Form 1099-CAP: Changes in Corporate Control and Capital Structure — 2025 Guide

What Form 1099-CAP Is For

Form 1099-CAP (Changes in Corporate Control and Capital Structure) is an information return that corporations must file when they undergo major structural changes worth $100 million or more. Think of it as a notification system that alerts both shareholders and the IRS when a company experiences a significant transformation, such as a merger, acquisition, or major restructuring.

The form serves two primary purposes. First, it documents what shareholders received during these corporate transactions—whether cash, stock in the new company, or other property. Second, it helps shareholders calculate whether they owe taxes on any gains from exchanging their old shares for something new.

You'll receive a Form 1099-CAP if you owned stock in a company that was acquired by another corporation, or if your company went through a substantial capital structure change, and you received at least $1,000 in cash, stock, or other property as a result. The corporation (or your broker, if they held your shares) is responsible for sending you this form by January 31 following the year of the transaction. IRS.gov

Common scenarios include: corporate mergers where your company was absorbed by another; acquisitions where another company bought controlling interest (at least 50% voting power or total stock value); major reorganizations involving asset transfers of $100 million or more; and bankruptcy restructurings where assets are transferred and stock or securities are distributed.

When You’d Use Form 1099-CAP (Late/Amended Returns)

Most shareholders will use Form 1099-CAP information when preparing their regular tax return for the year the transaction occurred. However, there are situations where you might need to file a late or amended return.

Late Filing

If you didn't receive your Form 1099-CAP by late February or early March when preparing your taxes, you should still estimate and report the transaction on your return. Contact the corporation's investor relations department or your broker to request a copy. Once you receive the official form, compare it with what you reported. If there are differences, you may need to file an amended return (Form 1040-X).

Amended Returns

File an amended return if you discover the amounts you originally reported don't match the Form 1099-CAP you later received, if you missed reporting the transaction entirely, or if you miscalculated the gain or loss from the exchange. The IRS typically allows three years from your original filing deadline to amend your return. IRS.gov

Corporate Filing Deadlines

The corporation itself must file Form 1099-CAP with the IRS by specific deadlines. For paper filings (corporations filing fewer than 10 forms), the deadline is February 28. For electronic filings (required for 10 or more forms), the deadline is March 31. There's a special earlier deadline of January 5 (or January 6, 2025, for the 2024 tax year) for furnishing forms to clearing organizations like the Depository Trust Company.

Key Rules or Details for 2025

The $100 Million Threshold

Corporations only need to file Form 1099-CAP if the transaction involves stock or assets valued at $100 million or more. This significant threshold means smaller corporate changes don't trigger this reporting requirement.

The $1,000 Minimum

Individual shareholders are exempt from receiving Form 1099-CAP if the total cash plus fair market value of stock and other property they received is $1,000 or less. This protects small shareholders from unnecessary paperwork.

Mandatory E-Filing

As of 2024, the e-filing threshold dropped dramatically from 250 returns to just 10 returns. This means most corporations filing Forms 1099-CAP must submit them electronically. The IRS has converted Form 1099-CAP to an online fillable format to accommodate lower-volume filers. Those filing fewer than 10 forms may print the form from IRS.gov and mail it, including Copy A (which can be printed in black and white for this form only). IRS.gov

Control Definition

Control means ownership of at least 50% of total voting power or 50% of total stock value. The IRS uses constructive ownership rules (Section 318(a)), meaning related parties' ownership can be attributed to you when determining control.

Exempt Recipients

Corporations don't need to file for certain shareholders, including C corporations (but not S corporations), tax-exempt organizations, IRAs and retirement accounts, government entities, foreign persons with proper documentation (Forms W-8BEN), REITs and RICs, banks and financial institutions, securities dealers, and entities registered under the Investment Company Act of 1940.

Section 367(a) Requirement

The corporation or at least one shareholder must be required to recognize gain under Section 367(a) (related to foreign corporations) for the reporting requirement to apply.

Step-by-Step (High Level)

For Corporations Filing Form 1099-CAP

Step 1 – Determine If Filing Is Required

Calculate whether your acquisition of control or capital structure change meets the $100 million threshold. Verify that you or your shareholders must recognize gain under Section 367(a). Consider whether you qualify for any exceptions (such as acquisitions within an affiliated group, making a consent election on Form 8806, or properly reporting under Form 966 or other information returns).

Step 2 – File Form 8806 First

Before filing Forms 1099-CAP, corporations must file Form 8806 (Information Return for Acquisition of Control or Substantial Change in Capital Structure) with the IRS. This form provides details about the transaction itself.

Step 3 – Identify Recipients

Compile a list of all shareholders who received cash, stock, or property. Exclude exempt recipients from your filing list. For each non-exempt shareholder who received over $1,000, gather their taxpayer identification numbers and addresses.

Step 4 – Calculate Amounts

For each recipient, determine the trade date of the exchange, aggregate amount of cash received, fair market value of any stock received, fair market value of other property received, number of shares exchanged, and class(es) of stock exchanged.

Step 5 – Complete the Forms

Use the online fillable form available at IRS.gov/Form1099CAP. Enter your corporation's name, address, phone number, and EIN. Fill in recipient information (name, address, TIN). Complete Box 1 (date of sale/exchange), Box 2 (aggregate amount received), Box 3 (number of shares exchanged), and Box 4 (classes of stock exchanged).

Step 6 – File and Furnish

File Copy A with the IRS electronically if filing 10 or more forms (by March 31), or on paper if filing fewer than 10 forms (by February 28). Furnish Copy B to shareholders by January 31. For clearing organizations, furnish forms by January 5 (January 6, 2025, for 2024 tax year transactions). IRS.gov

For Shareholders Receiving Form 1099-CAP

Step 1 – Verify Receipt

Ensure you receive your Form 1099-CAP by early February. Contact the corporation or your broker if you haven't received it by mid-February.

Step 2 – Review Information

Check that your personal information is correct. Verify the transaction date and amounts match your records.

Step 3 – Calculate Gain or Loss

Use the information to complete Form 8949 (Sales and Other Dispositions of Capital Assets). Calculate your basis in the old stock, compare to the fair market value of what you received, and determine your capital gain or loss.

Step 4 – Report on Tax Return

Transfer totals from Form 8949 to Schedule D (Capital Gains and Losses). Include Schedule D with your Form 1040.

Common Mistakes and How to Avoid Them

Mistake #1: Missing the Lower E-Filing Threshold

Many corporations still think they can paper-file up to 250 forms. The threshold is now just 10 forms. Solution: Set up electronic filing through the IRS Information Returns Intake System (IRIS) if you're filing 10 or more Forms 1099-CAP. Only those with fewer than 10 recipients can paper-file.

Mistake #2: Filing for Exempt Recipients

Corporations waste resources and create confusion by filing forms for shareholders who are exempt. Solution: Carefully review the exempt recipient categories before compiling your recipient list. Obtain exemption certificates from eligible shareholders. Keep documentation of foreign persons' Forms W-8BEN.

Mistake #3: Missing the January 5 Deadline for Clearing Organizations

The deadline for furnishing forms to clearing organizations like the Depository Trust Company is much earlier than the deadline for individual shareholders. Solution: Mark January 5 (or the next business day) prominently in your calendar. Alternatively, make the consent election on Form 8806 to avoid filing Forms 1099-CAP for shares held by clearing organizations.

Mistake #4: Incorrectly Calculating Aggregate Amount

Box 2 should include cash PLUS the fair market value of stock and other property, not just cash. Solution: For each shareholder, add together all cash received, fair market value of any stock received, and fair market value of any other property received. Use the FMV as of the transaction date.

Mistake #5: Truncating TINs on IRS Copies

While you can truncate (mask) taxpayer identification numbers on shareholder copies (showing only the last four digits), you must report complete TINs on forms filed with the IRS. Solution: Use different processes for IRS copies (full TIN) and shareholder copies (truncated TIN allowed). Never truncate the filing corporation's own TIN.

Mistake #6: Not Coordinating with Form 8806

Form 1099-CAP cannot be filed without first filing Form 8806. Additionally, penalties apply to both forms as a single return. Solution: Establish a workflow that requires Form 8806 completion and filing before processing Forms 1099-CAP. Review both forms together for consistency.

Mistake #7: Shareholders Ignoring or Misreporting the Form

Some shareholders assume this form is informational only and don't report the transaction, or they report only the cash received and ignore stock value. Solution: Treat Form 1099-CAP like any other tax form—it reports taxable transactions. Use all information from Box 2 when calculating your gain or loss. Consult a tax professional if you're unsure how to handle the exchange.

What Happens After You File

For Corporations

Once you file Forms 1099-CAP with the IRS and furnish copies to shareholders, the IRS processes them to match against shareholders' individual tax returns. If you filed a consent election on Form 8806, the IRS publishes transaction information on their website that brokers can use to fulfill their own reporting obligations.

You must retain copies of all filed forms and supporting documentation for at least three years from the filing date. The IRS may contact you if there are discrepancies or missing information. If you discover errors after filing, you must file corrected Forms 1099-CAP promptly.

Penalties

Failure to file can result in significant penalties. Under Section 6652(l), penalties accrue at up to $500 per day the failure continues, with a maximum of $100,000 for each acquisition of control or substantial change in capital structure. Form 8806 and all related Forms 1099-CAP are treated as a single return for penalty purposes. If the corporation transferred assets to another entity, both the transferor and transferee can be held jointly and severally liable if neither files. Criminal penalties may apply in cases of willful failure to file. IRS.gov

For Shareholders

You'll use the Form 1099-CAP information when preparing your tax return. Report the transaction on Form 8949 and Schedule D, calculating any capital gain or loss. The IRS receives copies of Forms 1099-CAP and will match them against your return. If you don't report the transaction, you may receive a CP2000 notice (Underreporter Inquiry) proposing additional tax, interest, and penalties.

Keep your Form 1099-CAP with your tax records for at least three years, or longer if you're carrying forward capital losses. If the transaction resulted in stock that you still own, retain the form indefinitely as it documents your basis in that stock.

FAQs

Q1: I received Form 1099-CAP but don't think I owe any taxes. Do I still need to report it?

Yes, you must still report the transaction on your tax return even if you believe there's no taxable gain. The form reports a corporate action that the IRS tracks. You'll calculate your actual gain or loss on Form 8949. If you exchanged stock for stock of equal or greater value in a qualifying reorganization, you might indeed have no taxable gain, but you still need to document this properly. The IRS computers will flag your return if they receive a Form 1099-CAP with your Social Security number but see no corresponding report on your return.

Q2: My broker sent me Form 1099-B, and the corporation sent Form 1099-CAP for the same transaction. Do I report it twice?

No, report it only once. Sometimes both the corporation and your broker file forms for the same transaction. Review both carefully—they should report the same information. Use the most complete and accurate form to report the transaction on your Form 8949. Generally, Form 1099-B from your broker may have more detailed basis information that's helpful for your return. Make a note in your records that you received both forms but are reporting the single transaction.

Q3: What if the amounts on Form 1099-CAP don't match what I actually received?

Contact the corporation's investor relations department or transfer agent immediately. They may have made an error and need to issue a corrected Form 1099-CAP. Don't simply ignore the discrepancy—the IRS will have the form on file and will expect your return to match. If you can't resolve the issue before filing, report the correct amounts on your return and attach a statement explaining the discrepancy and your attempts to obtain a correction.

Q4: I received less than $1,000 but still got a Form 1099-CAP. Is this an error?

Possibly. The corporation isn't required to file for shareholders receiving less than $1,000. However, they're permitted to file for these shareholders if they choose. If you received the form, report it regardless of the amount. Some corporations file for all shareholders to maintain simpler record-keeping systems, even though small recipients are technically exempt.

Q5: Can I use tax software to handle Form 1099-CAP information?

Yes, most major tax preparation software programs can handle Form 1099-CAP data. Look for sections about "corporate reorganizations," "mergers and acquisitions," or "exchanges of stock." You'll typically enter the information in the capital gains section or investment income section. However, complex corporate reorganizations sometimes require professional tax advice, especially if foreign corporations are involved or if you're unsure about your basis in the original stock.

Q6: Our corporation is going through a merger worth $150 million. Do we definitely need to file Form 1099-CAP?

Not necessarily. While you meet the $100 million threshold, several exceptions might apply. You don't need to file if the acquisition is within an affiliated group, if you make the consent election on Form 8806, if you properly report under Form 966 (for corporate dissolutions or liquidations), or if information returns are filed under Section 6042 (Form 1099-DIV) or Section 6045 (Form 1099-B) and you have no reason to believe these weren't filed. Additionally, Form 1099-CAP is only required if you or at least one shareholder must recognize gain under Section 367(a). Consult with tax counsel to determine whether any exceptions apply to your situation.

Q7: What's the relationship between Form 8806 and Form 1099-CAP?

Form 8806 (Information Return for Acquisition of Control or Substantial Change in Capital Structure) is the master form that corporations file first to report the corporate transaction itself. Form 1099-CAP is the individual shareholder form that reports what each specific shareholder received. Think of Form 8806 as reporting "A major transaction occurred" and Forms 1099-CAP as reporting "Here's what shareholder John Smith received in that transaction." The IRS treats Form 8806 and all related Forms 1099-CAP as a single return for penalty purposes. The corporation can make a consent election on Form 8806 that allows the IRS to publish transaction information, relieving the corporation of filing Forms 1099-CAP for shares held by clearing organizations.

Additional Resources:

IRS Form 1099-CAP Page
Instructions for Form 1099-CAP
General Instructions for Certain Information Returns
Publication 542 (Corporations)

This guide provides general information for educational purposes. Corporate reorganizations can involve complex tax issues. Consult a qualified tax professional for advice specific to your situation.

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