Posted by Abundant Wealth Planning LLC

Understanding Form 1099-CAP / Changes in Corporate Control and Capital Structure

Understanding Form 1099-CAP / Changes in Corporate Control and Capital Structure

Form 1099-CAP from the IRS is one of the series of the 1099 forms available from Uncle Sam. They use this to report transactions and payments from nonemployee. Whenever there is a massive change in capital structure or control, firms use 1099-CAP to report to the IRS.

Shareholders who get stock, cash, and other properties due to a massive change in the capital structure must use Form 1099-CAP.

Who Uses Form 1099-CAP?

For owners of stock as part of a firm that experiences a considerable change in capital structure, for which you get stock or cash, you will receive copies of Form 1099-CAP.

These forms must be completed and submitted on 31 January, the year after the capital structure change.


Uses of Form 1099-CAP

The primary use of FORM 1099-CAP is to reveal changes in capital or control structure. Uncle Sam defines a massive shift in the capital structure as the following:

  • The entire cash value that all shareholders get a minimum of $100 million. This can also be a property value. Also, the firm consolidates, joins, or transfers their assets to other corporations.

  • The firm sends all or some of their assets to a different corporation that is undergoing a bankruptcy case. 

  • The firm changes its form, structure, or location of an organization.

 The firm doesn't need to complete Form 1099-CAP with exempt shareholders. This includes firms that

  • Get stock for an exchange that is not subjected to recognition gain based on section 367(a)

  • Get less than a thousand dollars in cash alongside the fair market value of any property or stock.

  • Make available an exemption certificate for the Corporation.

The groups that are exempt are pretty diverse with the following under its umbrella:

  • A common trust fund

  • A regulated investment company (RIC)

  • A dealer in commodities or securities

  • Any state under the U.S. or the government itself

  • Any financial institution like the bank

  • Any firm registered with the IC Act of 1940

  • All corporations except a subchapter S Corporation

Reading Form 1099-CAP

This is a quick highlight of what you will find in form 1099-CAP

There will be details about the shareholders and the corporations on the form’s left side. This detail will include TIN numbers, names, addresses, and all corresponding account details.

There are five boxes on the form’s right hand. These are:

Box 1: Date of Exchange or Sale: the first box reveals the date of exchange of the stock for cash or even property

Box 2: The second box reveals the cash value as well as the stock’s market value or any other property that you got as an exchange for the stock with you

Box 3:The third box reveals the value of shares held from the company’s stock that you swapped in the deal

Box 4: Stock’s Class Exchanged: the fourth box reveals stocks' class in the exchange. There might be an abbreviation – P for preferred stock, C for common stock, and O for others.

Box 5 is usually blank.

Interested persons can get copies of 1099-CAP on the IRS website.

How can you get and Mail form 1099-CAP 

For people who have stock in a firm that goes through a massive change in capital or control structure, the firm will forward the second copy of 1099-CAP form as long as you get cash or other properties from the transaction.  

Form 1099 is available in three copies. For every 1099-CAP that a company files, 

  • Uncle Sam gets the first copy (A)

  • The Shareholder gets the second copy (B)

  • The Corporation holds Copy C.

Submission of Form 1099-CAP is not compulsory for a shareholder when filing the tax return. You, however, need this info to have your gains reported on FORM 8949.



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