Changes in Corporate Control and Capital Structure

2013

Department of the Treasury
Internal Revenue Service

Instructions for Form
1099-CAP
Changes in Corporate Control and Capital Structure
Section references are to the Internal Revenue Code unless
otherwise noted.

Future Developments

For the latest information about developments related to
Form 1099-CAP and its instructions, such as legislation
enacted after they were published, go to www,irs.gov/
form1099cap.

Who Must File

What's New

Reminder

In addition to these specific instructions, you should also use
the 2013 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 at www.irs.gov/
form1099cap 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.
See part C in the 2013 General Instructions for Certain
Information Returns and its Guide to Information Returns for
filing and furnishing dates. But see the separate guidance for
clearing organizations in Special reporting date–clearing
organizations, next.
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
Sep 12, 2012

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 has
engaged in a transaction of acquisition of 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 IRS.gov and enter keyword “Form 8806” in the
upper right corner.

TIP

Pilot program for truncating an individual's identifying
number on paper payee statements has ended. Filers of
Form 1099-CAP must show the shareholder's complete
identifying number on all copies of the form.

When To File

consent election, as discussed below. Furnish Form
1099-CAP to the clearing organization by January 6, 2014. 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.

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.
Any one of the following:

Cat. No. 35150T

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.

Changes its identity, form, or place of organization; and
The corporation or any of its shareholders is required to
recognize gain under section 367(a) as a result of the
transaction.

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.

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

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
2013 General Instructions for Certain Information Returns.

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

Statement to Shareholder

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 2013 General Instructions for Certain
Information Returns.

Acquisition of Control

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.

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 2013 General Instructions for
Certain Information Returns.

Name, Address, Telephone Number, and TIN

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

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.

Box 1. Date of Sale or Exchange

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

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

Box 2. Aggregate Amount Received

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.

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.

Box 3. No. of Shares Exchanged

Substantial Change in Capital Structure

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

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;

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.

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Instructions for Form 1099-CAP (2013)