Form 1099-CAP: Changes in Corporate Control and Capital Structure

A 1099-CAP is an IRS tax information form used by corporations to report significant changes to their ownership or financial makeup. It reports instances where shareholders receive cash, stock, or other property due to:

  1. A change in control (acquisition) of the corporation.
  2. A substantial change in the corporation's capital structure.

When is a 1099-CAP Issued?

The IRS defines a "substantial change in capital structure" as any of the following:

A. The total value of cash or other property distributed to shareholders is at least $100 million and the corporation:

  1. Merges, consolidates, or combines assets with another corporation.
  2. Transfers all or part of its assets to another corporation under bankruptcy proceedings.

B. The corporation undergoes a significant change in its identity, form, or place of organization.

By January 31st of the following year, the corporation must send you a 1099-CAP if they believe you may need to report a gain on your taxes due to the exchange of your shares for cash, stock, or other property.

What Information Does a 1099-CAP Include?

The 1099-CAP form provides key details about the transaction, including:

A. Date of Sale or Exchange: This indicates the date the change in control or capital structure occurred.

B. Aggregate Amount Received: This is the total value of cash, stock, or other property you received in exchange for your shares.

C. Number of Shares Exchanged: This specifies the number of shares you surrendered in the transaction.

D. Classes of Stock Exchanged: This identifies the type(s) of stock you exchanged.

Important Note: You cannot claim a loss on your taxes based on the amount shown in Box 2 (Aggregate Amount Received) of the 10949-CAP.

How to Use Form 1099-CAP?

  • Recordkeeping: Keep the form for your tax records.
  • Tax Implications: You may need to report any gains from the transaction on Form 8949.
  • Loss Reporting: Form 1099-CAP does not allow claiming losses on the exchange.
  • Further Guidance: Refer to IRS Publication 550 (Tax Guide for Individuals) for detailed instructions on reporting capital gains and losses.
  • Deadline: Corporations must send Form 1099-CAP to shareholders by January 31st of the year following the change.