1.6045-1—Returns of information of brokers and barter exchanges.
(1)
The term broker means any person (other than a person who is required to report a transaction under section 6043 ), U.S. or foreign, that, in the ordinary course of a trade or business during the calendar year, stands ready to effect sales to be made by others. A broker includes an obligor that regularly issues and retires its own debt obligations or a corporation that regularly redeems its own stock. However, with respect to a sale (including a redemption or retirement) effected at an office outside the United States, a broker includes only a person described as a U.S. payor or U.S. middleman in § 1.6049-5(c)(5). In addition, a broker does not include an international organization described in § 1.6049-4(c)(1)(ii)(G) that redeems or retires an obligation of which it is the issuer.
(2)
The term customer means, with respect to a sale effected by a broker, the person (other than such broker) that makes the sale, if the broker acts as:
(iii)
The participant in the sale responsible for paying to such person or crediting to such person's account the gross proceeds on the sale.
(v)
An interest in or right to purchase any of the foregoing in connection with the issuance thereof from the issuer or an agent of the issuer or from an underwriter that purchases any of the foregoing from the issuer, or
(vi)
An interest in a security described in paragraph (a)(3) (i) or (iv) (but not including options or executory contracts that require delivery of such type of security).
(4)
The term barter exchange means any person with members or clients that contract either with each other or with such person to trade or barter property or services either directly or through such person. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.
(i)
Any type of personal property or an interest therein (other than securities as defined in paragraph (a)(3)) the trading of regulated futures contracts in which has been approved by the Commodity Futures Trading Commission;
(iii)
Any other personal property or an interest therein that is of a type the Secretary determines is to be treated as a “commodity” under this section, from and after the date specified in a notice of such determination published in the Federal Register.
(6)
The term regulated futures contract means a regulated futures contract within the meaning of section 1256(b).
(i)
An executory contract that requires delivery of a commodity in exchange for cash and which contract is not a regulated futures contract; or
(ii)
An executory contract that requires delivery of personal property or an interest therein in exchange for cash, or a cash settlement contract, if such executory contract or cash settlement contract is of a type the Secretary determines is to be treated as a “forward contract” under this section, from and after the date specified in a notice of such determination published in the Federal Register.
(8)
The term closing transaction means any termination of an obligation under a forward contract or a regulated futures contract.
(9)
The term sale means any disposition of securities, commodities, regulated futures contracts, or forward contracts, and includes redemptions of stock, retirements of indebtedness, and enterings into short sales, but only to the extent any of these actions are conducted for cash. In the case of a regulated futures contract or a forward contract, a sale is any closing transaction. When a closing transaction in a regulated futures contract involves making or taking delivery, the profit or loss on the contract is a sale and the delivery is a separate sale. When a closing transaction in a forward contract involves making or taking delivery, the delivery is a sale without separating the profit or loss on the contract from the profit or loss on the delivery, except that taking delivery for United States dollars is not a sale. Grants or purchases of options, exercises of call options, and enterings into contracts that require delivery of personal property or an interest therein are not sales. For purposes of this section only, a constructive sale under section 1259 and a mark to fair market value under sections 475 or 1296 are not sales.
(i)
An agent for a party in the sale wherein the nature of the agency is such that the agent ordinarily would know the gross proceeds from the sale; or
Acting as an agent or principal with respect to grants or purchases of options, exercises of call options, or enterings into contracts that require delivery of personal property or an interest therein is not of itself effecting a sale. A broker that has on its books a forward contract under which delivery is made effects such delivery.
(14)
The term specified security means any share of stock (or any interest treated as stock, including, for example, an American Depositary Receipt) in an entity organized as, or treated for Federal tax purposes as, a corporation (foreign or domestic). Solely for purposes of this paragraph (a)(14), a security classified as stock by the issuer is treated as stock. If the issuer has not classified the security, the security is not treated as stock unless the broker knows that the security is reasonably classified as stock under general Federal tax principles.
(i) In general.
Except as provided in paragraph (a)(15)(iv) of this section, the following securities are covered securities:
(A)
A specified security acquired for cash in an account on or after January 1, 2011, except stock for which the average basis method is available under § 1.1012-1(e).
(B)
Stock for which the average basis method is available under § 1.1012-1(e) acquired for cash in an account on or after January 1, 2012.
(C)
A specified security transferred to an account if the broker or other custodian of the account receives a transfer statement (as described in § 1.6045A- 1) reporting the security as a covered security.
(ii) Acquired in an account.
For purposes of this paragraph (a)(15), a security is considered acquired in a customer's account at a broker or custodian if the security is acquired by the customer's broker or custodian or acquired by another broker and delivered to the customer's broker or custodian.
(iii) Corporate actions and other events.
For purposes of this paragraph (a)(15), a security acquired due to a stock dividend, stock split, reorganization, redemption, stock conversion, recapitalization, corporate division, or other similar action is considered acquired for cash in an account.
(iv) Exceptions.
Notwithstanding paragraph (a)(15)(i) of this section, the following securities are not covered securities:
(A)
Stock acquired in 2011 that is transferred to a dividend reinvestment plan (as described in § 1.1012-1(e)(6)) in 2011. However, a covered security acquired in 2011 that is transferred to a dividend reinvestment plan after 2011 remains a covered security.
(B)
A security acquired through an event described in paragraph (a)(15)(iii) of this section if the basis of the acquired security is determined from the basis of a noncovered security.
(C)
A security that is excepted at the time of its acquisition from reporting under paragraph (c)(3) or (g) of this section. However, a broker cannot treat a security as acquired by an exempt foreign person under paragraph (g)(1)(i) of this section at the time of acquisition if, at that time, the broker knows or should have known (including by reason of information that the broker is required to collect under section 1471 or 1472) that the customer is not a foreign person.
(D)
A security for which reporting under this section is required by § 1.6049-5(d)(3)(ii) (certain securities owned by a foreign intermediary or flow-through entity).
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
224
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
(c) Reporting by brokers—
(1) Requirement of reporting.
Any broker shall, except as otherwise provided, report in the manner prescribed in this section.
(2) Sales required to be reported.
Except as provided in paragraphs (c)(3), (c)(5), and (g) of this section, a broker is required to make a return of information for each sale by a customer of the broker if, in the ordinary course of a trade or business in which the broker stands ready to effect sales to be made by others, the broker effects the sale or closes the short position opened by the sale.
(A) In general.
No return of information is required with respect to a sale effected for a customer that is an exempt recipient under paragraph (c)(3)(i)(B) of this section.
(1) A corporation as defined in section 7701(a)(3), whether domestic or foreign, except that this exclusion does not apply to sales of covered securities acquired on or after January 1, 2012, by an S corporation as defined in section 1361(a) ;
(2) An organization exempt from taxation under section 501(a) or an individual retirement plan;
(3) The United States or a State, the District of Columbia, a possession of the United States, a political subdivision of any of the foregoing, a wholly owned agency or instrumentality of any one or more of the foregoing, or a pool or partnership composed exclusively of any of the foregoing;
(4) A foreign government, a political subdivision thereof, an international organization, or any wholly owned agency or instrumentality of the foregoing;
(5) A foreign central bank of issue as defined in § 1.895-1(b)(1) (i.e., a bank that is by law or government sanction the principal authority, other than the government itself, issuing instruments intended to circulate as currency);
(6) A dealer in securities or commodities registered as such under the laws of the United States or a State;
(7) A futures commission merchant registered as such with the Commodity Futures Trading Commission;
(8) A real estate investment trust (as defined in section 856 );
(9) An entity registered at all times during the taxable year under the Investment Company Act of 1940 (15 U.S.C. 80a-1, et seq. );
(10) A common trust fund (as defined in section 584(a) ); or
(11) A financial institution such as a bank, mutual savings bank, savings and loan association, building and loan association, cooperative bank, homestead association, credit union, industrial loan association or bank, or other similar organization.
(C) Exemption certificate—
(1) In general. Except as provided in paragraph (c)(3)(i)(C)(2) of this section, a broker may treat a person described in paragraph (c)(3)(i)(B) of this section as an exempt recipient based on a properly completed exemption certificate (as provided in § 31.3406(h)-3 of this chapter ); the broker's actual knowledge that the customer is a person described in paragraph (c)(3)(i)(B) of this section; or the applicable indicators described in § 1.6049-4(c)(1)(ii)(A) through (M). A broker may require an exempt recipient to file a properly completed exemption certificate and may treat an exempt recipient that fails to do so as a recipient that is not exempt.
(2) Limitation for corporate customers. For sales of covered securities acquired on or after January 1, 2012, a broker may not treat a customer as an exempt recipient described in paragraph (c)(3)(i)(B)(1) of this section based on the indicators of corporate status described in § 1.6049-4(c)(1)(ii)(A). However, for sales of all securities, a broker may treat a customer as an exempt recipient if one of the following applies:
(i) The name of the customer contains the term “insurance company,” “indemnity company,” “reinsurance company,” or “assurance company.”
(ii) The name of the customer indicates that it is an entity listed as a per se corporation under § 301.7701-2(b)(8)(i) of this chapter.
(iii) The broker receives a properly completed exemption certificate (as provided in § 31.3406(h)-3 of this chapter) that asserts that the customer is not an S corporation as defined in section 1361(a).
(iv) The broker receives a withholding certificate described in § 1.1441-1(e)(2)(i) that includes a certification that the person whose name is on the certificate is a foreign corporation.
(ii) Excepted sales.
No return of information is required with respect to a sale effected by a broker for a customer if the sale is an excepted sale. For this purpose, a sale is an excepted sale if it is so designated by the Internal Revenue Service in a revenue ruling or revenue procedure (see § 601.601(d)(2) of this chapter ).
(iii) Multiple brokers.
If a broker is instructed to initiate a sale by a person that is an exempt recipient described in paragraph (c)(3)(i)(B)(6 ), (7 ), or (11) of this section, no return of information is required with respect to the sale by that broker. In a redemption of stock or retirement of securities, only the broker responsible for paying the holder redeemed or retired, or crediting the gross proceeds on the sale to that holder's account, is required to report the sale.
(iv) Cash on delivery transactions.
In the case of a sale of securities through a cash on delivery account, a delivery versus payment account, or other similar account or transaction, only the broker that receives the gross proceeds from the sale against delivery of the securities sold is required to report the sale. If, however, the broker's customer is another broker (second-party broker) that is an exempt recipient, then only the second-party broker is required to report the sale.
(v) Fiduciaries and partnerships.
No return of information is required with respect to a sale effected by a custodian or trustee in its capacity as such or a redemption of a partnership interest by a partnership, provided the sale is otherwise reported by the custodian or trustee on a properly filed Form 1041, or the redemption is otherwise reported by the partnership on a properly filed Form 1065, and all Schedule K-1 reporting requirements are satisfied.
(vi) Sales at issue price.
No return of information is required with respect to a sale of an interest in a regulated investment company that can hold itself out as a money market fund under Rule 2a-7 under the Investment Company Act of 1940 that computes its current price per share for purposes of distributions, redemptions, and purchases so as to stabilize the price per share at a constant amount that approximates its issue price or the price at which it was originally sold to the public.
(vii) Obligor payments on certain obligations.
No return of information is required with respect to payments representing obligor payments on—
(A)
Nontransferable obligations (including savings bonds, savings accounts, checking accounts, and NOW accounts);
(B)
Obligations as to which the entire gross proceeds are reported by the broker on Form 1099 under provisions of the Internal Revenue Code other than section 6045 (including stripped coupons issued prior to July 1, 1982); or
(C)
Retirement of short-term obligations (i.e., obligations with a fixed maturity date not exceeding 1 year from the date of issue) that have original issue discount, as defined in section 1273(a)(1), with or without application of the de minimis rule.
(viii) Foreign currency.
No return of information is required with respect to a sale of foreign currency other than a sale pursuant to a forward contract or regulated futures contract that requires delivery of foreign currency.
(ix) Fractional share.
No return of information is required with respect to a sale of a fractional share of stock if the gross proceeds on the sale of the fractional share are less than $20.
(x) Certain retirements.
No return of information is required from an issuer or its agent with respect to the retirement of book entry or registered form obligations as to which the relevant books and records indicate that no interim transfers have occurred.
(xi) Short sales—
(A) In general.
A broker may not make a return of information under this section for a short sale of a security entered into on or after January 1, 2011, until the year a customer delivers a security to satisfy the short sale obligation. The return must be made without regard to the constructive sale rule in section 1259 or to section 1233(h). In general, the broker must report on a single return the information required by paragraph (d)(2)(i) of this section for the short sale except that the broker must report the date the short sale was closed in lieu of the sale date. In applying paragraph (d)(2)(i) of this section, the broker must report the relevant information regarding the security sold to open the short sale and the adjusted basis of the security delivered to close the short sale and whether any gain or loss on the closing of the short sale is long-term or short-term (within the meaning of section 1222 ).
(B) Short sale closed by delivery of a noncovered security.
A broker is not required to report adjusted basis and whether any gain or loss on the closing of the short sale is long-term or short-term if the short sale is closed by delivery of a noncovered security and the return so indicates. A broker that chooses to report this information is not subject to penalties under section 6721 or 6722 for failure to report this information correctly if the broker indicates on the return that the short sale was closed by delivery of a noncovered security.
(C) Short sale obligation transferred to another account.
If a short sale obligation is satisfied by delivery of a security transferred into a customer's account accompanied by a transfer statement (as described in § 1.6045A-1(b)(4)) indicating that the security was borrowed, the broker receiving custody of the security may not file a return of information under this section. The receiving broker must furnish a statement to the transferor that reports the amount of gross proceeds received from the short sale, the date of the sale, the quantity of shares or units sold, and the Committee on Uniform Security Identification Procedures (CUSIP) number of the sold security (if applicable) or other security identifier number that the Secretary may designate by publication in the Federal Register or in the Internal Revenue Bulletin (see § 601.601(d)(2) of this chapter ). The statement to the transferor also must include the transfer date, the name and contact information of the receiving broker, the name and contact information of the transferor, and sufficient information to identify the customer. If the customer subsequently closes the short sale obligation in the transferor's account with non-borrowed securities, the transferor must make the return of information required by this section. In that event, the transferor must take into account the information furnished under this paragraph (c)(3)(xi)(C) on the return unless the transferor knows that the information furnished under this paragraph is incorrect or incomplete. A failure to report correct information that arises solely from this reliance is deemed to be due to reasonable cause for purposes of penalties under sections 6721 and 6722. See § 301.6724-1(a)(1) of this chapter.
(xii) Cross reference.
For an exception for certain sales of agricultural commodities and certificates issued by the Commodity Credit Corporation after January 1, 1993, see paragraph (c)(7) of this section.
(4) Examples.
The following examples illustrate the application of the rules in paragraph (c)(3) of this section:
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
228
Code of Federal Regulations
Code of Federal Regulations
Code of Federal Regulations
(5) Form of reporting for regulated futures contracts—
(i) In general.
A broker effecting closing transactions in regulated futures contracts shall report information with respect to regulated futures contracts solely in the manner prescribed in this paragraph (c)(5). In the case of a sale that involves making delivery pursuant to a regulated futures contract, only the profit or loss on the contract is reported as a transaction with respect to regulated futures contracts under this paragraph (c)(5); such sales are, however, subject to reporting under paragraph (d)(2). The information required under this paragraph (c)(5) must be reported on a calendar year basis, unless the broker is advised in writing by an account's owner that the owner's taxable year is other than a calendar year and the broker elects to report with respect to regulated futures contracts in such account on the basis of the owner's taxable year. The following information must be reported as required by Form 1099 with respect to regulated futures contracts held in a customer's account:
(B)
The net realized profit or loss from all regulated futures contracts closed during the calendar year.
(C)
The net unrealized profit or loss in all open regulated futures contracts at the end of the preceding calendar year.
(D)
The net unrealized profit or loss in all open regulated futures contracts at the end of the calendar year.
(F)
Any other information required by Form 1099. See 17 CFR 1.33. For this purpose, the end of a year is the close of business of the last business day of such year. In reporting under this paragraph (c)(5), the broker shall make such adjustments for commissions that have actually been paid and for option premiums as are consistent with the books of the broker. No additional returns of information with respect to regulated futures contracts so reported are required.
(ii) Determination of profit or loss from foreign currency contracts.
A broker effecting a closing transaction in foreign currency contracts (as defined in section 1256(g)) shall report information with respect to such contracts in the manner prescribed in paragraph (c)(5)(i) of this section. If a foreign currency contract is closed by making or taking delivery, the net realized profit or loss for purposes of paragraph (c)(5)(i)(B) of this section is determined by comparing the contract price to the spot price for the contract currency at the time and place specified in the contract. If a foreign currency contract is closed by entry into an offsetting contract, the net realized profit or loss for purposes of paragraph (c)(5)(i)(B) of this section is determined by comparing the contract price to the price of the offsetting contract. The net unrealized profit or loss in a foreign currency contract for purposes of paragraphs (c)(5)(i) (C) and (D) of this section is determined by comparing the contract price to the broker's price for similar contracts at the close of business of the relevant year.
(iii) Examples.
The following examples illustrate the application of the rules in this paragraph (c)(5):