Source: https://www.federalregister.gov/documents/2003/12/29/03-31671/information-statements-for-certain-substitute-payments
Timestamp: 2018-07-20 12:46:50
Document Index: 538827895

Matched Legal Cases: ['§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u20091']

Federal Register :: Information Statements for Certain Substitute Payments
TD 9103
1545-BC97
https://www.federalregister.gov/d/03-31671 https://www.federalregister.gov/d/03-31671
Section 6045(a) of the Internal Revenue Code (Code) provides that every person doing business as a broker shall, when required by the Secretary, make a return showing the name and Start Printed Page 74848address of each customer, together with information as required by forms and regulations. Section 6045(d) provides that brokers who transfer a customer's securities for use in a short sale or similar transaction, and receive payments in lieu of a dividend, tax-exempt interest, or other items set forth in regulations (substitute payments), must furnish the customer with a written statement identifying the payment as being in lieu of the dividend, tax-exempt interest, or other item. This section authorizes the Secretary to prescribe regulations that require brokers to file information returns that include the information contained in the written statement.
Section 1.6045-2 of the existing Income Tax Regulations provides rules for reporting substitute payments under section 6045(d). In general, § 1.6045-2(a)(3)(i) of the existing regulations excludes payments in lieu of dividends received by a broker on behalf of an individual from the broker reporting requirements of section 6045(d). Section 1.6045-2(a)(3)(ii) of the existing regulations requires reporting for certain dividend substitute payments received by a broker on behalf of an individual, such as payments in lieu of exempt interest dividends distributed by regulated investment companies.
The IRS issued interim guidance regarding provisions of the JGTRRA that affect information reporting for payments in lieu of dividends in Notice 2003-67 (2003-40 I.R.B. 752). The notice also provided guidance on the definition of loanable shares and the allocation and selection of transferred shares (that is, shares giving rise to payments in lieu of dividends to customers). The IRS intends to issue comprehensive regulations amending § 1.6045-2 in the future. The IRS anticipates that these regulations will define payments in lieu of dividends, provide rules for determining loanable shares, and provide rules for allocating and selecting transferred shares to customers. Pending issuance of further amendments to § 1.6045-2 of the existing regulations, brokers may rely on Notice 2003-67 to comply with the requirements of the JGTRRA and section 6045(d).
In addition, pending issuance of further amendments to § 1.6045-2, the IRS will permit brokers to continue to use the rules of § 1.6045-2 of the existing regulations for allocating transferred shares to customers. A broker may continue to allocate transferred shares to shares of stock that the broker has borrowed under a security agreement with the customer. In addition, if a broker uses the lottery method of allocation and selection of loanable shares specified in § 1.6045-2(f)(2)(ii), the broker may make the selection of the transferred shares within the individual pool described in § 1.6045-2(f)(2)(ii)(C) using the methods of selection of transferred shares used within the nonindividual pool as prescribed in § 1.6045-2(f)(2)(ii)(B).
[FR Doc. 03-31671 Filed 12-24-03; 8:45 am]