The short answer
| What it reports | Information about cash, stock, or other property from an acquisition of control or the substantial change in capital structure of a corporation. |
|---|---|
| Amounts to report | Over $1,000 |
| To the recipient | (To Shareholders) January 31, (To Clearing Organization) January 5 |
| To the IRS, on paper | February 28 |
| To the IRS, electronically | March 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?
Is box 2 my gain?
Could a takeover of my shares go unreported?
My broker holds the shares. Who sends the form?
What are boxes 3 and 4?
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.