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Monday,
October 18, 2010
Part III
Department of the
Treasury
Internal Revenue Service
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26 CFR Parts 1, 31, 301 et al.
Basis Reporting by Securities Brokers and
Basis Determination for Stock; Final Rule
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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
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
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:
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SUMMARY:
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
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§§ 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.
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.
Background
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.
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
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2. Basis Determination—Average Basis
Method
a. Definition of Dividend Reinvestment
Plan
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.
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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.
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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
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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.
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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
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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.
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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
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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
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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
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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
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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.
elections, or events occurring outside
the account. Commentators asked
whether brokers must apply certain
Code provisions in determining
reported basis.
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.
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.
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,
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).
jlentini on DSKJ8SOYB1PROD with RULES3
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
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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.
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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.
jlentini on DSKJ8SOYB1PROD with RULES3
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
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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
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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
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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.
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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.
jlentini on DSKJ8SOYB1PROD with RULES3
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
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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.
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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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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.
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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.
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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
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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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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.
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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
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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
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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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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
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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
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64083
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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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.
jlentini on DSKJ8SOYB1PROD with RULES3
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Jkt 223001
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:
Basis of property.
*
Employment taxes, Income taxes,
Penalties, Pensions, Railroad retirement,
Reporting and recordkeeping
requirements, Social security,
Unemployment compensation.
18:19 Oct 15, 2010
Reporting and recordkeeping
requirements.
§ 1.1012–1
26 CFR Part 31
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26 CFR Part 602
*
*
*
*
(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
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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
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18:19 Oct 15, 2010
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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.
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64085
(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
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18:19 Oct 15, 2010
Jkt 223001
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,
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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
January 8, 2010 ........
February 8, 2010 ......
March 8, 2010 ..........
April 8, 2010 .............
Number
of shares
25
24
20
20
Cost
$200
200
200
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).
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(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.
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(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
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64087
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:
to use the average basis method for
stock held in separate accounts.
(ii) Account rule for stock sold before
Number
2012. A taxpayer’s election to use the
Date
Cost
of shares
average basis method for shares of stock
January 8, 2012 ........
25
$200 described in paragraph (e)(1)(i) of this
February 8, 2012 ......
24
200 section that a taxpayer sells, exchanges,
March 8, 2012 ..........
20
200 or otherwise disposes of before January
1, 2012, applies to all identical shares of
(ii) F notifies W that F elects, under
stock the taxpayer holds in any account.
paragraph (e)(9)(i) of this section, to use the
(iii) Separate account. Unless the
average basis method for the shares of N
single-account election described in
Company. On May 8, 2012, under paragraph
paragraph (e)(11)(i) of this section
(e)(9)(iii) of this section, F notifies W that F
applies, stock described in paragraph
revokes the average basis method election.
(e)(1)(i) of this section that is a covered
On June 1, 2012, F sells 60 shares of N
security (within the meaning of section
Company using the first-in, first-out basis
6045(g)(3)) is treated as held in a
determination method.
(iii) Under paragraph (e)(9)(iii) of this
separate account from stock that is a
section, the basis of the N Company shares
noncovered security (as described in
upon revocation, and for purposes of
§ 1.6045–1(a)(16)), regardless of when
determining gain on the sale, is $8.00 per
acquired.
share for each of the 25 shares purchased on
(iv) Examples. The provisions of this
January 8, 2012, $8.34 per share for each of
paragraph
(e)(10) are illustrated by the
the 24 shares purchased on February 8, 2012,
and $10 per share for the remaining 11 shares following examples:
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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
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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
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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.
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(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.
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64089
(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.
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*
*
*
*
*
(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).
*
*
*
*
*
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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:
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§ 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
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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
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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.
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(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
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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
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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
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64093
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.
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(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
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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).
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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
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64095
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
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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
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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.
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*
*
*
*
*
(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.
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(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
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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
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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.
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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
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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
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64099
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.
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(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
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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.
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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
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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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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).
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(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
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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:
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.
*
*
*
*
*
§ 1.6049–6 Statements to recipients of
interest payments and holders of
obligations for attributed original issue
discount.
PART 301—PROCEDURE AND
ADMINISTRATION
*
*
*
*
*
(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.
jlentini on DSKJ8SOYB1PROD with RULES3
*
*
*
*
*
(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
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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);
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64103
(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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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).
*
*
*
*
*
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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
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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);
E:\FR\FM\18OCR3.SGM
18OCR3
Doc 2010-22232 (35 pgs)
Federal Register / Vol. 75, No. 200 / Monday, October 18, 2010 / Rules and Regulations
jlentini on DSKJ8SOYB1PROD with RULES3
(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
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18:19 Oct 15, 2010
Jkt 223001
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).
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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
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) * * *
*
*
Current
OMB control
No.
CFR part or section where
identified and described
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*
*
*
*
1.6045–1(c)(3)(xi)(C) ................
1545–2186
1.6045A–1 ................................
1545–2186
PO 00000
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| File Type | application/pdf |
| File Title | Document |
| Subject | Extracted Pages |
| Author | U.S. Government Printing Office |
| File Modified | 2011-08-12 |
| File Created | 2010-10-18 |