Form 1099-CAP, “Changes in Corporate Control and Capital Structure,” is an IRS information return. It is used when shareholders receive cash, stock, or other property due to major corporate actions. These actions include a change in control of a corporation or a substantial change in the capital structure such as mergers, acquisitions, or recapitalizations. The form reports the value of cash, stock, or other property received by shareholders and the number of shares exchanged.
Who Must File Form 1099-CAP?
The corporation undergoing the change in control or capital structure is responsible for filing Form 1099-CAP. If shareholders receive distributions, the corporation must issue the form to them. In some cases, brokers or intermediaries may also have filing obligations if they handled the exchange of shares.
Filing Deadlines
Form 1099-CAP must be provided to shareholders by January 31 of the year following the transaction. The form must be filed with the IRS by February 28 if filed on paper or by March 31 if filed electronically. Meeting these deadlines is important to avoid penalties and ensure shareholders have the information needed to correctly report gains or losses on their tax returns.
Why Form 1099-CAP Matters
Form 1099-CAP ensures that the IRS can track taxable gains or losses when shareholders exchange stock for cash or other property. Shareholders use this information to report capital gains or losses on their individual tax returns.
Example Scenario
If Company A merges with Company B and shareholders of Company A receive both cash and shares of Company B in exchange for their original stock, Company A would issue Form 1099-CAP to those shareholders.
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