Form 1099-CAP Checklist — 2010 Tax Year
Form Purpose and Reporting Requirements
Form 1099-CAP reports cash, stock, or other property received by shareholders in transactions involving an acquisition of control or a substantial change in capital structure. Corporations use this form when they acquire control of another corporation or when a substantial change in capital structure occurs and shareholders receive consideration for their stock.
The form reports the consideration received, and shareholders use this information to calculate their individual gain or loss based on their adjusted basis in the surrendered stock. Tax treatment varies among shareholders depending on their basis, holding period, whether they receive boot, and whether the transaction qualifies as a tax-free reorganization under Internal Revenue Code Section 368.
Identifying Reportable Transactions
Determine whether your transaction requires Form 1099-CAP by analyzing whether it involves an acquisition of control under Internal Revenue Code Section 368 or a substantial change in capital structure. An acquisition of control generally means acquiring at least 80 percent of voting stock and 80 percent of each class of nonvoting stock. At the same time, substantial changes in capital structure include recapitalizations and similar transactions under applicable tax law provisions.
Shareholder Identification and Separate Reporting
Prepare a separate Form 1099-CAP for each shareholder who received cash, stock, or other property in the reportable transaction. You may report all exchanged shares of a single shareholder on one form, even when that shareholder held multiple classes of stock.
Recording the Exchange Date
Enter the date the exchange occurred for tax purposes in Box 1. In most cases, this date represents when the shareholder relinquished control of the old stock and received the new consideration.
Calculating Aggregate Amount Received
Sum all cash plus the fair market value of all stock and other property the shareholder received in the exchange. Record this total in Box 2 as the aggregate consideration only.
You do not report the shareholder's basis, boot calculations, recognized gain, or deferred gain on this form. The shareholder calculates and reports these amounts independently on their own tax return using their basis records and the information from Form 1099-CAP.
Reporting Share Counts and Classes
Complete Box 3 with the total number of shares the shareholder exchanged, aggregated across all classes. Complete Box 4 by listing each class or series of stock the shareholder surrendered in the transaction.
Box 3 aggregates the total share count, while Box 4 distinguishes between share classes to help shareholders match the form to their records. For convertible securities, report the class of stock actually surrendered in the exchange, identifying whether shares were common, preferred, or another specific class designation.
Completing Identification Information
Enter the corporation's legal name, federal Employer Identification Number, and complete address on the form. Enter the shareholder's name, Social Security Number or Individual Taxpayer Identification Number, and mailing address.
Copy A filed with the Internal Revenue Service must contain the complete taxpayer identification number for both the corporation and the shareholder. Copy B furnished to the shareholder may show only the last four digits of the shareholder's Social Security Number or Individual Taxpayer Identification Number for privacy protection. However, you must maintain the full number in your records.
Filing Corrections and Voided Returns
Check the CORRECTED box when amending a previously filed Form 1099-CAP for the 2010 tax year. Mark the original form as VOID before filing a replacement to prevent duplicate reporting to the Internal Revenue Service.
Furnishing Statements to Recipients
Furnish Copy B to each shareholder by January 31, 2011, or the next business day if January 31 falls on a weekend or holiday. This deadline applies to all recipients regardless of their status.
Filing Requirements and Deadlines
Attach Copy A to a completed Form 1096 transmittal summary page for submission to the Internal Revenue Service. File paper returns by February 28, 2011, and file electronic returns by March 31, 2011, using software that generates files compliant with Internal Revenue Service electronic filing specifications.
Paper Form Specifications
Use official Internal Revenue Service red-ink forms ordered from the Internal Revenue Service or printed using approved software that produces scannable substitutes meeting Internal Revenue Service specifications for paper Copy A submissions. Downloaded forms from the Internal Revenue Service website cannot be printed and filed as Copy A because they lack the required scannable format.
Optional Account Number Field
You may use the account number field to assign a unique identifier that helps match the form to internal records and assists shareholders in identifying the transaction. The Internal Revenue Service does not mandate a specific format or maintain a standardized numbering system for this optional field.
Shareholder Tax Reporting Guidance
Direct shareholders to Internal Revenue Service Publication 550, Chapter 4, for guidance on calculating and reporting gains or losses from stock exchanges and reorganizations. Shareholders must determine their gain or loss by comparing the amount received in Box 2 to their adjusted basis in the surrendered stock.
When the amount received exceeds the basis, shareholders recognize gain subject to applicable tax rules. When the amount received falls below the basis, shareholders may recognize a loss subject to limitations such as wash sale rules and related-party provisions.
Gain and Loss Recognition Rules
Shareholders calculate their individual tax consequences based on their specific circumstances rather than uniform treatment across all recipients. The tax outcome depends on the shareholder's adjusted basis, the consideration received, whether the transaction qualifies as a tax-free reorganization allowing gain deferral, and the holding period of the surrendered stock, affecting capital gain characterization.
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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.
