 

or short-term. 

(iv) Regulated investment company 

and real estate investment trust 

adjustments. A broker is not required to 

apply sections 852(b)(4)(A) and 

857(b)(8) (regarding effect of distributed 

and undistributed capital gain 

dividends on a loss on sale of regulated 

investment company or real estate 

investment trust shares held six months 

or less) or section 852(b)(4)(B) 

(regarding loss disallowance on sale of 

regulated investment company shares 

held six months or less due to receipt 

of tax-exempt dividends) when 

determining whether any gain or loss on 

the sale of a security is long-term or 

short-term. 

(v) No adjustments for hedging 

transactions or offsetting positions. A 

broker is not required to apply section 

1092 (regarding straddles), section 

1233(b)(2) (regarding effect of short sale 

on holding period of substantially 

identical property), or § 1.1221–2(b) 

(regarding hedging transactions) when 

determining whether any gain or loss on 

the sale of a security is long-term or 

short-term. 

(8) Conversion into United States 

dollars of amounts paid or received in 

foreign currency—(i) Conversion rules. 

(A) When a payment is made in a 

foreign currency, a broker must 

determine the U.S. dollar amount of the 

payment by converting the foreign 

currency into U.S. dollars on the date it 

receives, credits, or makes the payment, 

as applicable, at the spot rate (as defined 

in § 1.988–1(d)(1)) or pursuant to a 

reasonable spot rate convention. When 

reporting the sale of a security traded on 

an established securities market, 

however, a broker must determine the 

U.S. dollar amounts at the spot rate or 

pursuant to a reasonable spot rate 

convention as of the settlement date of 

the purchase or sale, as applicable. 

(B) A reasonable spot rate convention 

includes a month-end spot rate or a 

monthly average spot rate. A spot rate 

convention must be used consistently 

for all non-dollar amounts reported and 

from year to year. The convention may 

not be changed without the consent of 

the Commissioner or his or her delegate. 

(ii) Effect of identification under 

§ 1.988–5(a), (b), or (c) when the 

taxpayer effects a sale and a hedge 

through the same broker. In lieu of the 

amounts reportable under paragraph 

(d)(8)(i) of this section, the gross 

proceeds and adjusted basis must each 

be the integrated amount computed 

under § 1.988–5(a), (b) or (c) if— 

(A) A taxpayer effects through a 

broker a sale or exchange of 

nonfunctional currency (as defined in 

§ 1.988–1(c)) and hedges all or a part of 

the sale as provided in § 1.988–5(a), (b) 

or (c) with the same broker; and 

(B) The taxpayer complies with the 

requirements of § 1.988–5(a), (b) or (c) 

and so notifies the broker prior to the 

end of the calendar year in which the 

sale occurs. 

(iii) Example. The following example 

illustrates the rules of this paragraph 

(d)(8): 

Example. (i) Z, an individual, is a U.S. 

citizen. On July 4, 2012, Z purchases stock 


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of C, SA, a French corporation traded on an 

established securities market, in an account 

with Q, a broker. Q uses a daily spot rate for 

converting euro and U.S. dollars. Z pays 

Ö1,200 for the stock. On the settlement date 

for the purchase, the spot rate is Ö1 = $1.30. 

On October 4, 2012, Z sells the stock for 

Ö1,000. On the settlement date for the sale, 

the spot rate is Ö1 = $1.35. On October 5, 

2012, Z purchases additional shares of C, SA, 

that cause the Ö200 loss on the stock sold on 

October 4, 2012, to be disallowed under 

section 1091. 

(ii) Under paragraph (d)(8)(i)(A) of this 

section, Q must determine adjusted basis by 

converting the Ö1,200 paid on behalf of Z 

into U.S. dollars using the Ö1 = $1.30 spot 

rate on the settlement date of the purchase. 

Q must convert the Ö1,000 gross proceeds 

into U.S. dollars using the Ö1 = $1.35 spot 

rate on the settlement date for the sale. Thus, 

Q must report adjusted basis equal to $1,560, 

gross proceeds equal to $1,350, and $210 in 

loss disallowed by section 1091. 

(9) Coordination with the reporting 

rules for widely held fixed investment 

trusts under § 1.671–5. Information 

required to be reported under section 

6045(a) for a sale of a security in a 

widely held fixed investment trust 

(WHFIT) (as defined under § 1.671–5) 

and the sale of an interest in a WHFIT 

must be reported as provided by this 

section unless the information is also 

required to be reported under § 1.671– 

5. To the extent that this section 

requires additional information under 

section 6045(g), those requirements are 

deemed to be met through compliance 

with the rules in § 1.671–5. 

(e) * * * 

(2) * * * (i) In general. Except as 

provided in paragraphs (e)(2)(ii) and (g) 

of this section, a barter exchange must 

make a return of information for 

exchanges of personal property or 

services through the barter exchange 

during the calendar year among its 

members or clients or between these 

persons and the barter exchange. For 

this purpose, property or services are 

exchanged through a barter exchange if 

payment for property or services is 

made by means of a credit on the books 

of the barter exchange or scrip issued by 

the barter exchange or if the barter 

exchange arranges a direct exchange of 

property or services among its members 

or clients or exchanges property or 

services with a member or client. 

* * * * * 

(f) * * * 

(2) * * * (i) In general. As to each 

exchange for which a barter exchange is 

required to make a return of information 

under this section, the barter exchange 

must show on Form 1099–B, ‘‘Proceeds 

From Broker and Barter Exchange 

Transactions,’’ or any successor form the 

name, address, and taxpayer 

identification number of each member 

or client providing property or services 

in the exchange, the property or services 

provided, the amount received by the 

member or client for the property or 

services, the date on which the 

exchange occurred, and other 

information required by the form in the 

manner and number of copies required 

by the form. 

* * * * * 

(k) * * * (1) General requirements. A 

broker or barter exchange making a 

return of information under this section 

must furnish to the person whose 

identifying number is (or is required to 

be) shown on the return a written 

statement showing the information 

required by paragraph (c)(5), (d), or (f) 

of this section and containing a legend 

stating that the information is being 

reported to the Internal Revenue 

Service. If the return of information is 

not made on magnetic media, this 

requirement may be satisfied by 

furnishing to the person a copy of all 

Forms 1099 or any successor form for 

the person filed with the Internal 

Revenue Service Center. A statement is 

considered to be furnished to a person 

to whom a statement is required to be 

made under this paragraph (k) if it is 

mailed to the person at the last address 

of the person known to the broker or 

barter exchange. 

(2) Time for furnishing statements. A 

broker or barter exchange may furnish 

the statements required under this 

paragraph (k) yearly, quarterly, monthly, 

or on any other basis, without regard to 

the reporting period the broker or barter 

exchange elects; however, all statements 

required to be furnished under this 

paragraph (k) for a calendar year must 

be furnished 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 broker or barter exchange 

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 or barter exchange 

to customer as the statement required to 

be furnished under this section. For 

purposes of this paragraph (k)(3)(i), a 

broker may treat a shareholder of a 

broker as a customer of the broker and 

may treat a grouping of statements for a 

customer as including a statement 

required to be furnished under this 

section if the customer has an account 

with the broker for which a statement 

would be required to be furnished under 

this section if the customer purchased 

and sold stock in a corporation in the 

account during the year. 

(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. 

(iii) Examples. The following 

examples illustrate the rules of this 

paragraph (k)(3): 

Example 1. D has a taxable account with 

B, a broker, consisting solely of stock in a 

single corporation. In 2010, D receives 

reportable dividends from this stock and sells 

the stock. Under this section and § 1.6042– 

4, B must furnish a Form 1099–B, ‘‘Proceeds 

From Broker and Barter Exchange 

Transactions,’’ and Form 1099–DIV, 

‘‘Dividends and Distributions,’’ to D in 2011 

for the sale and the dividends. Under 

paragraph (k)(2) of this section, B is required 

to furnish the required statement under this 

section to D by February 15, 2011. B must 

furnish the statement reporting the dividends 

by the January 31, 2011, due date provided 

in § 1.6042–4. However, under paragraph 

(k)(3)(ii) of this section, B must furnish the 

statement reporting the dividends by 

February 15, 2011, if furnished in a 

consolidated reporting statement as defined 

in paragraph (k)(3)(i) of this section. 

Example 2. Assume the same facts as in 

Example 1 except that D has invested solely 

in a money market fund for which sales are 

excepted from the reporting required under 

this section. B therefore is not required to 

issue a statement under this section if D sells 

an interest in the money market fund. Under 

paragraph (k)(3)(i) of this section, B may treat 

a grouping of statements for D as including 

a required statement under this section 

because D has an account for which a 

statement would be required under this 

section if D purchased and sold stock in a 

corporation in the account during the year. 

Therefore, under paragraph (k)(3)(ii) of this 

section, B must furnish the statement 

reporting the dividends by February 15, 

2011. 

Example 3. E has a nontaxable IRA 

account with B, a broker. This account is the 

only account E holds with B. E sells stock in 

2010 in this account. E also receives a cash 

distribution from the account in 2010. The 

cash distribution from the IRA is reportable 

on Form 1099–R, ‘‘Distributions From 

Pensions, Annuities, Retirement or ProfitSharing Plans, IRAs, Insurance Contracts, 

etc.,’’ under § 1.408–7. Because the account is 

not taxable, sales in the account are not 

subject to reporting under this section. 

Therefore, because no statement is required 

under this section, under paragraph (k)(3) of 

this section, B may not furnish any 

statements to E in a consolidated reporting 

statement. B must furnish the Form 1099–R 

by the date required under § 1.408–7. 

Example 4. Assume the same facts as in 

Example 3 except that E and F have a joint 


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taxable account with B. Because sales in the 

joint taxable account are subject to reporting 

under this section, under paragraph (k)(3) of 

this section, B must furnish by February 15, 

2011, all customer statements for 2010 that 

B otherwise must furnish jointly to E and F 

on or before January 31, 2011, if furnished on 

the same date in a consolidated reporting 

statement with the required statements under 

this section for any sales in the joint taxable 

account. However, B may not include any 

statement for E’s IRA account in the 

consolidated reporting statement furnished 

jointly to E and F because the statements are 

not furnished to the same customer or group 

of customers. 

* * * * * 

■ Par. 8. Section 1.6045–2 is amended 

by revising paragraph (d) to read as 

follows: 

§ 1.6045–2 Furnishing statement required 

with respect to certain substitute payments. 

* * * * * 

(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. 

* * * * * 

■ Par. 9. Section 1.6045–3 is amended 

by revising paragraph (e) to read as 

follows: 

§ 1.6045–3 Information reporting for an 

acquisition of control or a substantial 

change in capital structure. 

* * * * * 

(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. 

(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. 

* * * * * 

■ Par. 10. Section 1.6045–4 is amended 

by revising paragraph (m)(2) and adding 

paragraph (m)(3) to read as follows: 

§ 1.6045–4 Information reporting on real 

estate transactions with dates of closing on 

or after January 1, 1991. 

* * * * * 

(m) * * * 

(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. 

* * * * * 

■ Par. 11. Section 1.6045–5 is amended 

by revising paragraph (a)(3) to read as 

follows: 

§ 1.6045–5 Information reporting on 

payments to attorneys. 

(a) * * * 

(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. 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. 

* * * * * 

■ Par. 12. Section 1.6045A–1 is added 

to read as follows: 

§ 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 (v) 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 


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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. 

(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: 

Example 1. V, an entity treated as an 

exempt recipient under § 1.6045–1(c)(3)(i), 

owns a security in an account with E, a 

broker. On February 1, 2012, V instructs E to 

transfer custody of the security to an account 

V maintains with F, another broker. Because 

E may treat V as an exempt recipient under 

§ 1.6045–1(c)(3)(i), under paragraph (a)(1)(iii) 

of this section, E is not required to furnish 

a transfer statement. 

Example 2. W maintains an account with 

G, a custodial broker. On August 1, 2012, W 

instructs G to purchase a security. G places 

an order to purchase the security with H, a 

broker with which G has a clearing 

agreement. W does not maintain a direct 

account with H. H executes the purchase and 

has the security delivered to G. Under 

paragraph (a)(1)(ii)(B) of this section, H is not 

required to furnish a transfer statement 

because G received custody of the security 

and H purchased the security solely at the 

instruction of G. 

Example 3. Assume the same facts as in 

Example 2 except that W later instructs G to 

sell the security. G places an order with H 

to sell the security. H executes the sale. G 

delivers the security to settle the sale. G is 

required to report the sale of the security 

under § 1.6045–1. Therefore, under 

paragraph (a)(1)(ii)(A) of this section, G is not 

required to furnish a transfer statement. 

Example 4. (i) X maintains an account 

with J, an introducing broker. J contracts with 

K, a clearing broker, to allow K to execute 

trades on J’s behalf under a clearing 

agreement. K uses L, a custodian of securities 

in the ordinary course of a trade or business, 

to hold custody of the securities of K’s 

customers. K maintains a separate disclosed 

account for X as a clearing broker with 

custody at L. On May 1, 2012, X instructs J 

to purchase a security for X as the beneficial 

owner. J instructs K to purchase the security. 

K effects the purchase and has the security 

delivered to L. 

(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. 

Example 5. (i) Assume the same facts as 

in Example 4 except that X later instructs J 

to sell the security. J instructs K to sell the 

security. K sells the security. L transfers 

custody of the security to settle X’s sale in 

accordance with its custody arrangement 

with K by delivering the security to the 

purchasing broker. K deposits the sale 

proceeds in X’s account with K. K is required 

to report the sale of the security under 

§ 1.6045–1. 

(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. 

Example 6. (i) Y, an investment advisor, 

wants to purchase shares of stock in C, a 

corporation, for several of Y’s customers. Y 

establishes a delivery-on-payment account 

with M, a broker, and provides M a standing 

instruction to deliver stock purchased in the 

account to Y’s account at N, a custodian of 

securities in the ordinary course of a trade or 

business. On November 1, 2012, Y enters into 

a cash-on-delivery transaction by instructing 

M to purchase shares of C stock. M executes 

the purchase and effects delivery of the C 

stock to N. 

(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 


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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. 

Example 7. (i) Z owns shares of stock in 

C, a corporation, in an account with O, a 

broker. On February 1, 2013, Z instructs O to 

transfer the C stock to C so that ownership 

is held on the books of the issuer. C has an 

arrangement with D, a transfer agent, to keep 

records of ownership of the company’s stock, 

how that stock is held, and how many shares 

each investor owns. O transfers the stock to 

D. 

(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. 

Example 8. Assume the same facts as in 

Example 7 except that Z later instructs D to 

transfer the stock to an account Z maintains 

with P, another broker. D transfers the stock 

to P. D is an agent of C, the issuer of the 

stock, and therefore is an applicable person 

that is a transferor within the meaning of 

paragraph (a)(4) of this section. Because P is 

a broker and D transfers custody of the stock 

to P, under paragraph (a)(1)(i) of this section, 

D must furnish a transfer statement to P. 

(b) Information required—(1) In 

general. 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 or units, and 

classification of the security (such as 

stock). 

(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) 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. 

(viii) Examples. The following 

examples illustrate the rules of this 

paragraph (b)(1): 

Example 1. (i) In a single account with P, 

a broker, Q purchases three lots of 100 shares 

of stock each in C, a corporation, at different 

prices on April 2, 2012, July 2, 2012, and 

October 2, 2012. Q instructs P to enroll the 

shares of the C stock in P’s dividend 

reinvestment plan and to average the basis of 

the shares of the C stock. All of the C stock 

purchased by P has the same CUSIP number. 

On September 13, 2013, less than five years 

after the acquisition dates for all three lots, 

Q transfers all 300 shares of the C stock to 

an account with another broker. 

(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. 

Example 2. Assume the same facts as in 

Example 1 except that Q transfers the shares 

to the account with the other broker on 

September 13, 2017. For the 100 shares 

purchased on April 2, 2012, and the 100 

shares purchased on July 2, 2012, under 

paragraph (b)(1)(vii) of this section, P may 

furnish a single transfer statement reporting 

the transfer of 200 shares with the original 

acquisition date as ‘‘VARIOUS’’ instead of 

furnishing two separate transfer statements. 

Example 3. (i) Assume the same facts as 

in Example 1 except that, on June 15, 2012, 

Q sells the 100 shares purchased on April 2, 

2012, at a loss. 

(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. 

Example 4. (i) R, an employee of C, a 

corporation, participates in C’s employee 

stock purchase program that satisfies the 

requirements of section 423. D administers 

the plan. R purchases stock in the plan at a 

15 percent discount to the fair market value 

of the stock determined on the date of 

purchase. R purchases stock through the plan 

during 2012 until R terminates employment 

on October 15, 2012. R later instructs D to 

transfer the plan shares to S, a broker. 

(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. 

(2) 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 paragraph 

(b)(1) 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 

paragraph (b)(1) of this section. 

(3) Transfers of noncovered securities. 

The information described in 

paragraphs (b)(1)(vii), (b)(5), and (b)(6) 

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 


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(b)(1)(v) of this section to identify each 

security. For purposes of this paragraph 

(b)(3), a transferor must treat a security 

for which a broker makes a singleaccount election described in § 1.1012– 

1(e)(11)(i) as a covered security. 

(4) 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). 

(5) 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 shares to satisfy a 

cash legacy. If a security is transferred 

from a decedent or a decedent’s estate 

to satisfy a cash legacy, paragraph (b)(1) 

of this section applies and paragraph 

(b)(5)(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. 

(6) 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)(6)(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)(6): 

Example 1. X instructs S, a broker, to give 

to Y stock in a publicly traded company that 

X holds in an account with S. The stock is 

a covered security. On X’s instruction, S 

transfers custody of the stock to T, Y’s broker. 

The transfer settles on August 15, 2013. 

Under paragraph (b)(6)(i) of this section, S 

must provide a transfer statement to T that 

identifies the securities as gifted securities 

and indicates X’s adjusted basis and original 

acquisition date. If S knows the settlement 

date, the transfer statement must also 

indicate that the date of the gift was August 

15, 2013, and, because S can readily ascertain 

the fair market value of the stock on August 

15, 2013, the fair market value of the stock 

on that date. 

Example 2. Assume the same facts as in 

Example 1 except that, one year later, Y 

transfers the stock to an account in his name 

with U, another broker. Under paragraph 

(b)(6)(ii) of this section, T must provide a 

transfer statement to U that identifies the 

securities as gifted securities and indicates 

X’s adjusted basis and original acquisition 

date of the stock. The transfer statement must 

also indicate the date of the gift, August 15, 

2013, and the fair market value of the stock 

on that date either by reporting the value that 

S reported to T or, because T can readily 

ascertain the fair market value of the stock on 

August 15, 2013, by determining the fair 

market value of the stock on that date. 

(7) 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 shares or units in the 

account for which the transferor does 

not know the acquisition or purchase 

date followed by the earliest shares or 

units purchased or acquired, whether 

covered securities or noncovered 

securities. 

(8) 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 


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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. 

(9) Failure to receive a complete 

transfer statement. 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. 

(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 transfers on or after 

January 1, 2011, of specified securities 

other than stock in a regulated 

investment company within the 

meaning of § 1.1012–1(e)(5) and to 

transfers on or after January 1, 2012, of 

stock in a regulated investment 

company. 

■ Par. 13. Section 1.6045B–1 is added to 

read as follows: 

§ 1.6045B–1 Returns relating to actions 

affecting basis of securities. 

(a) In general—(1) Information 

required. An issuer of a specified 

security (within the meaning of 

§ 1.6045–1(a)(14)) 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. 

(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). 

(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 


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64102 Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Rules and Regulations 

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: 

Example 1. (i) C, a corporation, distributes 

stock to shareholders on March 31, 2013. 

(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. 

Example 2. (i) D, a corporation, makes a 

cash distribution to shareholders on 

December 10, 2013. 

(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. 

Example 3. E, a corporation, undertakes a 

stock split as of April 1, 2014. E furnishes 

issuer statements under paragraph (b) of this 

section on April 1, 2014, at which time the 

books and records of E show that 90 percent 

of its outstanding stock is owned by 

shareholders through a clearing organization 

as their nominee, 7 percent is owned by 

5,000 individuals, and the remaining 3 

percent is owned by a dividend reinvestment 

plan operated by E that has 1,000 members. 

Under paragraph (b)(3) of this section, E must 

furnish statements to the clearing 

organization, the 5,000 individuals, and the 

1,000 members of the dividend reinvestment 

plan. 

(h) Effective/applicability dates. This 

section applies to organizational actions 

occurring on or after January 1, 2011, 

that affect the basis of specified 


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securities within the meaning of 

§ 1.6045–1(a)(14) other than stock in a 

regulated investment company within 

the meaning of § 1.1012–1(e)(5) and to 

organizational actions occurring on or 

after January 1, 2012, that affect stock in 

a regulated investment company. 

■ Par. 14. Section 1.6049–6 is amended 

by adding two new sentences to the end 

of paragraphs (c) and (e)(2) to read as 

follows: 

§ 1.6049–6 Statements to recipients of 

interest payments and holders of 

obligations for attributed original issue 

discount. 

* * * * * 

(c) * * * However, for a statement 

required to be furnished after December 

31, 2008, the February 15 due date 

under section 6045 applies to the 

statement if the statement is furnished 

in a consolidated reporting statement 

under section 6045. See §§ 1.6045– 

1(k)(3), 1.6045–2(d)(2), 1.6045–3(e)(2), 

1.6045–4(m)(3), and 1.6045–5(a)(3)(ii). 

* * * * * 

(e) * * * 

(2) * * * However, for a statement 

required to be furnished after December 

31, 2008, the February 15 due date 

under section 6045 applies to the 

statement if the statement is furnished 

in a consolidated reporting statement 

under section 6045. See §§ 1.6045– 

1(k)(3), 1.6045–2(d)(2), 1.6045–3(e)(2), 

1.6045–4(m)(3), and 1.6045–5(a)(3)(ii). 

* * * * * 

PART 31—EMPLOYMENT TAXES AND 

COLLECTION OF INCOME TAX AT THE 

SOURCE 

■ Par. 15. The authority citation for part 

31 continues to read in part as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 16. Section 31.6051–4 is 

amended by revising paragraph (c)(2) 

and adding two new sentences at the 

end of paragraph (d) to read as follows: 

§ 31.6051–4 Statement required in case of 

backup withholding. 

* * * * * 

(c) * * * 

(2) Except as provided in the 

prescribed form or instructions, the 

amount subject to reporting under 

section 6041, 6041A(a), 6042, 6044, 

6045, 6049, 6050A, 6050N, or 6050W 

whether or not the amount of the 

reportable payment is less than the 

amount for which an information return 

is required or, if tax is withheld under 

section 3406, the amount of the 

payment withheld upon; 

* * * * * 

(d) * * * However, for a statement 

required to be furnished after December 

31, 2008, the February 15 due date 

under section 6045 applies to the 

statement if the statement reports tax 

withheld from a payment reportable 

under section 6045 or is furnished in a 

consolidated reporting statement under 

section 6045. See §§ 1.6045–1(k)(3), 

1.6045–2(d)(2), 1.6045–3(e)(2), 1.6045– 

4(m)(3), and 1.6045–5(a)(3)(ii) of this 

chapter. 

* * * * * 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Par. 17. The authority citation for part 

301 continues to read in part as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 18. Section 301.6721–1 is 

amended by revising paragraphs (g)(2) 

and (g)(3) to read as follows: 

§ 301.6721–1 Failure to file correct 

information returns. 

* * * * * 

(g) * * * 

(2) Statements. The statements subject 

to this section are the statements 

required by— 

(i) Section 6041(a) or (b) (relating to 

certain information at source, generally 

reported on Form 1099–MISC, 

‘‘Miscellaneous Income’’; Form W–2, 

‘‘Wage and Tax Statement’’; Form W–2G, 

‘‘Certain Gambling Winnings’’; and Form 

1099–INT, ‘‘Interest Income’’); 

(ii) Section 6042(a)(1) (relating to 

payments of dividends, generally 

reported on Form 1099–DIV, ‘‘Dividends 

and Distributions’’); 

(iii) Section 6044(a)(1) (relating to 

payments of patronage dividends, 

generally reported on Form 1099–PATR, 

‘‘Taxable Distributions Received From 

Cooperatives’’); 

(iv) Section 6049(a) (relating to 

payments of interest, generally reported 

on Form 1099–INT or Form 1099–OID, 

‘‘Original Issue Discount’’); 

(v) Section 6050A(a) (relating to 

reporting requirements of certain fishing 

boat operators, generally reported on 

Form 1099–MISC); 

(vi) Section 6050N(a) (relating to 

payments of royalties, generally 

reported on Form 1099–MISC); 

(vii) Section 6051(d) (relating to 

information returns with respect to 

income tax withheld, generally reported 

on Form W–2); 

(viii) Section 6050R (relating to 

returns relating to certain purchases of 

fish, generally reported on Form 1099– 

MISC); 

(ix) Section 110(d) (relating to 

qualified lessee construction allowances 

for short-term leases, generally reported 

by attaching a statement to an income 

tax return); 

(x) Section 408(i) (relating to reports 

with respect to individual retirement 

accounts or annuities on Form 1099–R, 

‘‘Distributions From Pensions, 

Annuities, Retirement or Profit-Sharing 

Plans, IRAs, Insurance Contracts, etc.’’); 

or 

(xi) Section 6047(d) (relating to 

reports by employers, plan 

administrators, etc., on Form 1099–R). 

(3) Returns. The returns subject to this 

section are the returns required by— 

(i) Section 6041A(a) or (b) (relating to 

returns of direct sellers, generally 

reported on Form 1099–MISC); 

(ii) Section 6043A(a) (relating to 

returns relating to taxable mergers and 

acquisitions); 

(iii) Section 6045(a) or (d) (relating to 

returns of brokers, generally reported on 

Form 1099–B, ‘‘Proceeds From Broker 

and Barter Exchange Transactions,’’ for 

broker transactions; Form 1099–S, 

‘‘Proceeds From Real Estate 

Transactions,’’ for gross proceeds from 

the sale or exchange of real estate; and 

Form 1099–MISC for certain substitute 

payments and payments to attorneys); 

(iv) Section 6045B(a) (relating to 

returns relating to actions affecting basis 

of specified securities); 

(v) Section 6050H(a) or (h)(1) (relating 

to mortgage interest received in trade or 

business from individuals, generally 

reported on Form 1098, ‘‘Mortgage 

Interest Statement’’); 

(vi) Section 6050I(a) or (g)(1) (relating 

to cash received in trade or business, 

etc., generally reported on Form 8300, 

‘‘Report of Cash Payments Over $10,000 

Received In a Trade or Business’’); 

(vii) Section 6050J(a) (relating to 

foreclosures and abandonments of 

security, generally reported on Form 

1099–A, ‘‘Acquisition or Abandonment 

of Secured Property’’); 

(viii) Section 6050K(a) (relating to 

exchanges of certain partnership 

interests, generally reported on Form 

8308, ‘‘Report of a Sale or Exchange of 

Certain Partnership Interests’’); 

(ix) Section 6050L(a) (relating to 

returns relating to certain dispositions 

of donated property, generally reported 

on Form 8282, ‘‘Donee Information 

Return’’); 

(x) Section 6050P (relating to returns 

relating to the cancellation of 

indebtedness by certain financial 

entities, generally reported on Form 

1099–C, ‘‘Cancellation of Debt’’); 

(xi) Section 6050Q (relating to certain 

long-term care benefits, generally 

reported on Form 1099–LTC, ‘‘LongTerm Care and Accelerated Death 

Benefits’’); 

(xii) Section 6050S (relating to returns 

relating to payments for qualified 

tuition and related expenses, generally 


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64104 Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Rules and Regulations 

reported on Form 1098–E, ‘‘Student 

Loan Interest Statement,’’ or Form 1098– 

T, ‘‘Tuition Statement’’); 

(xiii) Section 6050T (relating to 

returns relating to credit for health 

insurance costs of eligible individuals, 

generally reported on Form 1099–H, 

‘‘Health Coverage Tax Credit (HCTC) 

Advance Payments’’); 

(xiv) Section 6052(a) (relating to 

reporting payment of wages in the form 

of group-life insurance, generally 

reported on Form W–2); 

(xv) Section 6050V (relating to returns 

relating to applicable insurance 

contracts in which certain exempt 

organizations hold interests, generally 

reported on Form 8921, ‘‘Applicable 

Insurance Contract Information 

Return’’); 

(xvi) Section 6053(c)(1) (relating to 

reporting with respect to certain tips, 

generally reported on Form 8027, 

‘‘Employer’s Annual Information Return 

of Tip Income and Allocated Tips’’); 

(xvii) Section 1060(b) (relating to 

reporting requirements of transferors 

and transferees in certain asset 

acquisitions, generally reported on Form 

8594, ‘‘Asset Acquisition Statement’’), or 

section 1060(e) (relating to information 

required in the case of certain transfers 

of interests in entities (effective for 

acquisitions after October 9, 1990, 

except any acquisition pursuant to a 

written binding contract in effect on 

October 9, 1990, and at all times 

thereafter before such acquisition)); 

(xviii) Section 4101(d) (relating to 

information reporting with respect to 

fuel oils (effective for information 

returns required to be filed after 

November 30, 1990)); 

(xix) Section 338(h)(10)(C) (relating to 

information required to be furnished to 

the Secretary in case of elective 

recognition of gain or loss (effective for 

acquisitions after October 9, 1990, 

except any acquisition pursuant to a 

written binding contract in effect on 

October 9, 1990, and at all times 

thereafter before such acquisition)); 

(xx) Section 264(f)(5)(A)(iv) (relating 

to reporting with respect to certain life 

insurance and annuity contracts); 

(xxi) Section 6050U (relating to 

charges or payments for qualified longterm care insurance contracts under 

combined arrangements, generally 

reported on Form 1099–R); 

(xxii) Section 6039(a) (relating to 

returns required with respect to certain 

options); or 

(xxiii) Section 6050W (relating to 

information returns with respect to 

payments made in settlement of 

payment card and third party network 

transactions). 

* * * * * 

■ Par. 19. Section 301.6722–1 is 

amended by revising paragraph (d)(2) to 

read as follows: 

§ 301.6722–1 Failure to furnish correct 

payee statements. 

* * * * * 

(d) * * * 

(2) Payee statement. The term payee 

statement means any statement required 

to be furnished under— 

(i) Section 6031(b) or (c), 6034A, or 

6037(b) (relating to statements furnished 

by certain pass-thru entities, generally a 

Schedule K–1 (Form 1065), ‘‘Partner’s 

Share of Income, Deductions, Credits, 

etc.,’’ for section 6031(b) or (c), a copy 

of the Schedule K–1 (Form 1041), 

‘‘Beneficiary’s Share of Income, 

Deductions, Credits, etc.,’’ for section 

6034A, and a copy of Schedule K–1 

(Form 1120S), ‘‘Shareholder’s Share of 

Income, Deductions, Credits, etc.,’’ for 

section 6037(b)); 

(ii) Section 6039(b) (relating to 

information required in connection with 

certain options); 

(iii) Section 6041(d) (relating to 

information at source, generally the 

recipient copy of Form 1099–MISC, 

‘‘Miscellaneous Income’’; Form W–2, 

‘‘Wage and Tax Statement’’; Form 1099– 

INT, ‘‘Interest Income’’; and the winner’s 

copies of Form W–2G, ‘‘Certain 

Gambling Winnings’’); 

(iv) Section 6041A(e) (relating to 

returns regarding payments of 

remuneration for services and direct 

sales, generally the recipient copy of 

Form 1099–MISC); 

(v) Section 6042(c) (relating to returns 

regarding payments of dividends and 

corporate earnings and profits, generally 

the recipient copy of Form 1099–DIV, 

‘‘Dividends and Distributions’’); 

(vi) Section 6043A(b) or (d) (relating 

to returns relating to taxable mergers 

and acquisitions); 

(vii) Section 6044(e) (relating to 

returns regarding payments of patronage 

dividends, generally the recipient copy 

of Form 1099–PATR, ‘‘Taxable 

Distributions Received From 

Cooperatives’’); 

(viii) Section 6045(b) or (d) (relating 

to returns of brokers, generally the 

recipient copy of Form 1099–B, 

‘‘Proceeds From Broker and Barter 

Exchange Transactions,’’ for broker 

transactions; the transferor copy of Form 

1099–S, ‘‘Proceeds From Real Estate 

Transactions,’’ for reporting proceeds 

from real estate transactions; and the 

recipient copy of Form 1099–MISC for 

certain substitute payments and 

payments to attorneys); 

(ix) Section 6045A (relating to 

information required in connection with 

transfers of covered securities to 

brokers); 

(x) Section 6045B(c) or (e) (relating to 

returns relating to actions affecting basis 

of specified securities); 

(xi) Section 6049(c) (relating to 

returns regarding payments of interest, 

generally the recipient copy of Form 

1099–INT or Form 1099–OID, ‘‘Original 

Issue Discount’’); 

(xii) Section 6050A(b) (relating to 

reporting requirements of certain fishing 

boat operators, generally the recipient 

copy of Form 1099–MISC); 

(xiii) Section 6050H(d) or (h)(2) 

(relating to returns relating to mortgage 

interest received in trade or business 

from individuals, generally the payor 

copy of Form 1098, ‘‘Mortgage Interest 

Statement’’); 

(xiv) Section 6050I(e), (g)(4), or (g)(5) 

(relating to returns relating to cash 

received in trade or business, etc., 

generally a copy of Form 8300, ‘‘Report 

of Cash Payments Over $10,000 

Received In a Trade or Business’’); 

(xv) Section 6050J(e) (relating to 

returns relating to foreclosures and 

abandonments of security, generally the 

borrower copy of Form 1099–A, 

‘‘Acquisition or Abandonment of 

Secured Property’’); 

(xvi) Section 6050K(b) (relating to 

returns relating to exchanges of certain 

partnership interests, generally a copy 

of Form 8308, ‘‘Report of a Sale or 

Exchange of Certain Partnership 

Interests’’); 

(xvii) Section 6050L(c) (relating to 

returns relating to certain dispositions 

of donated property, generally a copy of 

Form 8282, ‘‘Donee Information 

Return’’); 

(xviii) Section 6050N(b) (relating to 

returns regarding payments of royalties, 

generally the recipient copy of Form 

1099–MISC); 

(xix) Section 6050P(d) (relating to 

returns relating to the cancellation of 

indebtedness by certain financial 

entities, generally the recipient copy of 

Form 1099–C, ‘‘Cancellation of Debt’’); 

(xx) Section 6050Q(b) (relating to 

certain long-term care benefits, 

generally the policyholder and insured 

copies of Form 1099–LTC, ‘‘Long-Term 

Care and Accelerated Death Benefits’’); 

(xxi) Section 6050R(c) (relating to 

returns relating to certain purchases of 

fish, generally the recipient copy of 

Form 1099–MISC); 

(xxii) Section 6051 (relating to 

receipts for employees, generally the 

employee copy of Form W–2); 

(xxiii) Section 6052(b) (relating to 

returns regarding payment of wages in 

the form of group-term life insurance, 

generally the employee copy of Form 

W–2); 


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(xxiv) Section 6053(b) or (c) (relating 

to reports of tips, generally the 

employee copy of Form W–2); 

(xxv) Section 6048(b)(1)(B) (relating to 

foreign trust reporting requirements, 

generally copies of the owner and 

beneficiary statements of Form 3520–A, 

‘‘Annual Information Return of Foreign 

Trust With a U.S. Owner’’); 

(xxvi) Section 408(i) (relating to 

reports with respect to individual 

retirement plans on the recipient copies 

of Form 1099–R, ‘‘Distributions From 

Pensions, Annuities, Retirement or 

Profit-Sharing Plans, IRAs, Insurance 

Contracts, etc.’’); 

(xxvii) Section 6047(d) (relating to 

reports by plan administrators on the 

recipient copies of Form 1099–R); 

(xxviii) Section 6050S(d) (relating to 

returns relating to qualified tuition and 

related expenses, generally the borrower 

copy of Form 1098–E, ‘‘Student Loan 

Interest Statement,’’ or the student copy 

of Form 1098–T, ‘‘Tuition Statement’’); 

(xxix) Section 264(f)(5)(A)(iv) (relating 

to reporting with respect to certain life 

insurance and annuity contracts); 

(xxx) Section 6050T (relating to 

returns relating to credit for health 

insurance costs of eligible individuals, 

generally the recipient copy of Form 

1099–H, ‘‘Health Coverage Tax Credit 

(HCTC) Advance Payments’’); 

(xxxi) Section 6050U (relating to 

charges or payments for qualified longterm care insurance contracts under 

combined arrangements, generally the 

recipient copy of Form 1099–R); or 

(xxxii) Section 6050W (relating to 

information returns with respect to 

payments made in settlement of 

payment card and third party network 

transactions). 

* * * * * 

PART 602—OMB CONTROL NUMBERS 

UNDER THE PAPERWORK 

REDUCTION ACT 

■ Par. 20. The authority citation for part 

602 continues to read in part as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 21. In § 602.101, paragraph (b) is 

amended by adding the following 

entries to the table in numerical order 

to read in part as follows: 

§ 602.101 OMB Control numbers. 

* * * * * 

(b) * * * 

CFR part or section where 

identified and described 

Current 

OMB control 

No. 

* * * * * 

1.6045–1(c)(3)(xi)(C) ................ 1545–2186 

1.6045A–1 ................................ 1545–2186 

* * * * * 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: October 1, 2010. 

Michael Mundaca, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2010–25504 Filed 10–12–10; 4:15 pm] 

BILLING CODE 4830–01–P 


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