Form 1099-CAP (2011) Checklist
Purpose and Scope
Form 1099-CAP reports changes in corporate control or substantial capital structure modifications for the 2011 tax year. Shareholders must recognize gain (but not loss) from the receipt of cash, stock, or property exchanged for original stock. The 2011 form requires reporting by January 31, 2012, for shareholder copies and February 28, 2012, for IRS filing, with electronic filing due April 2, 2012, if using approved software per Publication 1220.
Corporation and Shareholder Identification
Verify Corporation Information
Verify the corporation's legal name, street address, city, state, ZIP code, and telephone number in the Box 1 header. Match the federal EIN to corporate tax records as filed for the 2010 tax year.
Accurate identification information prevents processing delays and ensures proper shareholder notification. The IRS matches EIN data across tax years to verify corporate identity and compliance.
Enter Shareholder Identification
Enter the shareholder's SSN or ITIN in the designated field for proper tax reporting. Confirm the identification number matches Form 1040 or other filed returns for the 2011 tax year.
Shareholder identification must be accurate for IRS matching and processing systems. Incorrect identification numbers may result in penalties or processing failures for both corporations and shareholders.
Transaction Details and Share Information
Record Transaction Date
Record the date of stock exchange, sale, or capital structure change in Box 5 using MM/DD/YYYY format. This date must fall within the 2011 calendar year for Form 1099-CAP to be filed in 2012.
The transaction date determines the tax year for gain recognition. Shareholders use this date to report the transaction on their 2011 tax return.
Calculate Aggregate Fair Market Value
Calculate and enter the aggregate fair market value of cash and property received in Box 2. Do NOT reduce for the shareholder's basis or losses, per 2011 shareholder instructions.
Report the full fair market value without any adjustments for cost basis. Shareholders will separately calculate their own basis and gain using this reported amount.
Report Share Quantity and Classes
- Insert the total number of shares exchanged in Box 3.
- Include all share classes participating in the transaction during 2011.
- List all classes of stock exchanged in Box 4 (e.g., common, preferred, Series A).
- Identify stock by name or designation used in corporate records.
Accurate share reporting helps shareholders calculate per-share gain or loss for their tax returns. The IRS uses this information to verify consistency between corporate reporting and shareholder returns.
Complete share class identification prevents confusion when shareholders hold multiple types of stock. The corporation must report all exchanged shares regardless of the shareholder's individual transaction size.
Account Numbers and Corrections
Assign Account Numbers
Assign an account number in the optional field if the corporation maintains individual shareholder accounts, using consistent numbering across all 2011 returns for tracking purposes.
Account numbers help corporations organize records and assist with future corrections, providing administrative benefits for large shareholder populations.
Mark Corrected Returns
Mark the CORRECTED box only if replacing an incorrect 2011 Form 1099-CAP previously filed or furnished, and do not use this box for amended 2012 or later year corrections.
Corrected forms must reference the original filing to ensure proper IRS processing and replacement of the original information with corrected data.
Copy Distribution and Filing Requirements
Prepare Required Copies
- Prepare Copy A (IRS), Copy B (shareholder), and Copy C (corporation) for each transaction. Ensure all copies are identical except for copy designations and instructions text.
- Copy A goes to the IRS for processing and matching. Copy B provides shareholders with information needed for their tax returns.
- Copy C serves as the corporation's permanent record of the transaction.
Furnish Shareholder Copies
Furnish Copy B to shareholders by January 31, 2012, for standard shareholders and ensure timely delivery. Furnish Copy B to clearing organizations by January 5, 2012, if the shareholder is identified as a clearing organization under IRS definitions.
Retain proof of delivery for all shareholder copies to document compliance with IRS furnishing requirements. The earlier clearing organization deadline accommodates their processing schedules for subsequent distribution to beneficial owners. It allows sufficient time for clearing organizations to fulfill their own distribution obligations to underlying shareholders.
File With IRS
File Copy A with the IRS by February 28, 2012, for paper filing or April 2, 2012, for electronic filing. Attach Form 1096 transmittal with a summary of all Forms 1099-CAP issued for 2011.
Electronic filing receives a two-month extension compared to paper filing. Do not print forms from the IRS website for paper filing, as forms must be official IRS stock due to scanning requirements during 2012 processing.
Shareholder Tax Reporting Rules
Gain Recognition Requirements
Form 1099-CAP explicitly prohibits shareholders from claiming loss deductions on Schedule D (Form 1040) based on the Box 2 aggregate amount. Gain recognition only applies per Publication 550, chapter 4 (2011 edition).
Shareholders calculate recognized gain by comparing the Box 2 fair market value to their adjusted basis in the exchanged stock. Loss recognition is not permitted for these transactions under the corporate control change rules.
Basis Calculation Methods
Shareholders must determine their own adjusted basis in the exchanged stock to calculate recognized gain. The basis includes the original purchase price plus any capital additions or adjustments.
Shareholders cannot rely solely on Box 2 to determine their tax liability. Professional tax advice may be necessary for complex transactions involving multiple share classes or acquisition dates.
Electronic Filing Specifications
Publication 1220 Requirements
Use Publication 1220 (2011) for file format requirements when filing electronically. The IRS does not accept paper forms printed from the website due to optical scanning protocols in effect for 2011 information return processing.
Electronic filing offers extended deadlines and faster processing. Approved software must meet the specifications outlined in Publication 1220 to ensure compatibility with IRS systems.
Information Reporting Customer Service
Contact Information for Assistance
The 2011 helpline for Form 1099-CAP questions operates at 1-866-455-7438 or 304-263-8700 for standard calls. TTY/TDD service is available at 304-579-4827 for deaf and hard-of-hearing callers.
Operating hours are Monday through Friday, 8:30 a.m. to 4:30 p.m. Eastern time. IRS representatives can answer questions about filing requirements, deadlines, and specific reporting situations for the 2011 tax year.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
