What Is Form 1099-CAP?

IRS Form 1099-CAP (Changes in Corporate Control and Capital Structure) is one of a series of “1099” forms used to report nonemployee payments and transactions. Corporations use Form 1099-CAP to report to the Internal Revenue Service (IRS) a substantial change in control or capital structure. A 1099-CAP is furnished to shareholders who receive cash, stock, or other property from an acquisition of control or a significant change in capital structure.

Key Takeaways

  • Corporations report a change in control or a substantial change in capital structure using IRS Form 1099-CAP.
  • Shareholders who receive a 1099-CAP may be required to recognize gains from the receipt of cash, stock, or other property that was exchanged for the company’s stock.
  • If you do have a gain from the exchange, report it on IRS Form 8949 when you file your income tax return.       

Who Needs Form 1099-CAP?

If you own stock in a corporation that undergoes a significant change in control or capital structure—and you received cash, stock, or other property as a result—the company will send you Copy B of the 1099-CAP form. 

Form 1099-CAP must be filed by Jan. 31 of the year following the change in control or capital structure.

What Is Form 1099-CAP Used For?

Corporations use Form 1099-CAP to report changes in control or capital structure. According to the IRS, a substantial change in capital structure occurs if:

  • The total amount of cash or other property given to shareholders is at least $100 million and the corporation merges, consolidates, transfers assets to, or otherwise combines with another corporation.
  • The corporation transfers all or part of its assets to another corporation under bankruptcy proceedings.
  • The corporation changes its identity, form, or place of organization.
  • The corporation or any of its shareholders is required to recognize gains under Internal Revenue Code 367(a) as the result of the transaction. 

The corporation doesn’t have to file Form 1099-CAP with shareholders who are exempt, which includes those who:

  • Receive stock in an exchange that isn’t subject to gain recognition under section 367(a)
  • Receive less than $1,000 in cash and the fair market value of any stock or property
  • Provide the corporation with an exemption certification

The exempt group also includes those who are one of the following:

  • A corporation, except a subchapter S corporation
  • A tax-exempt organization
  • An individual retirement account (IRA)
  • The U.S. government or a state
  • A foreign government, an international organization, or a foreign central bank of issue
  • A real estate investment trust (REIT)
  • A regulated investment company (RIC)
  • A securities or commodities dealer
  • An entity registered under the Investment Company Act of 1940
  • A common trust fund
  • A financial institution such as a bank or credit union
  • A foreign individual whom the corporation associates with a valid IRS Form W-8BEN (Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting) 

How to Read Form 1099-CAP

Here's a quick rundown of the 1099-CAP form:

The left side of the form includes details about the corporation and shareholder, including names, addresses, tax identification numbers, and the associated account number. The right side of the form has five boxes:

  • Box 1: Date of sale or exchange. Box 1 shows the date the stock was exchanged for cash, stock, or other property.
  • Box 2: Aggregate amount rec’d. Box 2 shows the amount of any 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. Box 3 shows the number of shares of the company’s stock you held that were exchanged in the transaction.
  • Box 4: Classes of stock exchanged. Shows the class or classes of stock that were exchanged. The class may be abbreviated (e.g., “C” for common stock, “P” for preferred stock, or “O” for other).
  • Box 5: Blank
1099-CAP Form

All copies of Form 1099-CAP are available on the IRS website.

Where to Get Form 1099-CAP

If you own stock in a corporation that undergoes a significant change in control or capital structure—and you received cash, stock, or other property as a result—the company will send you Copy B of the 1099-CAP form.

Where to Mail Form 1099-CAP

There are three copies of the 1099-CAP. When a corporation files Form 1099-CAP, the IRS receives Copy, A, the shareholder gets Copy B, and the corporation retains Copy C. As a shareholder, you do not need to submit form 1099-CAP when you file your tax return. However, you will use the information to report gains on IRS Form 8949 (Sales and Other Dispositions of Capital Assets).