What the Form Is For
IRS Form 1099-CAP 2018 is used to report changes in corporate control and capital structure when a corporation experiences an acquisition or a substantial change in ownership. It applies when shareholders receive cash, stock, or other property valued at $100 million or more as part of a merger, consolidation, or similar transaction. The form allows the IRS to track these transactions because they often result in taxable income or capital gains that must be reported on a taxpayer’s tax return. It also ensures compliance with federal tax laws applicable to corporations, investment companies, and businesses across various industries.
This form records key transaction details, including the date, total number of shares exchanged, and the amount of cash or property received by shareholders. The information helps determine whether gains from capital assets or securities are taxable or tax-deductible, as well as whether dividends or equity payments are required to be reported. Corporations must file and submit accurate forms to prevent errors or reporting failures that could result in IRS penalties. Similar examples from previous years demonstrate that proper filing fosters transparency among companies, investors, and government agencies under the Investment Company Act and related tax regulations.
When You’d Use It Form 1099-CAP (2018)
A corporation must file Form 1099-CAP when there are changes in corporate control and capital structure during a tax year, such as acquisitions or restructurings, where shareholders receive cash or property. The due date for furnishing forms to shareholders is January 31, and the filing deadline with the IRS is February 28 for paper submissions or April 2 for e-file. If errors occur—like missing Social Security numbers or incorrect values—the corporation must submit a corrected form. Filing late or inaccurately can result in penalties, so businesses should review every transaction and ensure that each taxpayer record is complete.
Key Rules for 2018
Form 1099-CAP must be filed when a company is acquired or undergoes a substantial change in capital structure resulting in a total transaction value of at least $100 million. The corporation must also file Form 8806 before distributing 1099-CAP forms to shareholders. Reporting is not required for exempt entities, such as government institutions, investment companies, or foreign individuals who provide valid documentation from a foreign central bank. Generally, transactions that involve only stock and no cash or other property are excluded from reporting.
For complete details on reporting, withholdings, and tax filings, see our guide for Information Returns & Reporting Forms.
Step-by-Step Filing Process (High Level)
Step 1: Determine whether filing is required
A corporation must determine whether an acquisition of control or a substantial change in capital structure occurred. It should verify that the total fair market value meets or exceeds $100 million and that Section 367(a) gain recognition applies.
Step 2: File Form 8806
Before issuing Forms 1099-CAP, the corporation must file Form 8806 to notify the IRS about the transaction. This filing helps establish reporting obligations.
Step 3: Identify non-exempt shareholders
The corporation must review shareholder records to identify non-exempt shareholders, including individuals, partnerships, and S corporations. Taxpayer identification numbers should be verified to prevent errors in reporting.
Step 4: Complete individual forms
Each Form 1099-CAP must include:
- The date of the transaction
- The total amount of cash, stock, or other property received
- The number and class of shares exchanged
- The corporation’s identifying information, including EIN and contact details
Step 5: Furnish and file
Corporations must send Copy B to shareholders by January 31, 2019, and file Copy A with the IRS by the due date. Paper filings must include Form 1096 as a summary transmittal.
Common Mistakes and How to Avoid Them
Corporations often make avoidable mistakes when preparing and filing Form 1099-CAP. The most frequent errors include:
- Misunderstanding the $100 million threshold: Apply the threshold to the total transaction value, not per shareholder, to determine whether Form 1099-CAP reporting is required.
- Ignoring Section 367(a) gain recognition rules: Review cross-border merger and transfer requirements under Section 367(a) to ensure proper reporting and compliance.
- Using incorrect taxpayer identification numbers: Confirm all TINs match official records to avoid penalties, mismatches, or backup withholding issues.
- Missing clearing organization reporting deadlines: Ensure shares held through clearing organizations (such as DTC) are reported by the January 5 deadline to prevent penalties.
- Filing Form 1099-CAP for stock-only exchanges: Do not file when shareholders received only stock and no cash or other property, since the transaction is not reportable.
Carefully reviewing filing thresholds, deadlines, and shareholder details ensures compliance and helps corporations avoid penalties and processing delays.
What Happens After You File
After filing, the corporation must retain all forms, reports, and supporting documentation for a minimum of four years to comply with IRS regulations. Shareholders use the form to report capital gains or losses, dividends, and other property received on their tax return. The information helps taxpayers in various industries determine whether amounts received are taxable or tax-deductible. Failure to file or submit incorrect reports can result in penalties and negatively impact both the company and its investors. Therefore, each business should carefully review all filings and maintain accurate records for both previous and recent years.
Frequently Asked Questions
What is IRS Form 1099-CAP 2018 used for?
IRS Form 1099-CAP 2018 reports changes in corporate control and capital structure when a corporation experiences an acquisition or substantial change. It ensures shareholders and the IRS record transactions involving cash, stock, or other property that may affect taxable income, capital gains, and assets reported on a tax return.
Who needs to file this form during a tax year?
A corporation must file this form when shareholders receive cash, stock, or property worth $100 million or more as part of changes in corporate control and capital structure. Companies across different industries must file accurate forms to comply with IRS rules and avoid penalties.
How do foreign individuals and foreign central banks report?
Foreign individuals and entities, including a foreign central bank, are typically exempt from Form 1099-CAP filing if they submit valid tax documentation. However, corporations must review each transaction under the Investment Company Act to determine reporting requirements for international investors and cross-border acquisitions.
What are common mistakes when businesses file Form 1099-CAP?
Businesses often miss the due date, fail to e-file required forms, or report incorrect Social Security numbers. Errors in reporting property values, stock totals, or transaction dates can impact taxable income and capital gains, potentially resulting in government penalties for the company and its shareholders.
How does this form relate to previous years and different industries?
In previous years and recent years, corporations in various industries used Form 1099-CAP to report acquisitions, equity changes, and substantial restructurings. The form helps the IRS monitor corporate control, investments, and securities transactions, ensuring transparency in taxes, dividends, and gains from capital assets.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
