Guide to Tax Form 1099 – CAP

The Internal Revenue Service (IRS), also known as information returns, uses 1099 forms to report different types of income This article will give you all the details you need to navigate Form 1099-CAP and confidently file your taxes this This article will give you all the details you need to navigate Form 1099-CAP and confidently file your taxes this season.

At a glance:

Corporations send a 1099-CAP when they experience changes in structure, such as mergers or acquisitions.

• If you received any cash, stock, or property as a shareholder due to these changes, you might get Form 1099-CAP.
• Any gains from this situation must be reported on your tax return.
• What is a 1099-CAP?

Corporations send out IRS Form 1099-CAP, Changes in Corporate Control and Capital Structure, to filers and the IRS when they experience significant structure changes. You will receive Form 1099-CAP if you own stock in a corporation that has undergone such changes, like a merger or acquisition, and you received cash, stock, or other property because of this change.

Essentially, the 1099-CAP form is your official notice that the corporation’s capital structure has shifted. As a shareholder, that might have implications for your investments, such as a gain or loss.

What counts as a substantial change in capital structure?

The IRS recognizes a change in capital structure when:

The corporation provides $100 million or more in cash or other property to shareholders, and it merges, consolidates, or transfers all or substantially all its assets to another corporation.

• The corporation transfers all or part of its assets to another corporation in bankruptcy proceedings, including distributing its stock or securities.
• The corporation changes its identity, form, or place of organization, and the corporation or any of its shareholders must recognize gain under Internal Revenue Code 367(a) because of the transaction.
• Exempt shareholders

The corporation does not have to send you Form 1099-CAP if you are an exempt shareholder. You are exempt if:

You receive stock in an exchange that is not subject to gain recognition in section 367(a) and the regulations.

• Your amount of cash plus the fair market value (FMV) of any stock and other property does not exceed $1,000.
• You provide the corporation with a properly completed exemption certificate.
• You are a foreign individual with whom the corporation associated with a valid Form W-8BEN.
• Additionally, the following entities are exempt from being required to file a Form 1099-CAP:

Corporations (except S corporations)

1. Tax-exempt organizations
2. Individual retirement accounts (IRAs)
3. The U.S. government or a state
4. Foreign governments, international organizations, or a foreign central bank of issue
5. Real estate investment trusts (REITs)
6. Regulated investment companies (RICs)
7. Securities or commodities dealers
8. Entities registered under the Investment Company Act of 1940
9. Common trust funds
10. Financial institutions such as banks, credit unions, or similar
11. Example of Form 1099-CAP

Let’s look at a 1099-CAP example. This is what the 1099-CAP looks like:

On the form, you will see the name You’ll also see your information and TIN, which is often your Social Security number.

To the right, there are several boxes with key information:

Box 1: Date of sale or exchange:

• The date the stock was exchanged for cash, stock, or other property.Box 2: Aggregate amount rec’d:
• The amount of cash and the fair market value of any stock (or other property) you received in exchange for the stock you held.Box 3: No. of shares exchanged
• : The total number of shares you owned that were exchanged.Box 4: Classes of stock exchanged:
• This tells you what kind of stock was exchanged. You might see “C” for common stock, “P” for preferred stock, or “O” for other.Form 1099-CAP instructions

Here’s what you should do if you receive a 1099-CAP form:

Review the form:

1. Make sure all the information is correct. Double-check the share details and FMV listed. If anything looks off, contact the issuer immediately.Determine
2. your taxable income: Not every entry on Form 1099-CAP will lead to taxable income. It depends on the corporate action and whether it results in a gain or loss. If you e-file, TaxAct(r), our software can help you determine where to report your 1099 Losses can be used as a way to offset other gains and income. In the next section, we will discuss this topic in greater detail. It’s best to double-check. Forms can get lost in the shuffle. Here’s how you can use Form 1099 CAP with TaxAct. They may then automatically transfer to Schedule D or Form 8949. You have several options:1. You can import your brokerage’s data electronically:
3. 2. Enter each Form 1099 B manually in your tax return:3. CSV import from your brokerage:

4. Stock Assistant can be used to enter multiple transactions at the same time:

5. Entering information from Form 8949 if you received this tax statement:

You must enter the property description, date acquired, cost or other basis, date sold, sales proceeds, and any federal income tax withheld. If you received a 1099-B, it may or may not have reported the date acquired or cost basis. Capital Gains and Losses FAQ – Various purchase dates can help you if there are multiple purchase dates. Understanding your Form 1099 and what to do is a good first step. And remember, TaxAct is always here to help you navigate filing your 1099 forms with confidence.

For more detailed information about Form 1099-CAP, head to the IRS website or TaxAct’s 1099-CAP support page.

This article is for informational purposes only and not legal or financial advice.

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