IRS Instruction 1099-CAP

IRS Instruction 1099-CAP – The IRS Form 1099-CAP, officially titled “Changes in Corporate Control and Capital Structure,” is a specialized information return used to report significant corporate events that impact shareholders. This form helps ensure transparency in tax reporting for transactions involving acquisitions of control or substantial restructurings in a corporation’s capital setup.

What Is IRS Form 1099-CAP and Its Purpose?

Form 1099-CAP is filed by corporations to notify both the IRS and affected shareholders when a change in corporate control occurs or when there is a substantial change in capital structure. Shareholders who receive cash, stock, or other property as a result of these events get a copy of the form. It provides details like the aggregate amount received and the number of shares exchanged, which shareholders use to report potential capital gains (or note non-reportable losses) on their tax returns, typically via Form 8949 and Schedule D.

According to the IRS, this form promotes accurate reporting under sections of the Internal Revenue Code related to corporate reorganizations and acquisitions. It is not used for everyday dividends or minor stock adjustments but for major events like mergers, acquisitions, or recapitalizations where shareholder ownership or corporate value shifts significantly.

The most current instructions (Revision April 2025) apply for tax year 2025 and subsequent years until updated.

Who Must File Form 1099-CAP?

A corporation must file Form 1099-CAP if:

  • There is an acquisition of control (e.g., a person or group acquires more than 50% of the corporation’s stock) or
  • The corporation undergoes a substantial change in capital structure (e.g., significant recapitalization, redemption, or restructuring).

Filing is required when shareholders receive cash, stock, or other property from the transaction, and the aggregate value meets certain thresholds (historically tied to high-value events, often linked to Form 8806 filing requirements for large transactions).

The corporation furnishes Copy B to each qualifying shareholder and files with the IRS. Even low-volume forms like 1099-CAP are now often handled as online fillable PDFs due to limited paper filings.

Key Reportable Transactions

Reportable events typically include:

  • Change in corporate control — When control (generally over 50% of voting power or value) is acquired by another party.
  • Substantial change in capital structure — Events like major stock redemptions, conversions, exchanges, or restructurings that alter the corporation’s equity setup significantly.

Shareholders use the information to determine if the transaction results in a taxable gain. If calculations show a loss, no reporting is required on Form 8949/Schedule D for that aspect.

Filing Deadlines and Requirements

  • To shareholders — Furnish by January 31 of the year following the calendar year of the transaction (e.g., January 31, 2026, for 2025 events).
  • To the IRS — File by February 28 (paper) or March 31 (electronic) of the following year.
  • For clearing organizations — Specific early deadlines may apply, such as January 6 (or January 5 in subsequent years).

Electronic filing is encouraged or required based on volume thresholds under general 1099 rules. Penalties apply for failure to file, late filing, or incorrect information, as outlined in the General Instructions for Certain Information Returns.

Corrected or void returns follow standard procedures.

How Shareholders Use Form 1099-CAP?

If you receive Form 1099-CAP:

  • Report the aggregate amount in Box 2 as sales proceeds on Form 8949 (do not report losses from these transactions).
  • Include details like date acquired, basis, and description.
  • Consult IRS Publication 550 (Investment Income and Expenses) for guidance on these transactions.

Where to Find Official Resources?

For the latest details, download the current instructions and form directly from the IRS website:

Always refer to irs.gov for updates, as tax rules can evolve. If involved in a corporate transaction, consult a tax professional to ensure proper reporting and compliance. This form plays a key role in maintaining accurate records during major corporate changes.