Changes in Corporate Control and Capital Structure

2019

Department of the Treasury
Internal Revenue Service

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

Future Developments

For the latest information about developments related to
Form 1099-CAP and its instructions, such as legislation
enacted after they were published, go to IRS.gov/
Form1099CAP.

Reminder

In addition to these specific instructions, you should also
use the 2019 General Instructions for Certain Information
Returns. Those general instructions include information
about the following topics.
• Who must file.
• When and where to file.
• Electronic reporting.
• Corrected and void returns.
• Statements to recipients.
• Taxpayer identification numbers (TINs).
• Backup withholding.
• Penalties.
• Other general topics.
You can get the general instructions at General
Instructions for Certain Information Returns or go to
IRS.gov/Form1099CAP.
Online fillable form. Due to the very low volume of
paper Forms 1099-CAP received and processed by the
IRS each year, this form has been converted to an online
fillable format. You may fill out the form, found online at
IRS.gov/Form1099CAP, and send Copy B to the recipient.
For filing with the IRS, follow your usual procedures for
filing electronically if you are filing 250 or more forms. If
you are filing this form on paper due to a low volume of
recipients, for this form only, you may send in the
black-and-white Copy A with a Form 1096 that you print
from the IRS website.

Specific Instructions

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

Who Must File
Any broker who holds shares on behalf of a

TIP customer in a corporation that the broker knows or
has reason to know based on readily available

Oct 23, 2018

information has engaged in a transaction of acquisition of
control or substantial change in capital structure must file
Form 1099-B unless the customer is an exempt recipient.
Readily available information includes information from a
clearing organization, such as the Depository Trust
Company (DTC). Information is also published on the IRS
website. Go to IRS.gov and enter keyword “Form 8806” in
the upper right corner.
A domestic corporation that is required to file Form 8806,
Information Return for Acquisition of Control or Substantial
Change in Capital Structure, must file Form 1099-CAP
with the IRS and furnish a copy to each shareholder who
receives cash, stock, or other property as a result of the
acquisition of control or substantial change in capital
structure and who is not an exempt recipient. However, if
the corporation can reasonably determine that the receipt
of such stock would not cause the shareholder to
recognize gain, then the corporation is not required to
report the fair market value (FMV) of any stock provided to
a shareholder. Corporations do not file Form 1099-CAP
under one of the following conditions.
• The transaction involves the acquisition of control within
an affiliated group or involves stock valued at less than
$100 million.
• The corporation makes the consent election on Form
8806. Under the election, the corporation is not required
to file Form 1099-CAP with respect to shares held by a
clearing organization because it allows the IRS to publish
information necessary for brokers to meet their reporting
obligations.
• The corporation properly reports the transaction under
section 6043(a) on Form 966, Corporate Dissolution or
Liquidation.
• Information returns are filed under section 6042 (Form
1099-DIV) or section 6045 (Form 1099-B), unless the
corporation knows or has reason to know that such
returns were not filed.

Exempt Recipients
The corporation is not required to file Form 1099-CAP for
the following shareholders including brokers who are also
exempt.
• Any shareholder who receives solely stock described in
paragraph (a)(1)(v)(C) of Regulations section 1.6043-4T
in exchange for its stock in the corporation.
• Any shareholder whose amount of cash plus the FMV
of any stock and other property does not exceed $1,000.
• Any shareholder from whom the corporation has
received a properly completed exemption certificate.
• Any one of the following.
1. A corporation, except a subchapter S corporation.

Cat. No. 35150T

consolidates, or otherwise combines with another
corporation or transfers all or substantially all of its assets
to one or more corporations;
• Transfers all or part of its assets to another corporation
under bankruptcy proceedings including distributing its
stock or securities; or
• Changes its identity, form, or place of organization; and
• The corporation or any of its shareholders is required to
recognize gain under section 367(a) as a result of the
transaction.

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

!

CAUTION

When To File

See part C in the 2019 General Instructions for Certain
Information Returns and its Guide to Information Returns
for filing and furnishing dates. But see the separate
guidance for clearing organizations in Special reporting
date–clearing organizations next.
Special reporting date–clearing organizations. A
corporation must file Form 1099-CAP and furnish a copy
to each of its shareholders who receives any stock or
other consideration in the transaction and who is not an
exempt recipient. A clearing organization, such as the
DTC, is not an exempt recipient. The corporation is
therefore required to file and furnish a copy of Form
1099-CAP to a clearing organization with respect to
shares held by the clearing organization unless it makes a
consent election, as discussed below. Furnish Form
1099-CAP to the clearing organization by January 6,
2020. If you are furnishing the DTC with Forms
1099-CAP, see Notice 2004-9, 2004-04 I.R.B. 334,
available at IRS.gov/irb/2004-04_IRB#NOT-2004-9.

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

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

Penalties for Failure To File

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

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

Failure to file Forms 1099-CAP also includes the
requirement to file electronically. For more information on
penalties for failure to file electronically, see part F in the
2019 General Instructions for Certain Information Returns.

See Form 8806 and Regulations section 1.6043-4 for
details and special rules with respect to constructive
ownership of stock.
Section 338 election. An acquisition of stock of a
corporation under which a section 338 election is made is
treated as an acquisition of stock and not as an
acquisition of the assets of the corporation.

Statement to Shareholder

If required to file Form 1099-CAP, you must furnish a
statement to the shareholder. For more information about
the requirement to furnish a statement to the shareholder,
see part M in the 2019 General Instructions for Certain
Information Returns.

Substantial Change in Capital Structure
A change in capital structure occurs if:
• The amount of cash or other property provided to its
shareholders is $100 million or more and the corporation
in a transaction or series of transactions merges,

Truncating recipient’s TIN. Under Regulations section
301.6109-4, corporations required to file Form 1099-CAP
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Instructions for Form 1099-CAP (2019)

Box 1. Date of Sale or Exchange

may truncate a recipient’s TIN (social security number
(SSN), individual taxpayer identification number (ITIN),
adoption taxpayer identification number (ATIN), or
employer identification number (EIN)) on payee
statements. A filer's TIN may not be truncated on any
form. Truncation is not allowed on any documents the filer
files with the IRS. See part J in the 2019 General
Instructions for Certain Information Returns.

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

Box 2. Aggregate Amount Received

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

Account Number

Box 3. No. of Shares Exchanged

The account number is required if you have multiple
accounts for a recipient for whom you are filing more than
one Form 1099-CAP. Additionally, the IRS encourages
you to designate an account number for all Forms
1099-CAP that you file. See part L in the 2019 General
Instructions for Certain Information Returns.

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

Box 4. Classes of Stock Exchanged

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

Corporation’s Name, Address, Telephone
Number, and Federal Identification Number
Generally, this will be the reporting corporation's
information and EIN.

Instructions for Form 1099-CAP (2019)

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