Proceeds From Broker and Barter Exchange Transactions

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Instructions for Form 1099-B (2010)

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11:36 - 26-JAN-2010

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2010

Department of the Treasury
Internal Revenue Service

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

What’s New
Short sales of securities. The Treasury Department and
IRS expect to propose new rules requiring brokers to report
sales of securities opened on or after January 1, 2010, for
the year the short sale is closed. This change is part of the
expected proposed regulations regarding reporting by
brokers of adjusted basis and holding period for securities
beginning in January 2011. Thus, brokers would not report a
short sale opened in 2010 for calendar year 2010 as the
current rules required if the short sale remains open on
January 1, 2011. If a short sale is opened in 2010, remains
open on January 1, 2011, and is closed in 2011, the
proposed rule requires the broker to report the short sale for
calendar year 2011 and typically to report both the gross
proceeds and basis information for the short sale. For more
information about the proposed regulations, go to www.
regulations.gov and enter the keyword REG-101896-09.
Truncating recipient identification number on paper
payee statements. Notice 2009-93 allows filers of this
form to truncate a recipient’s identification number (social
security number (SSN), individual taxpayer identification
number (ITIN), or adoption taxpayer identification number
(ATIN)) on paper payee statements for tax years 2009 and
2010. See part M in the 2010 General Instructions for
Certain Information Returns (Forms 1098, 1099, 3921,
3922, 5498, and W-2G).

Reminder
In addition to these specific instructions, you should also use
the 2010 General Instructions for Certain Information
Returns. 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
A broker or barter exchange must file Form 1099-B,
Proceeds From Broker and Barter Exchange Transactions,
for each person:
• For whom the broker has sold (including short sales)
stocks, bonds, commodities, regulated futures contracts,
foreign currency contracts (pursuant to a forward contract or
regulated futures contract), forward contracts, debt
instruments, etc., for cash,
• Who received cash, stock, or other property from a
corporation that the broker knows or has reason to know

has undergone a reportable change in control or substantial
change in capital structure, or
• Who exchanged property or services through a barter
exchange.

Brokers
A broker is any person who, in the ordinary course of a trade
or business, stands ready to effect sales to be made by
others. A broker may include a U.S. or foreign person or a
governmental unit and any subsidiary agency.
You are considered a broker if:
• You are an obligor that regularly issues and retires its own
debt obligations or
• You are a corporation that regularly redeems its own
stock.
However, for a sale, redemption, or retirement at an office
outside the United States, only a U.S. payer or U.S.
middleman is a broker. See Regulations sections
1.6045-1(g)(1) and 1.6049-5(c)(5).
You are not considered a broker if:
• You are a corporation that purchases odd-lot shares from
its stockholders on an irregular basis (unless facts indicate
otherwise),
• You manage a farm for someone else, or
• You are an international organization that redeems or
retires its own debt. See Regulations section 1.6045-1(a)(1).

Reporting
Widely held fixed investment trusts (WHFITs). Trustees
and middlemen must report the amount of non pro-rata
partial principal payments (as defined in Regulations section
1.671-5(b)(13)), trust sales proceeds (as defined in
Regulations section 1.671-5(b)(21)), redemption asset
proceeds (as defined in Regulations section 1.671-5(b)(14)),
redemption proceeds (as defined in Regulations section
1.671-5(b)(15)), the sales asset proceeds (as defined in
Regulations section 1.671-5(b)(17)), and the sales proceeds
(as defined in Regulations section 1.671-5(b)(18)) that are
attributable to a trust interest holder (TIH) for the calendar
year on Form 1099-B.
To determine the amount of each item of proceeds to be
reported on Form 1099-B, see generally Regulations section
1.671-5. If the trustee provides WHFIT information using the
safe harbor rules in Regulations section 1.671-5(f)(1) or
(g)(1), the trustee or middleman must determine the
amounts reported on Forms 1099 under Regulations section
1.671-5(f)(2) or (g)(2), as appropriate.
Requirement to furnish a tax information statement to
TIH. A tax information statement that includes the
information provided to the IRS on Form 1099-B, as well as
additional information identified in Regulations section
1.671-5(e) must be provided to TIHs. The written tax
information statement for 2010 furnished to the TIH is due
on or before March 15, 2011. The amount of an item of a
trust expense that is attributable to a TIH must be included
on the tax information statement provided to the TIH and is
not required to be included in box 5 on the Form 1099-DIV.
See Regulations section 1.671-5(e) for a complete list of the
items of information that must be included in the statement
to the TIH.

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Instructions for Form 1099-B (2010)

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Acquisition of control or substantial change in capital
structure. Any broker that holds shares on behalf of a
customer in a corporation that the broker knows, or has
reason to know based on readily available information, must
recognize gain under section 347(a) from the transfer of
property to a foreign corporation in an acquisition of control
(as described in Regulations section 1.6043-4(d)) must file
Form 1099-B. Readily available information includes
information from a clearing organization, such as the
Depository Trust Company (DTC) or from information
published on the IRS website.

1. Sales for exempt recipients, including corporations,
charitable organizations, IRAs, Archer MSAs, health savings
accounts (HSAs), the United States, a state, or political
subdivisions.
2. Sales initiated by dealers in securities and financial
institutions.
3. Sales by custodians and trustees, provided the sale is
reported on a properly filed Form 1041, U.S. Income Tax
Return for Estates and Trusts.
4. Sales at issue price of interests in certain regulated
investment companies.
5. Obligor payments on:
a. Nontransferable obligations, such as savings bonds or
CDs.
b. Obligations for which gross proceeds are reported on
other Forms 1099, such as stripped coupons issued before
July 1, 1982.
c. Retirement of short-term obligations with original issue
discount that is reported on Form 1099-INT, Interest
Income. However, Form 1099-B is required for the
retirement of short-term state obligations having no original
issue discount.
d. Callable demand obligations that have no premium or
discount.
6. Sales of foreign currency unless under a forward or
regulated futures contract that requires delivery of foreign
currency.
7. Sales of fractional shares of stock if gross proceeds
are less than $20.
8. Retirements of book-entry or registered form
obligations if no interim transfers have occurred.
9. Exempt foreign persons as defined in Regulations
section 1.6045-1(g)(1)(i).
10. Sales of Commodity Credit Corporation certificates.
11. Spot or forward sales of agricultural commodities. See
below.
12. Some sales of precious metals. See below.
13. Grants or purchases of options, exercises of call
options, or entering into contracts that require delivery of
personal property or an interest therein.

Go to www.irs.gov and enter keyword “Form 8806” in

TIP the upper right corner to find information on the IRS
website.
A broker is not required to file Form 1099-B for a
customer who is an exempt recipient (under Regulations
sections 1.6045-1(c)(3)(i) or 1.6043-4(b)(5)). For a list of
exempt recipients, see the 2010 Instructions for Form
1099-CAP.
If a broker is required to file a Form 1099-B for a
customer to report proceeds from an acquisition of corporate
control or change in capital structure, the broker may satisfy
the filing requirements by filing and furnishing one Form
1099-B for amounts reported under both Regulations
sections 1.6045-1 and 1.6045-3. However, if the customer
had additional transactions during the year with the reporting
corporation, then a separate Form 1099-B would be
required to report each of these transactions.
Cash on delivery account. For a sale of securities
through a “cash on delivery” or similar account, only the
broker that receives the gross proceeds from the sale
against delivery of the securities sold is required to report
the sale. However, if such broker’s customer is a
“second-party broker” that is an exempt recipient, only the
second-party broker is required to report the sale.
Foreign currency. If the proceeds of a sale are paid in
foreign currency, you must convert the amount to be
reported into U.S. dollars. Generally, you must convert the
foreign currency on the payment date at the spot rate or by
following a reasonable spot rate convention. For example,
you may use a month-end spot rate or monthly average spot
rate. See Regulations section 1.6045-1(d)(6).
Transactional/aggregate reporting. Report each
transaction (other than regulated futures or foreign currency
contracts) on a separate Form 1099-B. Report transactions
involving regulated futures or foreign currency contracts on
an aggregate basis.
Substitute payments. Do not report substitute payments
in lieu of dividends and tax-exempt interest on Form 1099-B.
Instead, report these payments in box 8 of Form
1099-MISC, Miscellaneous Income. See section 6045(d)
and the Instructions for Form 1099-MISC.
Stock options. If an employee, former employee, or other
service provider, in connection with the performance of
services, obtains substantially vested shares of stock from
the exercise of a stock option, and sells that stock through a
broker on the same day, then the broker may not be
required to report the sale on Form 1099-B. For details, see
Rev. Proc. 2002-50 which is on page 173 of Internal
Revenue Bulletin 2002-29 at www.irs.gov/pub/irs-irbs/
irb02-29.pdf.
Partnership sale. Form 8308, Report of a Sale or
Exchange of Certain Partnership Interests, does not have to
be filed if, under section 6045, a return is required to be filed
by a broker on Form 1099-B for the transfer of the
partnership interest.
Exceptions. Brokers are not required to file, but may file,
Form 1099-B for:

Spot or forward sales of agricultural commodities.
Agricultural commodities include grain, feed, livestock, meat,
oil seed, timber, or fiber. A spot sale is a sale that results in
almost immediate delivery of a commodity. A forward sale is
a sale under a forward contract. However, sales and
exchanges of timber for lump-sum payments must be
reported on Form 1099-S.
Report sales of agricultural commodities under a
regulated futures contract, sales of derivative interests in
agricultural commodities, and sales of receipts for
agricultural commodities issued by a designated warehouse
on Form 1099-B. A designated warehouse is a warehouse,
depository, or other similar entity designated by a
commodity exchange in which or out of which a particular
type of agricultural commodity is deliverable to satisfy a
regulated futures contract. Sales of warehouse receipts
issued by any other warehouse are not reportable.
Sales of precious metals. A sale of a precious metal
(gold, silver, platinum, or palladium) in any form for which
the Commodity Futures Trading Commission (CFTC) has
not approved trading by regulated futures contract (RFC) is
not reportable. Further, even if the sale is of a precious
metal in a form for which the CFTC has approved trading by
RFC, the sale is not reportable if the quantity, by weight or
by number of items, is less than the minimum required
quantity to satisfy a CFTC-approved RFC.
For example, a broker selling a single gold coin does not
need to file Form 1099-B even if the coin is of such form and
quality that it could be delivered to satisfy a CFTC-approved

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Instructions for Form 1099-B (2010)

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Instructions for Form 1099-B (2010)

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RFC because all CFTC-approved contracts for gold coins
currently call for delivery of at least 25 coins.

second notice. See part N in the 2010 General Instructions
for Certain Information Returns for more information.

Sales of precious metals for a single customer during a
24-hour period must be aggregated and treated as a single
sale to determine if this exception applies. This exception
does not apply if the broker knows or has reason to know
that a customer, either alone or with a related person, is
engaging in sales to avoid information reporting.

For more information on the TIN Matching System

TIP offered by the IRS, see the 2010 General
Instructions for Certain Information Returns.

Corporation’s Name
For an acquisition of control or change in capital structure,
enter the corporation’s name.

No reporting on Form 1099-B will be required for

TIP securities futures contracts (SFCs) unless guidance

Account Number

issued after Notice 2003-8, which is on page 310 of
Internal Revenue Bulletin 2003-4 at www.irs.gov/pub/
irs-irbs/irb03-04.pdf, imposes such a reporting obligation.
Exemption certificate. A broker may require an exempt
recipient to file a properly completed Form W-9, Request for
Taxpayer Identification Number and Certification, or similar
form. A broker may treat an exempt recipient that fails to do
so as a recipient that is not exempt. See part J in the 2010
General Instructions for Certain Information Returns for
more information.

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

Box 1a. Date of Sale or Exchange
For broker transactions, enter the trade date of the sale or
exchange. For barter exchanges, enter the date that cash,
property, a credit, or scrip is actually or constructively
received.

Barter Exchanges
A barter exchange is any person or organization with
members or clients that contract with each other (or with the
barter exchange) to jointly trade or barter property or
services. The term does not include arrangements that
provide solely for the informal exchange of similar services
on a noncommercial basis. Persons who do not contract a
barter exchange but who trade services do not file Form
1099-B. However, they may be required to file Form
1099-MISC.
Transactional/aggregate reporting. Barter exchanges
involving noncorporate members or clients must report each
transaction on a separate Form 1099-B. Transactions
involving corporate members or clients of a barter exchange
may be reported on an aggregate basis.
Member information. In the recipient area of the Form
1099-B, enter information about the member or client that
provided the property or services in the exchange.
Exceptions. Barter exchanges are not required to file Form
1099-B for:
1. Exchanges through a barter exchange having fewer
than 100 transactions during the year.
2. Exempt foreign persons as defined in Regulations
section 1.6045-1(g)(1).
3. Exchanges involving property or services with a fair
market value of less than $1.00.

Box 1b. CUSIP No.
For transactional reporting by brokers, enter the CUSIP
(Committee on Uniform Security Identification Procedures)
number of the obligation.

Box 2. Stocks, Bonds, etc.
Enter the aggregate gross cash proceeds from all
dispositions of securities (including short sales),
commodities, or forward contracts. However, for reporting
an acquisition of control or substantial change in capital
structure, include in box 2 the aggregate amount of cash
and the fair market value of any stock or other property
received. See Reporting on page 1 for more information for
brokers. Show a loss, such as one from a closing
transaction on a forward contract, as a negative amount by
enclosing it in parentheses. If the aggregate amount
reported includes a loss from a corporation that has
undergone a change in control or substantial change in
capital structure, advise the recipient separately of the loss
amount from this transaction and check box 12. The
recipient is prohibited from using the loss to offset other
capital gains.
To determine gross proceeds, you may take into account
commissions and option premiums if this treatment is
consistent with your books. You may not take into account
state and local transfer taxes. Check the applicable box to
indicate which amount has been reported to the IRS. Do not
include amounts shown in boxes 8 through 11.
Do not include any accrued interest on bonds sold
between payment dates (or on a payment date) in this box.
Instead, report this accrued interest on Form 1099-INT.

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

Box 3. Bartering
Enter the gross amounts received by a member or client of a
barter exchange. This includes cash received, the fair
market value of any property or services received, and the
fair market value of any trade credits or scrip credited to the
member’s or client’s account. However, do not include
amounts received by a member or client in a subsequent
exchange of credits or scrip. Do not report negative
amounts.

2nd TIN Not.
You may enter an “X” in this box if you were notified by the
IRS twice within 3 calendar years that the payee provided
an incorrect taxpayer identification number (TIN). If you
mark this box, the IRS will not send you any further notices
about this account. However, if you received both IRS
notices in the same year, or if you received them in different
years but they both related to information returns filed for the
same year, do not check the box at this time. For purposes
of the two notices in 3-years rule, you are considered to
have received one notice, and you are not required to send
a second “B” notice to the taxpayer upon receipt of the
Instructions for Form 1099-B (2010)

Box 4. Federal Income Tax Withheld
Enter backup withholding. For example, persons who have
not furnished their TIN to you in the manner required are
subject to withholding at a 28% rate on certain amounts
required to be reported on this form. Use Form W-9 to

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Instructions for Form 1099-B (2010)

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request the TIN of the recipient. For foreign recipients,
request the recipient complete the appropriate Form W-8.
See the Instructions for the Requester of Forms W-8BEN,
W-8ECI, W-8EXP, and W-8IMY.

Regulated Futures Contracts—Brokers
Only:

Box 5. Number of Shares Exchanged

Enter the profit or (loss) realized by the customer on closed
regulated futures or foreign currency contracts in 2010.

Box 8. Profit or (Loss) Realized in 2010

Enter the number of shares of the corporation’s stock
exchanged by the recipient in an acquisition of control or
substantial change in capital structure.

Box 9. Unrealized Profit or (Loss) on Open
Contracts—12/31/2009

Box 6. Classes of Stock Exchanged

Enter the unrealized profit or (loss) on open regulated
futures or foreign currency contracts at the end of 2009.

Enter the class of stock (for example, preferred, common,
etc.) exchanged by the recipient in an acquisition of control
or substantial change in capital structure whether for cash or
other property received. Abbreviate the class to fit the entry.
For example, enter “C” for common stock, “P” for preferred,
or “O” for other. Also abbreviate any subclasses.

Box 10. Unrealized Profit or (Loss) on Open
Contracts—12/31/2010
Enter the unrealized profit or (loss) on open regulated
futures or foreign currency contracts at the end of 2010.

Box 7. Description

Box 11. Aggregate Profit or (Loss)

For transactions other than an acquisition of control or
substantial change in capital structure, enter a brief
description of the disposition item (for example, 100 shares
of XYZ Corp. stock). If necessary, abbreviate the description
so that it fits within box 7. For regulated futures contracts
and forward contracts, enter “RFC” or other appropriate
description.
For bartering transactions, describe the services or
property provided.

Enter the aggregate profit or (loss) for the year from
regulated futures or foreign currency contracts. Use boxes
8, 9, and 10 to figure the aggregate profit or (loss).

Box 12.
See Box 2. Stocks, Bonds, etc. on page 3.

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Instructions for Form 1099-B (2010)