Changes in Corporate Control and Capital Structure

2010 Instructions for Form 1099-CAP
Purpose: This is the first circulated draft of the 2010 Instructions for Form 1099-CAP
for your review and comments. See below for a discussion of the major changes.
TPCC Meeting: None, but one may be arranged if requested.
Prior Version: The 2009 Instructions for Form 1099-CAP are available at:
http://www.irs.gov/pub/irs-pdf/i1099cap.pdf
Form: The 2010 Form 1099-CAP was circulated earlier and is attached.
Other Products: Circulations of draft tax forms, instructions, notices, and publications
are posted at:
http://taxforms.web.irs.gov/Circulations/index.htm
Comments: Please email, fax, call, or mail any comments by August 21, 2009.
Janice Y. Martin
Tax Forms and Publications
SE:W:CAR:MP:T:I:P
Email: [email protected]
Phone: 202-283-2640
Fax: 202-283-4544

Major Changes for 2010 Instructions for Form 1099-CAP
1. All years and dates have been updated as appropriate.
2. The title to the General Instructions was changed to General Instructions for
Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) at
the request of the Enterprise Computing Center-Martinsburg. W&I, EPSS,
Information Branch.

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Instructions for Form 1099-CAP

❏ Draft
(Init. & date)

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Ok to Print

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2010

Department of the Treasury
Internal Revenue Service

Instructions for Form
1099-CAP
Section references are to the Internal Revenue Code unless
otherwise noted.

Reminder
In addition to these specific instructions, you should also
use the 2010 General Instructions for Certain Information
Returns (Forms 1098, 1099, 3921, 3922, 5498, and
W-2G). Those general instructions include information
about the following topics.
• Backup withholding.
• Electronic reporting requirements.
• Penalties.
• Who must file (nominee/middleman).
• When and where to file.
• Taxpayer identification numbers.
• Statements to recipients.
• Corrected and void returns.
• Other general topics.
You can get the general instructions from the IRS
website at www.irs.gov or by calling 1-800-TAX-FORM
(1-800-829-3676).

Specific Instructions
File Form 1099-CAP, Changes in Corporate Control and
Capital Structure, for shareholders of a corporation if
control of the corporation was acquired or it underwent a
substantial change in capital structure. Form 1099-CAP
is furnished to shareholders who receive cash, stock, or
other property from an acquisition of control or a
substantial change in capital structure.

When To File
File Form 1099-CAP with the IRS by February 28, 2011
(March 31, 2011, if filed electronically); furnish the
statement to shareholders by January 31, 2011.
Special reporting date –clearing organizations. A
corporation must file Form 1099-CAP and furnish a copy
to each of its shareholders who receives any stock or
other consideration in the transaction and who is not an
exempt recipient. A clearing organization, such as the
Depository Trust Company (DTC), is not an exempt
recipient. The corporation is therefore required to file and
furnish a copy of Form 1099-CAP to a clearing
organization with respect to shares held by the clearing
organization unless it makes a consent election, as
discussed below. Furnish Form 1099-CAP to the clearing
organization on or before January 5 of the year following
the calendar year in which the transaction took place. If
you are furnishing the DTC with Forms 1099-CAP, see
Notice 2004-9, 2004-04 I.R.B. 334, available at
http://www.irs.gov/irb/2004-04_IRB/ar12.html.

control or substantial change in capital structure must file
Form 1099-B unless the customer is an exempt recipient.
Readily available information includes information from a
clearing organization, such as the DTC. Information is
also published on the IRS website. Go to www.irs.gov
and enter keyword “Form 8806” in the upper right corner.
A domestic corporation that is required to file Form
8806, Information Return for Acquisition of Control or
Substantial Change in Capital Structure, must file Form
1099-CAP with the IRS and furnish a copy to each
shareholder who receives cash, stock, or other property
as a result of the acquisition of control or substantial
change in capital structure and who is not an exempt
recipient. However, if the corporation can reasonably
determine that the receipt of such stock would not cause
the shareholder to recognize gain, then the corporation is
not required to report the fair market value of any stock
provided to a shareholder. Corporations do not file Form
1099-CAP under one of the following conditions.
• The transaction involves the acquisition of control
within an affiliated group or involves stock valued at less
than $100 million.
• The corporation makes the consent election on Form
8806. Under the election, the corporation is not required
to file Form 1099-CAP with respect to shares held by a
clearing organization because it allows the IRS to publish
information necessary for brokers to meet their reporting
obligations.
• The corporation properly reports the transaction under
section 6043(a).
• Information returns are filed under section 6042 (Form
1099-DIV) or section 6045 (Form 1099-B), unless the
corporation knows or has reason to know that such
returns were not filed.

Exempt Recipients
The corporation is not required to file Form 1099-CAP for
the following shareholders including brokers who are also
exempt.
• Any shareholder who receives only stock for its stock
in the corporation.
• Any shareholder whose amount of cash plus the fair
market value (FMV) of any stock and other property does
not exceed $1,000.
• Any shareholder from whom the corporation has
received a properly completed exemption certificate.

Who Must File
Any broker that holds shares on behalf of a
TIP customer in a corporation that the broker knows
or has reason to know based on readily available
information has engaged in a transaction of acquisition of
Cat. No. 35150T

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Instructions for Form 1099-CAP

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• Any one of the following:

• The corporation or any of its shareholders is required

to recognize gain under section 367(a) as a result of the
transaction.

1. A corporation, except a subchapter S corporation;
2. A tax-exempt organization;
3. An individual retirement account (IRA);
4. The U.S. government or a state;
5. A foreign government, an international
organization, or a foreign central bank of issue;
6. A real estate investment trust (REIT);
7. A regulated investment company (RIC);
8. A securities or commodities dealer;
9. An entity registered under the Investment Company
Act of 1940;
10. A common trust fund; or
11. A financial institution such as a bank, savings and
loan, credit union, or similar organization.
• Any foreign person the corporation associates with a
valid Form W-8BEN, Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding, or
other documentation upon which the corporation relies in
order to treat the shareholder as a foreign beneficial
owner or foreign payee. See Regulations section
1.6049-5(c) for more information.

!

CAUTION

Penalties for Failure To File
The penalties under section 6652(l) for failure to file
information returns under section 6043(c) apply. For
purposes of the section 6652(l) penalty, Form 8806 and
all Forms 1099-CAP required to be filed are treated as
one return. Thus, the penalty will not exceed $500 for
each day the failure continues, up to a maximum of
$100,000, for any acquisition of control or any substantial
change in capital structure. If a corporation (transferor)
transfers all or substantially all of its assets to another
entity (transferee) and is required to file Form 1099-CAP,
the transferor must satisfy the reporting requirements. If
the transferor fails to file Form 1099-CAP, then the
transferee must meet the filing requirements. If the filing
requirements are not met by either the transferor or
transferee, then both are jointly and severally liable for
the applicable penalties.
Failure to file Forms 1099-CAP also includes the
requirement to file electronically. For more information on
penalties for failure to file electronically, see part F in the
2010 General Instructions for Certain Information
Returns.

Corporations are not relieved of their withholding
obligations on nonresident aliens under
section 1441.

Acquisition of Control

Statement to Shareholder

An acquisition of control of a corporation (first
corporation) occurs if, in a transaction or series of related
transactions, before an acquisition of stock of the first
corporation (directly or indirectly) by a second
corporation, the second corporation does not have
control of the first corporation; after the acquisition, the
second corporation has control of the first corporation;
the FMV of the stock acquired in the transaction and in
any related transactions as of the date or dates on which
the stock was acquired is $100 million or more; the
shareholders of the first corporation receive stock or
other property pursuant to the acquisition; and the first
corporation or any of its shareholders is required to
recognize gain under section 367(a) as a result of the
transaction.

If required to file Form 1099-CAP, you must provide a
statement to the shareholder. For more information about
the requirement to furnish a statement to the
shareholder, see part M in the 2010 General Instructions
for Certain Information Returns.

Account Number
The account number is required if you have multiple
accounts for a recipient for whom you are filing more than
one Form 1099-CAP. Additionally, the IRS encourages
you to designate an account number for all Forms
1099-CAP that you file. See part L in the 2010 General
Instructions for Certain Information Returns.

Name, Address, Telephone Number, and TIN

For these purposes, control is defined as the
ownership of stock possessing at least 50 percent of the
total combined voting power of all classes of stock
entitled to vote, or at least 50 percent of the total value of
shares of all classes of stock.

Generally, this will be the reporting corporation’s
information and employer identification number (EIN).

Box 1. Date of Sale or Exchange

See Form 8806 and Regulations section 1.6043-4 for
details and special rules with respect to constructive
ownership of stock.

Enter the trade date of the sale or exchange, actually or
constructively received.

Section 338 election. An acquisition of stock of a
corporation under which a section 338 election is made is
treated as an acquisition of stock and not as an
acquisition of the assets of the corporation.

Enter the aggregate amount of cash and the fair market
value of any stock and other property received in
exchange for the number of shares exchanged in the
reporting corporation.

Box 2. Aggregate Amount Received

Substantial Change in Capital Structure

Box 3. No. of Shares Exchanged

A change in capital structure occurs if:
• The amount of cash or other property provided to its
shareholders is $100 million or more and the corporation
in a transaction or series of transactions merges,
consolidates, or otherwise combines with another
corporation or transfers all or substantially all of its assets
to one or more corporations;
• Transfers all or part of its assets to another corporation
under bankruptcy proceedings including distributing its
stock or securities;
• Changes its identity, form, or place of organization;
and

Enter the number of shares the shareholder exchanged
in the reporting corporation for cash or other property
received.

Box 4. Classes of Stock Exchanged
Enter the class or classes of stock (for example,
preferred, common, etc.) exchanged in the reporting
corporation for cash or other property received.
Abbreviate the class to fit the entry. For example, you
may enter “C” for common stock, “P” for preferred, or “O”
for other. Also, abbreviate any subclasses.
-2-

2010 Form 1099-CAP, Changes in Corporate Control and Capital Structure
Purpose: This is the first circulated draft of the 2010 Form 1099-CAP for your review
and comments. See below for a discussion of the major changes.
TPCC Meeting: None, but one may be arranged if requested.
Prior Version: The 2009 Form 1099-CAP is available at:
http://www.irs.gov/pub/irs-pdf/f1099cap.pdf
Instructions: The 2010 Instructions for Form 1099-CAP will be circulated at a later
date. The 2009 instructions are available at:
http://www.irs.gov/pub/irs-pdf/i1099cap.pdf
Other Products: Circulations of draft tax forms, instructions, notices, and publications
are posted at:
http://taxforms.web.irs.gov/Circulations/index.htm
Comments: Please email, fax, call, or mail any comments by July 15, 2009.

Janice Y. Martin
Tax Forms and Publications
SE:W:CAR:MP:T:I:P
Email: [email protected]
Phone: 202-283-2640
Fax: 202-283-4544

Major Changes for 2010 Form 1099-CAP, Changes in Corporate Control and
Capital Structure

1. All years and dates have been updated as appropriate.
2. Under Instructions for Corporations, the phone number for TTY/TDD has been
changed. SE:W: CAS: EPSS: IRB
3. Under Instructions for Corporations, the title to Publication 1220, Specifications
for Filing Forms 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically
has been changed to include Form 8935, Airline Payments Report.
SE:W:CAS:EPSS:IRB
4. Under Instructions for Corporations, the hours of operation have been added at
the request of the Senior Technical Advisor.

TLS, have you
transmitted all R
text files for this
cycle update?

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Action

1

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reproduction proofs. MUST be removed before printing.

Date

VOID

SHAREHOLDER’S name

Street address (including apt. no.)

Revised proofs
requested

CORRECTED

CORPORATION’S name, street address, city, state, ZIP code, and telephone no.

1 Date of sale or exchange

OMB No. 1545-1814

2 Aggregate amount rec’d*

2010
1099-CAP

Changes in
Corporate
Control and
Capital Structure

$

Form

3 No. of shares exchanged

4 Classes of stock exchanged

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CORPORATION’S federal identification no.

SHAREHOLDER’S identification no.

5

City, state, and ZIP code

Account number (see instructions)

Signature

O.K. to print
Responsible
scan organization

Separation 1 for page 1 of Form 1099-CAP (2000). Prints in
Red (J-6983) Ink.
Separation 2 for page 1 of Form 1099-C (2000). Prints in Black Ink.

7373

Date

O.K. to print
T:FP:F

* The shareholder cannot claim a loss based on the

Copy A
For
Internal Revenue
Service Center
File with Form 1096.
For Paperwork
Reduction Act
Notice, see the
2010 General
Instructions for
Forms 1099, 1098,
3921, 3922, 5498,
and W-2G.

amount in box 2.

Form

1099-CAP

Cat. No. 35115M

Do Not Cut or Separate Forms on This Page

—

Department of the Treasury - Internal Revenue Service

Do Not Cut or Separate Forms on This Page

Certain Information
Returns

Page 3 of 6 of Form 1099-CAP

1

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CORRECTED (if checked)
CORPORATION’S name, street address, city, state, ZIP code, and telephone no.

1 Date of sale or exchange
2 Aggregate amount rec’d*

Street address (including apt. no.)

2010
1099-CAP

Changes in
Corporate
Control and
Capital Structure

$

Form

3 No. of shares exchanged

4 Classes of stock exchanged

f
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a
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0
f
0
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5
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CORPORATION’S federal identification no.

SHAREHOLDER’S name

OMB No. 1545-1814

SHAREHOLDER’S identification no.

5

City, state, and ZIP code

Account number (see instructions)

Form

1099-CAP

* You cannot claim a loss based on the amount in box 2.

(keep for your records)

Copy B
For Shareholder
This is important tax
information and is being
furnished to the Internal
Revenue Service. If you
are required to file a
return, a negligence
penalty or other
sanction may be
imposed on you if
taxable income results
from this transaction
and the IRS determines
that it has not been
reported.

Department of the Treasury - Internal Revenue Service

1

Page 4 of 6 Form 1099-CAP

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Instructions for Shareholder
A corporation in which you own stock that has had a
change in control or a substantial change in capital
structure must send you this statement by January 31
of the year following the calendar year of the change.
You have received this statement because the
corporation has reasonably determined that you may
be required to recognize gain from the receipt of cash,
stock, or other property that was exchanged for the
corporation’s stock. Report any gain from the
exchange on Schedule D (Form 1040), Capital Gains
and Losses. However, you cannot claim a (loss) on
Schedule D (Form 1040) as a result of this exchange.
See Pub. 550, Investment Income and Expenses,
chapter 4, for additional information.

Box 1. Shows the date the stock was exchanged for
cash, stock, or other property.
Box 2. Shows the aggregate amount of any cash and
the fair market value of any stock or other property
received by you in the exchange for the stock you
held.
Box 3. Shows the number of shares of the
corporation’s stock that you held which were
exchanged in the transaction.
Box 4. Shows the class or classes of stock that were
exchanged.

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Account number. May show an account or other
unique number the payer corporation assigned to
distinguish your account.

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Page 5 of 6 of Form 1099-CAP

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VOID

CORRECTED

CORPORATION’S name, street address, city, state, ZIP code, and telephone no.

1 Date of sale or exchange
2 Aggregate amount rec’d*

Street address (including apt. no.)

2010
1099-CAP

Form

3 No. of shares exchanged

4 Classes of stock exchanged

SHAREHOLDER’S identification no.

5

City, state, and ZIP code

Account number (see instructions)

Changes in
Corporate
Control and
Capital Structure

$

f
o
s
a
9
t
0
f
0
a
2
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/
D /07
5
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CORPORATION’S federal identification no.

SHAREHOLDER’S name

OMB No. 1545-1814

Copy C
For Corporation
For Paperwork
Reduction Act
Notice, see the
2010 General
Instructions for
Forms 1099, 1098,
3921, 3922, 5498,
and W-2G.

* The shareholder cannot claim a loss based on the
amount in box 2.

Form

1099-CAP

Department of the Treasury - Internal Revenue Service

Certain Information
Returns

1

Page 6 of 6 Form 1099-CAP

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Instructions for Corporations

Certain Information
Returns

General and specific form instructions are provided as
separate products. The products you should use for
2010 are the General Instructions for Forms 1099,
1098, 3921, 3922, 5498, and W-2G and the 2010
Instructions for Form 1099-CAP. A chart in the general
instructions gives a quick guide to which form must be
filed to report a particular payment. To order these
instructions and additional forms, visit the IRS website
at www.irs.gov or call 1-800-TAX-FORM
(1-800-829-3676).

File Copy A of this form with the IRS by February 28,
2011. If you file electronically, the due date is March
31, 2011. To file electronically, you must have software
that generates a file according to the specifications in
Pub. 1220, Specifications for Filing Forms 1098, 1099,
3921, 3922, 5498, 8935, and W-2G Electronically. IRS
does not provide a fill-in form option.

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Caution: Because paper forms are scanned during
processing, you cannot file with the IRS Forms 1096,
1098, 1099, 3921, 3922, or 5498 that you print from
the IRS website.

Need help? If you have questions about reporting on
Form 1099-CAP, call the information reporting
customer service site toll free at 1-866-455-7438 or
304-263-8700 (not toll free). For TTY/TDD equipment,
call 304-579-4827 (not toll free). The hours of operation
are Monday through Friday from 8:30 a.m. to 4:30
p.m., Eastern time.

Due dates. Generally, furnish Copy B of this form to
the shareholder by January 31, 2011. However, if the
recipient is a clearing organization, furnish Copy B by
January 5, 2011.

Printed on recycled paper