An Item To Note
In addition to these specific instructions, you should also use the
2002 General Instructions for Forms 1099, 1098, 5498, and W-2G.
Those general instructions include information about:
- Backup withholding
- Magnetic media and electronic reporting requirements
- Penalties
- When and where to file
- Taxpayer identification numbers
- Statements to recipients
- Corrected and void returns
- Other general topics
You can get the general instructions from the IRS Web Site at
www.irs.gov or by calling 1-800-TAX-FORM (1-800-829-3676).
Specific Instructions for Form 1099-S
File Form 1099-S, Proceeds From Real Estate
Transactions, to report the sale or exchange of real estate.
Reportable Real Estate
Generally, you are required to report a transaction that consists
in whole or in part of the sale or exchange for money, indebtedness,
property, or services of any present or future ownership interest in
any of the following:
- Improved or unimproved land, including air space.
- Inherently permanent structures, including any residential,
commercial, or industrial building.
- A condominium unit and its appurtenant fixtures and common
elements, including land.
- Stock in a cooperative housing corporation (as defined in
section 216).
Sale or exchange.
A sale or exchange includes any transaction properly treated as a
sale or exchange for Federal income tax purposes, even if the
transaction is not currently taxable. For example, a sale of a
principal residence may be a reportable sale even though the
transferor may be entitled to exclude the gain under section 121. But
see Exceptions on this page. Also, a transfer to a
corporation that qualifies for nonrecognition of gain under section
351 is a reportable exchange. In addition, a transfer under a land
contract is reportable in the year in which the parties enter into the
contract.
Ownership interest.
An ownership interest includes fee simple interests, life estates,
reversions, remainders, and perpetual easements. It also includes any
previously created rights to possession or use for all or part of any
particular year (e.g., a leasehold, easement, or timeshare), if such
rights have a remaining term of at least 30 years, including any
period for which the holder may renew such rights, determined on the
date of closing. For example, a preexisting leasehold on a building
with an original term of 99 years and a remaining term of 35 years on
the closing date is an ownership interest; however, if the remaining
term is 10 years, it is not an ownership interest. An ownership
interest does not include any option to acquire real
estate.
Involuntary conversion.
A sale of real estate under threat or imminence of seizure,
requisition, or condemnation is generally a reportable transaction.
Exceptions
The following is a list of transactions that are not
reportable. However, you may choose to report them; but if you
do, the return filed and the statement furnished to the transferor
must comply with the reporting rules.
- Sale or exchange of a principal residence (including stock
in a cooperative housing corporation) for $250,000 or less ($500,000
or less for married filing a joint return) and you received
an acceptable written assurance (certification) from the
seller. If there are joint sellers, you must obtain a certification
from each seller (whether married or not). The certification must be
signed by each seller under penalties of perjury. You must file and
furnish Form 1099-S for any seller who does not provide a
certification. The certification must include information to support
the conclusion that the full gain on the sale is excludable from the
seller's gross income.
You may get the certification any time on or before January 31 of
the year after the year of sale. You may rely on the certification and
not file or furnish Form 1099-S unless you know that any assurance on
the certification is incorrect.
You must retain the certification for 4 years after the year of
sale. You may retain the certification on paper, microfilm,
microfiche, or in an electronic storage system.
You are not required to obtain the certification. However, if you
do not obtain it, you must file and furnish Form 1099-S.
Rev. Proc. 98-20, 1998-1 C.B. 549, provides a sample acceptable
certification that you may use.
- Any transaction in which the transferor is a corporation (or
is considered to be a corporation under Regulations section
1.6045-4(d)(2)); a governmental unit, including a foreign government
or an international organization; or an exempt volume transferor.
Under this rule, if there are exempt and nonexempt transferors, you
must file Form 1099-S only for the nonexempt transferors.
An exempt volume transferor is someone who sold or
exchanged during the year, who expects to sell or exchange during the
year, or who sold or exchanged in either of the 2 previous years, at
least 25 separate items of reportable real estate to at least 25
separate transferees. In addition, each item of reportable real
estate must have been held, at the date of closing, or will be held,
primarily for sale or resale to customers in the ordinary course of a
trade or business. You are not required to report an exempt volume
transferor's transactions if you receive the penalties of perjury
certification required by Regulations section 1.6045-4(d)(3).
- Any transaction that is not a sale or exchange, including a
bequest, a gift (including a transaction treated as a gift under
section 1041), and a financing or refinancing that is not related to
the acquisition of real estate.
- A transfer in full or partial satisfaction of a debt secured
by the property. This includes a foreclosure, a transfer in lieu of
foreclosure, or an abandonment.
- A de minimis transfer for less than $600. A transaction is
de minimis if it can be determined with certainty that the total
money, services, and property received or to be received is less than
$600, as measured on the closing date. For example, if a contract for
sale provides for total consideration of $1.00 plus other valuable
consideration, the transfer is not a de minimis transfer unless
you can determine that the other valuable consideration is less
than $599, as measured on the closing date. The $600 rule applies to
the transaction as a whole, not separately to each transferor.
The following also are not reportable if the transaction
is not related to the sale or exchange of reportable real estate:
- An interest in crops or surface or subsurface natural
resources, that is, timber (see Timber Royalties below),
water, ores, and other natural deposits, whether or not such crops or
natural resources are severed from the land.
- A burial plot or vault.
- A manufactured structure used as a dwelling that is
manufactured and assembled at a location different from that where it
is used, but only if such structure is not affixed, on the closing
date, to a foundation. This exception applies to an unaffixed mobile
home.
Timber Royalties
Report on Form 1099-S payments of timber royalties made under a
pay-as-cut contract, reportable under section 6050N. For more
information, see Announcement 90-129, 1990-48 I.R.B. 10.
Gross Proceeds
See Box 2. Gross Proceeds on page S-3.
Who Must File
Generally, the person responsible for closing the transaction, as
explained in 1 below, is required to file Form 1099-S. If
no one is responsible for closing, the person required to file Form
1099-S is explained in 2 below. However, you may designate
the person required to file Form 1099-S in a written agreement, as
explained under 3 below.
- If you are the person responsible for closing the
transaction, you must file Form 1099-S. If a Uniform Settlement
Statement, prescribed under the Real Estate Settlement Procedures Act
of 1974 (RESPA), is used, the person responsible for closing is the
person listed as the settlement agent on that statement. A Uniform
Settlement Statement includes any amendments, variations, or
substitutions that may be prescribed under RESPA if any such form
requires disclosure of the transferor and transferee, the application
of the proceeds, and the name of the settlement agent or other person
responsible for preparing the settlement statement.
If a Uniform Settlement Statement is not used, or no settlement
agent is listed, the person responsible for closing is the person who
prepares the closing statement, including a settlement statement or
other written document that identifies the transferor, transferee, and
real estate transferred, and that describes how the proceeds are to be
disbursed.
If no closing statement is used, or if two or more statements are
used, the person responsible for closing is, in the following order:
(a) the transferee's attorney if the attorney is present at
the delivery of either the transferee's note or a significant part of
the cash proceeds to the transferor or if the attorney prepares or
reviews the preparation of the documents transferring legal or
equitable ownership; (b) the transferor's attorney if the
attorney is present at the delivery of either the transferee's note or
a significant part of the cash proceeds to the transferor or if the
attorney prepares or reviews the preparation of the documents
transferring legal or equitable ownership; or (c) the
disbursing title or escrow company that is most significant in
disbursing gross proceeds. If there is more than one attorney
described in (a) or (b), the one whose
involvement is most significant is the person responsible for filing.
- If no one is responsible for closing the transaction as
explained in 1 above, the person responsible for filing is,
in the following order: (a) the mortgage lender, (b)
the transferor's broker, (c) the transferee's broker, or
(d) the transferee.
For purposes of 2 above, apply the following
definitions:
- Mortgage lender means a person who lends new
funds in connection with the transaction, but only if the loan is at
least partially secured by the real estate. If there is more than one
lender, the one who lends the most new funds is the mortgage lender.
If several lenders advance equal amounts of new funds, and no other
person advances a greater amount of new funds, the mortgage lender is
the one who has the security interest that is most senior in priority.
Amounts advanced by the transferor are not treated as new
funds.
- Transferor's broker means the broker who
contracts with the transferor and who is compensated for the
transaction.
- Transferee's broker means the broker who
significantly participates in the preparation of the offer to acquire
the property or who presents such offer to the transferor. If there is
more than one such person, the transferee's broker is the one who most
significantly participates in the preparation of the acquisition
offer. If there is no such person, the one who most significantly
participates in the presentation of the offer is the transferee's
broker.
- Transferee means the person who acquires the
greatest interest in the property. If no one acquires the greatest
interest, the transferee is the person listed first on the ownership
transfer documents.
- Designation agreement.
You can enter into a
written agreement at or before closing to designate who must file Form
1099-S for the transaction. The agreement will identify the person
responsible for filing if such designated person signs the agreement.
It is not necessary that all parties to the transaction (or that more
than one party) enter into the agreement.
You may be designated in the agreement as the person who must file
if you are the person responsible for closing (as explained in 1
above), the transferee's or transferor's attorney (as explained
in 1 above), a title or escrow company that is most
significant in terms of the gross proceeds disbursed, or the mortgage
lender (as explained in 2a above).
The designation agreement may be in any written form and may be
included on the closing statement. It must identify by name and
address the person designated as responsible for filing; it must
include the names and addresses of each person entering into the
agreement; it must be signed and dated by all persons entering into
the agreement; it must include the names and addresses of the
transferor and transferee; and it must include the address and any
other information necessary to identify the property. Each person who
signs the agreement must retain it for 4 years.
For each transaction, be sure that only one person is responsible
for filing and that only one Form 1099-S is filed for each transferor.
Employees, Agents, and Partners
If an employee, agent, or partner, acting within the scope of such
person's employment, agency, or partnership, participates in a real
estate transaction, only the employer, principal, or partnership (not
the employee, agent, or partner) may be the reporting person.
However, the participation of a person listed on the Uniform
Settlement Statement as the settlement agent acting as an agent of
another is not attributed to the principal.
Foreign Transferors
Sales or exchanges involving foreign transferors are reportable on
Form 1099-S. For information on the transferee's responsibility to
withhold income tax when a U.S. real property interest is acquired
from a foreign person, see Pub. 515, Withholding of Tax on
Nonresident Aliens and Foreign Entities, and Form 8288,
U.S. Withholding Tax Return for Dispositions by Foreign Persons
of U.S. Real Property Interests.
Multiple Transferors
For multiple transferors of the same real estate, you must file a
separate Form 1099-S for each transferor. At or before closing, you
must request from the transferors an allocation of the gross proceeds
among the transferors. The request and the response are not required
to be in writing. You must make a reasonable effort to contact all
transferors of whom you have knowledge. However, you may rely on the
unchallenged response of any transferor, and you need not make
additional contacts with other transferors after at least one complete
allocation is received (100% of gross proceeds, whether or not
received in a single response). If you receive the allocation, report
gross proceeds on each Form 1099-S accordingly.
You are not required to, but you may, report gross proceeds in
accordance with an allocation received after the closing date but
before the due date of Form 1099-S (without extensions). However, you
cannot report gross proceeds in accordance with an allocation received
on or after the due date of Form 1099-S (without extensions).
If no gross proceeds are allocated to a transferor because no
allocation or an incomplete allocation is received, you must report
the total unallocated gross proceeds on the Form 1099-S made for that
transferor. If you do not receive any allocation or you receive
conflicting allocations, report on each transferor's Form 1099-S the
total unallocated gross proceeds.
Husband and wife.
If the transferors were husband and wife at the time of closing,
who held the property as joint tenants, tenants by the entirety,
tenants in common, or as community property, treat them as a single
transferor. Only one Form 1099-S showing either of them as the
transferor is required. You need not request an allocation of gross
proceeds if husband and wife are the only transferors. But if you
receive an uncontested allocation of gross proceeds from them, file
Form 1099-S for each spouse according to the allocation. If there are
other transferors, you must make a reasonable effort to contact either
the husband or wife to request an allocation.
Partnerships.
If the property is transferred by a partnership, file only one Form
1099-S for the partnership, not separate Forms 1099-S for each
partner.
Multiple Assets Sold
If real estate is sold or exchanged and other assets are sold or
exchanged in the same transaction, report the total gross proceeds
from the entire transaction on Form 1099-S.
Taxpayer Identification Numbers (TINs)
You must request the transferor's TIN no later than the time of
closing. The TIN request need not be made in a separate mailing.
Rather, it may be made in person or in a mailing that includes other
items. The transferor is required to furnish his or her TIN and to
certify that the TIN is correct.
For U.S. persons (including U.S. resident aliens), you may request
a TIN on Form W-9, Request for Taxpayer Identification
Number and Certification. Alternatively, you may provide a written
statement to the transferor similar to the following: You are
required by law to provide (insert name of person responsible for
filing) with your correct taxpayer identification number. If you do
not provide (insert name of person responsible for filing) with your
correct taxpayer identification number, you may be subject to civil or
criminal penalties imposed by law. The solicitation must contain
space for the name, address, and TIN of the transferor, and a place to
certify under penalties of perjury that the TIN furnished is the
correct TIN of the transferor. The certification must read similar to:
Under penalties of perjury, I certify that the number shown on this
statement is my correct taxpayer identification number. If you use
a Uniform Settlement Statement (under RESPA), you may provide a copy
of such statement, appropriately modified to solicit the TIN, to the
transferor. Keep the Form W-9 or substitute form in your records for 4
years.
Foreign persons must provide their TIN to you on the appropriate
Form W-8. See part F of the General Instrucitons for
Forms 1099, 1098, 5498, and W-2G.
Separate Charge Prohibited
You may not charge your customers a separate fee for complying with
the Form 1099-S filing requirements. However, you may take into
account the cost of filing the form in setting the fees you charge
your customers for services in a real estate transaction.
Statements to Transferors
If you are required to file Form 1099-S, you must provide a
statement to the transferor. Furnish a copy of Form 1099-S or an
acceptable substitute statement to each transferor. For more
information about the requirement to furnish a statement to the
transferor, see part H in the General Instructions for
Forms 1099, 1098, 5498, and W-2G.
Filer's Name and Address Box
Enter the name and address of the person who is filing Form 1099-S.
This information must be the same as the filer information reported on
Form 1096.
Transferor's Name and Address Box
Enter the name and address of the seller or other transferor of the
real estate. If a husband and wife are joint sellers, it is only
necessary to enter one name and the TIN for that person on the form.
Box 1. Date of Closing
Enter the closing date. On a Uniform Settlement Statement (under
RESPA), the closing date is the settlement date. If a Uniform
Settlement Statement is not used, the closing date is the earlier of
the date title transfers or the date the economic burdens and benefits
of ownership shift to the transferee.
Box 2. Gross Proceeds
Enter the gross proceeds from the sale or exchange of real estate.
Gross proceeds means any cash received or to be received for the real
property by or on behalf of the transferor, including the stated
principal amount of a note payable to or for the benefit of the
transferor and including a note or mortgage paid off at settlement. If
the transferee assumes a liability of the transferor or takes the
property subject to a liability, such liability is treated as cash and
is includible as part of gross proceeds. For a contingent payment
transaction, include the maximum determinable proceeds. Also see
Multiple Assets Sold above.
If you are reporting a like-kind exchange of property
for which no gross proceeds are reportable, enter 0 (zero) in box 2
and mark the checkbox in box 4.
Gross proceeds do not include the value of property or services
received or to be received by, or on behalf of, the transferor or
separately stated cash received for personal property, such as
draperies, carpeting, or a washer and dryer.
Do not reduce gross proceeds by any expenses paid by the
transferor, such as sales commissions, deed preparation, advertising,
and legal expenses. If a Uniform Settlement Statement (under RESPA) is
used for a transfer of real estate for cash and notes only, gross
proceeds generally will be the contract sales price shown on that
statement. If other property or services were exchanged, see Box
4. Check Here if the Transferor Received or Will Receive Property or
Services as Part of the Consideration below.
Contingent payment transaction.
A contingent payment transaction is one in which the receipt, by or
on behalf of the transferor, is subject to a contingency. The maximum
determinable proceeds means the greatest amount of gross proceeds
possible if all the contingencies are satisfied. If the maximum
amount of gross proceeds cannot be determined with certainty, the
maximum determinable proceeds are the greatest amount that can be
determined with certainty.
Box 3. Address or Legal Description (Including City, State, and ZIP Code)
Enter the address of the property, including the city, state, and
ZIP code. If the address does not sufficiently identify the property,
also enter a legal description, such as section, lot, and block. For
timber royalties, enter Timber.
Box 4. Check Here if the Transferor Received or Will Receive Property or Services as Part of the Consideration
If the transferor received or will receive property
(other than cash and consideration treated as cash in computing
gross proceeds) or services as part of the consideration
for the property, enter an X in the checkbox in box 4.
Box 5. Buyer's Part of Real Estate Tax
For a real estate transaction involving a residence, enter the real
estate tax paid in advance that is allocable to the buyer. You do not
have to report an amount as allocable to the buyer for real estate
taxes paid in arrears. You may use the appropriate information
included on the HUD-1, or comparable form, provided at closing. For
example, a residence is sold in a county where the real estate tax is
paid annually in advance. The seller paid real estate taxes of $1,200
for the year in which the sale took place. The sale occurred at the
end of the 9th month of the real estate tax year. Therefore, $300 of
the tax paid in advance is allocated to the buyer, by reference to the
amount of real estate tax shown on the HUD-1 as paid by the seller in
advance, and is reported in box 5. See Notice 93-4, 1993-1 C.B. 295.
You are not required to indicate on Form 1099-S that the
transferor's (seller's) financing was Federally subsidized. Also, you
are not required to enter the following:
- Both total gross proceeds and the allocated
gross proceeds for a multiple transferor transaction (enter either one
or the other);
- An indication that the transferor may receive property
or services for an obligation having a stated principal amount; or
- An indication that, in connection with a contingent
payment transaction, the transferor may receive gross proceeds that
cannot be determined with certainty under the regulations and is not
included in gross proceeds.
First
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