The short answer

What it reportsInformation about cash, stock, or other property from an acquisition of control or the substantial change in capital structure of a corporation.
Amounts to reportOver $1,000
To the recipient(To Shareholders) January 31, (To Clearing Organization) January 5
To the IRS, on paperFebruary 28
To the IRS, electronicallyMarch 31

If one arrives

Usually a taxable exchange of your shares. The form is issued by the corporation, not your broker.

The form is how a payer tells the IRS what it paid. Its absence is not permission — income you received is reportable whether or not a form covers it, and a threshold decides only who must file, never what you owe.

What it is for

Form 1099-CAP is rare, and it arrives without warning. A corporation files it for its shareholders "if control of the corporation was acquired or it underwent a substantial change in capital structure," and it goes to each shareholder "who receive[s] cash, stock, or other property" in that transaction.

Both events are large. An acquisition of control means another corporation gains at least 50% of the voting power or value of the shares, in a deal where the stock acquired is worth $100 million or more. A substantial change in capital structure means a merger, a transfer of substantially all the assets to another corporation, or a change in the corporation's identity, form or place of organization, with $100 million or more of cash or property going to shareholders. In both cases the form applies only where the corporation or its shareholders must recognise gain under section 367(a), which applies to certain exchanges involving foreign corporations.

Who sends it, and who does not get one

The corporation files it when it had to file Form 8806 for the transaction. But much of the reporting happens elsewhere:

  • If your shares are held by a broker, the broker usually reports the exchange to you on Form 1099-B.
  • The corporation does not have to file when the transaction is already reported on Form 1099-DIV or Form 1099-B.
  • It does not file for a shareholder who received $1,000 or less in cash, stock and property combined.

So a shareholder in a large deal may see a 1099-CAP, a 1099-B, or neither, depending on how the shares were held.

The boxes

Box What it holds
1 Date of the sale or exchange
2 Aggregate amount received: cash plus the fair market value of stock and other property
3 Number of shares you exchanged
4 Classes of stock exchanged, such as C for common or P for preferred

Where it goes on your return

The exchange of your old shares is reported like a sale. It goes on Form 8949, with box 2 as the proceeds and your basis in the old shares as the cost, and the gain or loss carries to Schedule D. Whether it is short or long term depends on how long you held the old shares. Keep a record of what you received and its value on that date: when you later sell any new shares, you will need their basis.

Common questions

Why did I get a 1099-CAP when I did not sell anything?
Because a company whose shares you owned was taken over or restructured, and you received cash, stock or other property for your shares. The exchange is treated as a disposal of the old shares, even though you placed no order.
Is box 2 my gain?
No. Box 2 is "the aggregate amount of cash and the FMV of any stock and other property received" for your shares. Your gain is that amount less your basis in the shares you gave up.
Could a takeover of my shares go unreported?
The 1099-CAP may not come. The corporation does not file when "the amount of cash plus the FMV of any stock and other property does not exceed $1,000" for a shareholder, among other exemptions, and in many deals a Form 1099-B from your broker reports the exchange instead. Whether you have a gain to report does not depend on either form.
My broker holds the shares. Who sends the form?
Usually the broker, on Form 1099-B. The instructions say a broker that knows, or has reason to know from readily available information, that a corporation it holds shares in went through such a transaction must file Form 1099-B for its customers.
What are boxes 3 and 4?
Box 3 is the number of your shares exchanged, and box 4 the class of stock they were, such as C for common or P for preferred. Together with box 1, the date, they identify the lot for your records.

This page is for educational purposes only and does not constitute tax, legal, or financial advice. It covers United States federal reporting. Consult a qualified tax professional about your situation.

Official sources