File Form 1099-CAP with the IRS by March 1, 2004 (March 31, 2004, if filed electronically); file the statement to shareholders by February 2, 2004 (March 1, 2004, if filed by a broker).

A domestic corporation that undergoes a transaction covered by the temporary regulations is required to report to shareholders the fair market value (FMV) of any stock and other consideration received by the shareholders in the transaction. Transactions involving the acquisition of control within an affiliated group or involving stock valued at less than $100 million are not required to be reported. The corporation is also required to file Form 8806, Statement of Acquisition of Control or Change in Capital Structure, with its income tax return describing these transactions. See Temporary Regulations section 1.6043-4T(a) for more information. Corporations undergoing transactions covered under Temporary Regulations section 1.6043-4T that have properly reported the transactions in accordance with sections 351, 355, 368, or 6043(a) are not required to file Form 8806. However, corporations are still subject to the Form 1099-CAP filing requirements. Corporations that must report such transactions under section 6043(a) are not required to file Form 8806 or Forms 1099-CAP, provided the corporation properly reports the transaction under section 6043(a). Corporations do not need to file Form 1099-CAP, if information returns are required to report these amounts under sections 6042 (Form 1099-DIV) or 6045 (Form 1099-B), unless the corporation knows that such returns were not filed.

Exempt Recipients

The corporation is not required to file Form 1099-CAP for the following shareholders:

• Any shareholder who receives only stock for its stock in the corporation if the corporation reasonably determines that the shareholder is not required to recognize gain (if any) from the receipt of such stock for U.S. Federal tax purposes.
• Any shareholder whose amount of cash plus the FMV of any stock and other property does not exceed $1,000.
• Any one of the following:
  1. A tax-exempt organization;
  2. An individual retirement account (IRA);
  3. The U.S. government or state;
  4. A foreign government, an international organization, or a foreign central bank;
  5. A real estate investment trust (REIT);
  6. A regulated investment trust (RIC);
  7. A common trust fund; or
  8. A corporation defined in section 7701(a)(3), except for a corporation that is a broker or the record holder of stock for the actual owner.
• Any foreign person who the corporation associates with a valid Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, or other documentation upon which the corporation relies in order to treat the shareholder as a foreign beneficial owner or foreign payee. See Regulations section 1.6049-5(c) for more information.

Corporations are not relieved of their withholding obligations on nonresident aliens under section 1441 except for a corporation that is a broker or the record holder of stock for the actual owner.

An acquisition of control of a corporation (first corporation) occurs if, in a transaction or series of related transactions, either:

For these purposes, control is defined as the ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote, or a least 50 percent of the total value of shares of all classes of stock.

See Temporary Regulations section 1.6043-4T(c) for details and special rules with respect to constructive ownership of stock.

A change in capital structure occurs if a corporation takes part in one or more of the following transactions:

The penalties under section 6652(l) for failure to file information returns under section 6043(c) apply. For purposes of the 6652(l) penalty, Form 8806 and Forms 1099-CAP required to be filed are treated as one return. Thus, the penalty will not exceed $500 for each day the failure continues, up to a maximum of $100,000, for any acquisition of control or any substantial change in capital structure. If a corporation (transferor) transfers all or substantially all of its assets to another entity (transferee) and is required to file Form 1099-CAP, the transferor must satisfy the reporting requirements. If the transferor fails to file Form 1099-CAP, then the transferee must meet the filing requirements. If the filing requirements are not met by either the transferor or transferee, then both are jointly and severally liable for the applicable penalties.

Failure to file Forms 1099-CAP also includes the requirement to file on magnetic media or electronically. For more information on penalties under section 6011 and its regulations, see the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G.

If required to file Form 1099-CAP, you must provide a statement to the shareholder. For more information about the requirement to furnish a statement to the shareholder, see part H in the General Instructions for Forms 1099, 1098, 5498, and W-2G.

Generally, this will be the reporting corporation's information and employer identification number (EIN). However, brokers who are furnishing the actual owner with the required statement must enter their own name and TIN, not that of the corporation. Brokers must enter the reporting corporation's information in Box 10.

You will not be subject to penalties under section 6652(l) if you are a broker and check the box (see Who Must File on CAP-1).

If you are a broker, you may enter an “X” in this box if you were notified by the IRS twice within 3 calendar years that the payee provided an incorrect taxpayer identification number (TIN). If you check this box, the IRS will not send you any further notices about this account.

This box must be checked if the reporting corporation reasonably determines that the exchange is part of a transaction described in section 367(a) for which shareholders are required to recognize gain (if any) but are not allowed to claim a loss.

Enter the trade date of the sale or exchange, actually or constructively received.

If you are a broker, enter the CUSIP (Committee on Uniform Security Identification Procedures) number of the obligation.

Enter the amount of cash received in exchange for the number of shares exchanged in the reporting corporation. To determine the cash received amount, you may take into account commissions and option premiums if this treatment is consistent with your books. You may not take into account state and local transfer taxes. Check the applicable box to indicate which amount has been reported to the IRS.

If you are a broker, enter backup withholding. For example, persons who have not furnished their TIN to you in the manner required are subject to withholding at a 30% rate on certain amounts required to be reported on this form. See Form W-9, Request for Taxpayer Identification Number and Certification, for information on backup withholding.

Enter the number of shares the shareholder exchanged in the reporting corporation for cash or other property received.

Enter the class of stock (e.g., preferred, common, etc.) exchanged in the reporting corporation for cash or other property received. Abbreviate the class to fit the entry. For example, you may enter “C” for common stock, “P” for preferred, or “O” for other. Also, abbreviate any subclasses.

Enter the FMV of any stock provided to the shareholder in exchange for the reporting corporation's stock if the reporting corporation reasonably determines that the shareholder would be required to recognize gain (if any) on the receipt of the stock.

Enter the FMV of any property (other than stock) provided to the shareholder in exchange for the reporting corporation's stock.

If you are a broker, enter the name and EIN of the reporting corporation. If necessary, abbreviate the name so that it fits within Box 10.