Internal Revenue Bulletin 2010-5 (PDF rendition): IRS Announcements

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 201
0-5
February 1, 2010
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
T.D. 9476, page 336.
Final regulations under section 1561 of the Code provide guid-
ance to corporations that are component members of a con-
trolled group of corporations and to consolidated groups filing
life-nonlife Federal income tax returns. The regulations also
provide guidance to component members regarding the ap-
portionment of tax benefit items and the amount and type of
information they are required to submit with their returns.
REG–101896–09, page 347.
Proposed regulations under section 6045 of the Code provide
rules for stockbrokers regarding changes in the law that re-
quire them to report for certain sales the adjusted basis of the
stock being sold and whether any gain or loss with respect
to the sale is long-term or short-term. The regulations under
section 1012 of the Code address changes in the law that al-
ter how investors compute basis when averaging the basis of
shares acquired at different prices and that expand the ability
of investors to compute basis by averaging. The regulations
under sections 6045A, 6045B, 6721, and 6722 of the Code
address new reporting requirements imposed on issuers of se-
curities for corporate actions that affect the securities’ basis
and on brokers (including custodians and issuers of securities)
for transfers of securities. A public hearing is scheduled for
February 17, 2010. Rev. Rul. 67–436 obsoleted.
EMPLOYEE PLANS
Notice 2010–14, page 344.
Weighted average interest rate update; corporate bond
indices; 30-year Treasury securities; segment rates.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in January 2010;
the 24-month average segment rates; the funding transitional
segment rates applicable for January 2010; and the minimum
present value transitional rates for December 2009.
EXEMPT ORGANIZATIONS
Announcement 2010–4, page 384.
TheIRShasrevokeditsdeterminationthatCoinmachDisas-
ter Relief Fund Trust of Plainview, NY; Five Rivers Commu-
nity Development Corporation of Georgetown, SC; Interfaith
Adopt-A-Building of New York, NY; Jeffrey and Sara Brunken
Family FDN of Salt Lake City, UT; Newton County Community
Center, Inc., of Covington, GA; The Hemp & Cannabis Founda-
tion of Portland, OR; and Nuestra Sra De La Ribida-USA Auxil-
iary Service, Inc., of Tamarac, FL, qualify as organizations de-
scribed in sections 501(c)(3) and 170(c)(2) of the Code.
(Continued on the next page)
Finding Lists begin on page ii.

ADMINISTRATIVE
REG–101896–09, page 347.
Proposed regulations under section 6045 of the Code provide
rules for stockbrokers regarding changes in the law that re-
quire them to report for certain sales the adjusted basis of the
stock being sold and whether any gain or loss with respect
to the sale is long-term or short-term. The regulations under
section 1012 of the Code address changes in the law that al-
ter how investors compute basis when averaging the basis of
shares acquired at different prices and that expand the ability
of investors to compute basis by averaging. The regulations
under sections 6045A, 6045B, 6721, and 6722 of the Code
address new reporting requirements imposed on issuers of se-
curities for corporate actions that affect the securities’ basis
and on brokers (including custodians and issuers of securities)
for transfers of securities. A public hearing is scheduled for
February 17, 2010. Rev. Rul. 67–436 obsoleted.
February 1, 20102010–5 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2010–5 I.R.B.February 1, 2010

February 1, 20102010–5 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 1561.
—Limitations
on Certain Mul
tiple Tax
Benefits in the Case
of Certain Controlled
Corporations
26 CFR 1.1561–1: General rules regarding certain
tax benefits available to the component members of a
controlled group of corporations.
T.D. 9476
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Apportionment of Tax Items
Among the Members of
a Controlled Group of
Corporations
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains fi-
nal regulations that provide guidance to
corporations that are component members
of a controlled group of corporations and
to consolidated groups filing life-nonlife
Federal income tax returns. They provide
guidance to component members regard-
ing the apportionment of tax benefit items
and the amount and type of information
theyarerequiredtosubmitwiththeirre-
turns.
DATES:Effective Date:These regulations
are effective on December 28, 2009.
Applicability Date:For dates of
applicability,see §§1.1502–43(e),
1.1502–47(t), 1.1561–1(d), 1.1561–2(f)
and 1.1561–3(d). Inaccordance with sec-
tion 7805(b)(1), respective portions of this
Treasury decision are applicable to consol-
idated Federal income tax returns due on
or after December 21, 2009 or to taxable
years beginning on or after December 21,
2009, as the case may be.
FOR FURTHER IN
FORMATION
CONTACT: Grid
Glyer, (202) 622–7930
(not a toll-fr
ee number).
SUPPLEMENTARY INFORMATION:
Background
On December
22, 2006, the IRS and the
Treasury De
partment published several
temporary r
egulations, including tempo-
rary regula
tions under sections 1502 and
1561. See T
.D. 9304 (71 FR 76904),
2007–1 C.B
. 423. Also on December
22, 2006, t
he IRS and the Treasury De-
partment i
ssued a notice of proposed
rulemakin
g cross-referencing those tem-
porary re
gulations. See REG–161919–05
(71 FR 769
55), 2007–1 C.B. 463. For
administ
rative reasons, these regulations
were relo
cated in REG–113688–09. See
T.D. 945
1 (74 FR 25147), 2009–23 I.R.B.
1060.
On Decem
ber 26, 2007, the IRS and
the Trea
sury Department published sev-
eral tem
porary regulations, including an
additio
nal temporary regulation under sec-
tion 156
1. See T.D. 9369 (72 FR 72929),
2008–1
C.B. 394. Also on December 26,
2007, t
he IRS and the Treasury Depart-
ment is
sued a notice of proposed rulemak-
ing cro
ss-referencing those temporary reg-
ulatio
ns. See REG–104713–07 (72 FR
72970
), 2008–1 C.B. 409.
Explanation of Provisions
This Treasury decision adopts the
proposed regulations (§§1.1502–43,
1.1502–47, 1.1561–0, 1.1561–1, 1.1561–2
and 1.1561–3) with no substantive
changes. However, this Treasury decision
makes clarifying changes to §§1.1561–2
and 1.1561–3. These changes are dis-
cussed in the following portion of this
preamble.
1.O
nly the Positive Taxable Income or
Pos
itive Alternative Minimum Taxable
Inc
ome of the Component Members of
aC
ontrolled Group of Corporations
Sh
all Be Combined for Purposes of
De
termining the Amount of the Additional
Ta
x Imposed by Section 11(b)(1) and the
Re
duction in the Alternative Minimum
Tax Exemption
Amount Under Section
55(d)(3), Res
pectively.
Section 1561(
a) provides that in com-
puting the amo
unt of additional tax im-
posed by sect
ion 11(b)(1) (the additional
tax), and the
phase-out of the alternative
minimum tax e
xemption amount under
section 55(d
)(3) (the exemption amount),
the compone
nt members of a controlled
group of cor
porations (as defined in sec-
tion 1563) s
hall, as a first step, combine
their taxab
le incomes (or alternative min-
imum taxab
le incomes) for their tax years
that inclu
de the same December 31
st
date.
This taxab
le income (or alternative min-
imum taxab
le income) is for the entire
tax year of
a component member, even
if it was n
ot a member of the group for
each day o
f that tax year. In the case of
the deter
mination of the additional tax,
the calcu
lation is limited to the taxable
incomes o
f those component members to
which an
y part of the tax bracket amounts
are appo
rtioned.
The ques
tion has arisen whether a com-
ponent m
ember that incurs a loss for a
tax year
may apply that loss to reduce the
amount o
f the combined taxable income
(or comb
ined alternative minimum taxable
income
) of the controlled group for pur-
poses o
f determining the amount of the ad-
dition
al tax or the reduction in the exemp-
tion am
ount, respectively. This Treasury
decisi
on clarifies that, for these purposes,
only t
he positive taxable incomes (or posi-
tive a
lternative minimum taxable incomes)
of tho
se component members can be com-
bined
.
Only i
f the members of an affiliated
group
of corporations, as defined in section
1504,
elect to file a consolidated return, as
defi
ned in section 1502, may these mem-
bers
offset their income and losses in deter-
mini
ng their consolidated Federal income
tax l
iability. See, for example,Woolford
Real
ty Co. v. Rose, 286 U.S. 319 (1932).
Sin
ce the members of a controlled group
hav
e not elected to file a consolidated re-
tur
n (even if such controlled group meets
the
section1504definitionofanaffiliated
gro
up), they may not offset their income
and
losses in determining their combined
Fe
deral income tax liability. Hence, they
2010–5 I.R.B.336February 1, 2010

cannot offset such income and losses to de-
termine their combinedadditional tax lia-
bility or their combined alternative mini-
mum taxable income for purposes of de-
termining the reduction in the exemption
amount.
2.A Component Member That Has a
Short Taxable Year That Does Not Include
a December 31
st
Date Calculates Its
Additional Tax and Alternative Minimum
Tax Liability on Just Its Own Income.
Section 1561(b) and §1.1561–2(e) pro-
vide rules for apportioning the tax bracket
amounts and accumulated earnings credit
to a member with a short taxable year
that does not include a December 31
st
date (a short-year member). However,
§1.1561–2(e) does not provide guidance
to a short-year member for determining
its additional tax liability. This Treasury
decision clarifies that such a member de-
termines its additional tax liability on its
own income for such short taxable year.
Further, such income is not combined with
the taxable incomes of the other com-
ponent members of the same controlled
group for purposes of determining the
additional tax liability of such other com-
ponent members.
In addition, for purposes of a short-year
member determining its alternative mini-
mum tax liability, this Treasury decision
includes a reference to section 443(d).
Section 443(d) provides that if a tax-
payer has a return of less than 12 months
(whether or not the tax year of that tax-
payer includes a December 31
st
date), its
alternative minimum tax liability is deter-
minedonanannualizedbasis.
3.Clarification of the Rules under Which
An Apportionment Plan Is Terminated.
Section 1.1561–3(c)(3) provides the
circumstances under which an apportion-
ment plan is terminated. Paragraphs (iii)
and (iv) of §1.1561–3(c)(3) of the pro-
posed regulations provided:
(iii) Any corporation which was a com-
ponent member of such group on the par-
ticular December 31 is not a component
member of such group on such succeeding
December 31; or
(iv) Any corporation which was not a
component member of such group on the
particular December 31 is a component
member of such group on such succeeding
December 31.
It is often not feasible for the members
of a controlled group to know for the cur-
rent tax year whether a corporation will or
will not be a component member of such
group for the succeeding tax year. Accord-
ingly, this Treasury decision clarifies these
paragraphs by rewriting them to refer to
the previous tax year and the current tax
year, instead of the succeeding tax year.
In addition, this Treasury decision clarifies
that the fact that a corporation is joining or
leaving a consolidated group, when such
consolidated group is treated collectively
as constituting one component member of
the controlled group, will not serve to af-
fect the ongoing status of such controlled
group, provided that, after that corpora-
tion has either left or joined such consol-
idated group, such consolidated group re-
mains in existence within the meaning of
§1.1502–75(d).
The IRS and the Treasury Department
received no written or electronic com-
ments from the public in response to the
notice of proposed rulemaking and no
public hearing was requested or held.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations. Therefore,
a regulatory flexibility analysis under the
Regulatory Flexibility Act (5 U.S.C. chap-
ter 6) is not required. Pursuant to section
7805(f) of the Code, the notices of pro-
posed rulemaking preceding these regula-
tions were submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on their impact
on small business.
Drafting Information
The principal author of these regula-
tions is Grid Glyer, Office of Associate
Chief Counsel (Corporate). However,
other personnel from the IRS and the
Treasury Department participated in their
development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding entries in nu-
merical order and removing the entries for
§§1.1502–43T and 1.1561–2T to read as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1502–43also issued under
26 U.S.C. 1502. * * *
Section1.1561–2alsoissuedunder
26 U.S.C. 1561. * * *
§1.924(a)–1T [Amended]
Par. 2. Section 1.924(a)–1T(j)(2)(i),
fifth sentence, is amended by removing
the language “§1.1561–3T” and adding
“§1.1561–3” in its place.
Par. 3. Section 1.924(a)–1T(j)(2)(i),
sixth sentence, is amended by removing
the language “§1.1561–3T(a)” and adding
“§1.1561–3” in its place.
Par. 4. Section 1.1502–43 is amended
by revising paragraphs (d) and (e) to read
as follows:
§1.1502–43 Consolidated accumulated
earnings tax.
*****
(d)Consolidated accumulated earnings
credit—(1)In general.[Reserved]
(2)Special rule if a consolidated group
is part of a controlled group. If a consol-
idated group is treated collectively as be-
ing one component member of a controlled
group, or if each member of a consolidated
group is treated as being a separate com-
ponent member of a controlled group, see
section1561fordeterminingtheportionof
the accumulated earnings credit to be allo-
cated to such group or to such members.
(e)Effective/applicability date.This
section applies to any consolidated Federal
income tax return due (without extensions)
on or after December 21, 2009. However,
a consolidated group may apply this sec-
tion to any consolidated Federal income
tax return filed on or after December 21,
2009. For returns due before December
21, 2009, see §1.1502–43T as contained in
26 CFR part 1 in effect on April 1, 2009.
February 1, 20103372010–5 I.R.B.

§1.1502–43T [Removed]
Par. 5. Section 1.1502–43T is removed.
Par. 6. Section 1.1502–47 is amended
by revising paragraphs (s) and (t) to read
as follows:
§1.1502–47 Consolidated returns by
life-nonlife groups.
*****
(s)Filing requirements—(1)In general.
Tofileaconsolidatedincometaxreturn
for a life-nonlife consolidated group, the
common parent shall—
(i) File the applicable consolidated cor-
porate income tax return: a Form 1120-L,
“U.S. Life Insurance Company Income
Tax Return,”where the common parent is a
life insurance company; a Form 1120-PC,
“U.S. Property and Casualty Insurance
Company Income Tax Return,”where the
common parent is an insurance company,
other than a life insurance company; or
a Form 1120,“U.S. Corporation Income
Tax Return,”where the common parent is
any other type of corporation;
(ii) Indicate clearly on the face of this
return that such corporate tax return is a
life-nonlife return;
(iii) Show any set offs required by para-
graphs (g), (m), and (n) of this section;
(iv) Report separately the nonlife con-
solidated taxable income or loss, deter-
mined under paragraph (h) of this section,
on a Form 1120 or 1120-PC (whether filed
by the common parent or as an attachment
to the consolidated return), as the case may
be, of all nonlife members of the consoli-
dated group; and
(v) Report separately the consolidated
partial Life Insurance Company Taxable
Income (as defined by paragraph (d)(3)
of this section), determined under para-
graph (j) of this section, on a Form 1120-L
(whether filed by the common parent or
as an attachment to the consolidated re-
turn), of all life members of the consoli-
dated group.
(2)Cross reference. See §1.1502–75(j),
regarding the inclusion in a corporate
tax return of the required statements and
schedules for subsidiaries.
(t)Effective/applicability date. Para-
graph (s) of this section applies to any
consolidated Federal income tax re-
turn due (without extensions) on or af-
ter December 21, 2009. However, a
consolidated group may apply paragraph
(s) of this section to any consolidated
Federal income tax return filed on or
after December 21, 2009. For returns
due before December 21, 2009, see
§1.1502–47T as contained in 26 CFR part
1ineffectonApril1,2009.
§1.1502–47T [Removed]
Par. 7. Section 1.1502–47T is removed.
Par. 8. Section 1.1561–0 is added to
read as follows:
§1.1561–0 Table of contents.
This section lists the table of contents
for §§1.1561–1 through 1.1561–3.
§1.1561–1 General rules regarding
certain tax benefits available to the
component members of a controlled group
of corporations.
(a) In general.
(1) Limitation.
(2) Definitions.
(b) Special rules.
(1) S Corporation.
(2) 52–53-week taxable year.
(c) Tax avoidance.
(d) Effective/applicability date.
§1.1561–2 Special rules for allocating
reductions of certain Section 1561(a)
tax-benefit items.
(a) Additional tax.
(1) Calculation.
(2) Apportionment.
(3) Examples.
(b) Reduction to the amount exempted
from the alternative minimum tax.
(1) Calculation.
(2) Apportionment.
(3) Examples.
(c) Accumulated earnings credit.
(d) [Reserved].
(e) Short taxable year not including a
December 31
st
date.
(1) General rule.
(2) Additional rules.
(3) Calculation of the additional tax.
(4) Calculation of the alternative mini-
mum tax.
(5) Examples.
(f) Effective/applicability date.
§1.1561–3 Allocation of the section
1561(a) tax items.
(a) Filing of form.
(1) In general.
(2) Exception for component members
that are members of a consolidated group.
(b) No apportionment plan in effect.
(c) Apportionment plan in effect.
(1) Adoption of plan.
(2) Limitation on adopting a plan.
(3) Termination of plan.
(d) Effective/applicability date.
§1.1561–0T [Removed]
Par. 9. Section 1.1561–0T is removed.
Par. 10. Section 1.1561–1 is added to
read as follows:
§1.1561–1 General rules regarding
certain tax benefits available to the
component members of a controlled group
of corporations.
(a)In general—(1)—Limitation.PartII
(section 1561 and following) of subchap-
ter B of chapter 6 of the Internal Rev-
enue Code (Code) (part II) provides rules
to limit the amounts of certain specified
tax benefit items of component members
of a controlled group of corporations for
their tax years whichinclude a particu-
lar December 31
st
date, or, in the case of
a short taxable year member (see section
1561(b) and §1.1561–2(e)), the date sub-
stituted for that December 31
st
date. The
amount of the tax items enumerated in sec-
tion 1561(a) available to any of the compo-
nent members of a controlled group shall
be determined for purposes of subtitle A
of the Code as if the component mem-
bers were a single corporation. Certain
other tax items also set forth in section
1561(a) (for example, the additional tax
imposed by section 11(b)(1) and the sec-
tion 55(d)(3) phase out of the alternative
minimum tax exemption amount) will be
determined by combining the positive tax-
able income or positive alternative min-
imum taxable income of the component
members of such a group and then allocat-
ing the amount of such items among those
members.
(2)Definitions. For certain definitions
(including the definition of acontrolled
group of corporationsand acomponent
member) and special rules for purposes of
this part II see section 1563.
2010–5 I.R.B.338February 1, 2010

(b)Special rules—(1)SCorpora-
tion. For purposes of this part II, the
termcorporationincludes a small busi-
ness corporation (as defined in section
1361). However, for the treatment of such
a corporation as anexcluded memberof
a controlled group of corporations see
§1.1563–1(b)(2)(ii)(C).
(2)52–53-week taxable year.In
the case of corporations electing a
52–53-week taxable year under section
441(f)(1), the provisions of this part II
shall be applied in accordance with the
special rule of section 441(f)(2)(A). See
§1.441–2.
(c)Tax avoidance. The provisions of
this part II do not delimit or abrogate any
principle of law established by judicial de-
cision, or any existing provisions of the
Code, such as sections 269, 482, and 1551,
which serve to prevent any avoidance or
evasion of income taxes.
(d)Effective/applicability date.This
section applies to any tax year beginning
on or after December 21, 2009. How-
ever, taxpayers may apply this section to
any Federal income tax return filed on or
after December 21, 2009. For tax years
beginning before December 21, 2009, see
§1.1561–1T as contained in 26 CFR part 1
in effect on April 1, 2009.
§1.1561–1T [Removed]
Par. 11. Section 1.1561–1T is removed.
Par. 12. Section 1.1561–2 is added to
read as follows:
§1.1561–2 Special rules for allocating
reductions of certain section 1561(a)
tax-benefit items.
(a)Additional tax—(1)Calcula-
tion—(i)In general. For the purpose of
determining the amount, if any, of the
additional tax imposed by section 11(b)(1)
(the additional tax), the taxable incomes
of all of the component members of a
controlled group of corporations shall be
combined to determine whether either of
the income thresholds for imposing the
additional tax have been attained.
(ii)Special rules. For purposes of para-
graph (a)(1)(i) of this section—
(A)Component membermeans a corpo-
ration that is apportioned some part of any
applicable tax bracket amount; and
(B)Taxable incomemeans the positive
taxable income of a component mem-
ber for its entire tax year (even if it was
not a member of the group for each day
of that tax year) that includes the same
December 31
st
testing date, which is
also applicable to the other component
members of that same controlled group.
(2)Apportionment—(i)General rule.
Any additional tax determined under para-
graph (a)(1) of this section shall be appor-
tioned among such members in the same
manner as the corresponding tax bracket of
section 11(b)(1) is apportioned. For rules
to apportion the section 11(b)(1) tax brack-
ets among the component members of a
controlled group, see §1.1561–3(b) or (c).
(ii)Apportionment methods.Unless
the component members of a controlled
group elect to use the first-in-first-out
(FIFO) method described in paragraph
(a)(2)(ii)(B) of this section, such mem-
bers are required to apportion the amount
of the additional tax using the propor-
tionate method described in paragraph
(a)(2)(ii)(A) of this section. These compo-
nent members may elect the FIFO method
by specifically adopting such method in
their apportionment plan.
(A)Proportionate method.Underthe
proportionate method, the additional tax
is allocated to each component member
in the same proportion as the portion of
the tax-benefit amount that inured to a
member from utilizing lower tax brack-
ets bears to the amount of the group’s to-
tal tax-benefit amount inuring to it from
utilizing those lower tax brackets. The
tax-benefit amount that inures to a corpo-
ration from using a particular tax bracket
is the tax savings that such corporation re-
alizes from having a portion of its taxable
income taxed at the lower rate attributed
to that tax bracket instead of the high tax
rates to which it would otherwise be sub-
ject. The steps for applying the proportion-
ate method of allocation are as follows:
(1)Step 1. The regular tax (not includ-
ing the additional tax) owed by a compo-
nent member under a particular tax bracket
is divided by the total tax owed by all com-
ponent members under that tax bracket;
(2)Step 2. The percentage calculated
underStep 1is multiplied by the total tax-
benefit amount inuring to all the mem-
bers of the group from their use of this tax
bracket. This computed amount equals the
portion of the group’s tax-benefit amount
that inured to such member from using its
portion of this tax bracket;
(3)Step 3. The amount determined
underStep 2is divided by the total tax-
benefit amount, inuring to all the compo-
nent members of the group from using all
the tax brackets to which any component
member’s income was subject;
(4)Step 4. The percentage calculated
underStep 3is multiplied by the amount
of the group’s additional tax. The amount
determined under thisStep 4equals the
amount of the additional tax apportioned
to such member for that tax bracket; and
(5)Step 5. If a component member
is liable for regular tax (not including the
additional tax) under more than one tax
bracket, that member must calculate the
amount of the additional tax apportioned
to it with respect to each tax bracket. Ac-
cordingly, steps 1 through 4 must be ap-
plied for each tax bracket applicable to that
member. The sum of all the apportioned
amounts of additional tax from each tax
bracket for which the member is subject is
the total amount of the additional tax ap-
portionedtothatmember.
(B)FIFO method.UndertheFIFO
method, the first dollars of the additional
tax are to be allocated proportionately to
the members starting with the lowest tax
bracket (that is, the first tax bracket), up
to the amount of the tax benefit inuring to
those members from using that tax bracket.
Any remaining amount of additional tax
is then allocated proportionately among
the component members who use the next
higher tax bracket, and so on, until the
entire amount of the additional tax has
been fully apportioned among the mem-
bers. For example, the first $9,500 of
the additional tax liability of a controlled
group is apportioned entirely to the mem-
ber(s) that availed themselves of the bene-
fit of the 15 percent tax bracket.
(3)Examples. The provisions of this
paragraph (a) may be illustrated by the fol-
lowing examples:
Example 1.(i)Facts. A controlled group of cor-
porations consists of three members: X, Y and Z.
X owns all the stock of Y and Z. Each corporation
files its separate return on a calendar year basis. For
calendar year 2007, the component members of the
controlled group have an apportionment plan in ef-
fect. The members apportioned 80% of the 15 percent
tax-bracket amount ($40,000) to X and the remaining
10% ($10,000) to Y. The members apportioned 100%
of the 25 percent tax-bracket amount ($25,000) to Y.
However, these members have not adopted the FIFO
method for apportioning the additional taxes. There-
fore, they must follow the proportionate method. For
2007, X had taxable income (TI) of $40,000, Y had
February 1, 20103392010–5 I.R.B.

TI of $60,000 and Z had TI of $100,000. Thus the
total TI of the group is $200,000.
(ii)Calculating the tax from the tax brackets and
the tax benefit derived from such tax.(A)Regular tax
of group subject to a 15 percent tax rate.(1)Calcu-
lating the group’s tax which resulted from applying a
15 percent tax rate. The amount of tax under the 15
percent tax bracket is $7,500 (15% x $50,000).
(2)The tax-benefit amount inuring to the group
from using the 15 percent tax bracket. A tax bene-
fit inures to those members of the group who avail
themselves of the 15 percent tax bracket. That tax
benefit results from having the first $50,000 of its in-
come taxed at the 15 percent tax rate, instead of at
the 34 percent tax rate. Thus, the tax-benefit amount
inuring to this group from using the 15 percent tax
bracket is $9,500 ($17,000 (34% x $50,000) minus
$7,500 (15% x $50,000)).
(B)Regular tax of group subject to a 25 per-
cent tax rate.(1)Calculating the group’s tax which
resulted from applying a 25 percent tax rate.The
amount of tax under the 25 percent tax bracket is
$6,250 (25% x $25,000 ($75,000 - $50,000)).
(2)The tax-benefit amount inuring to the group
from using the 25 percent tax bracket. A tax benefit
inures to those members of the group who avail them-
selves of the 25 percent tax bracket. That tax bene-
fit results from having $25,000 of its income taxed
at the 25 percent tax rate, instead of at the 34 per-
cent tax rate. Thus, the tax-benefit amount inuring
to this group from using the 25 percent tax bracket is
$2,250 ($8,500 (34% x $25,000) minus $6,250 (25%
x $25,000)).
(C)Regular tax of group subject to a 34 per-
cent tax rate.(1)Calculating the group’s tax which
resulted from applying a 34 percent tax rate.The
amount of tax under the 34 percent tax bracket is
$42,500 (34% x $125,000 ($200,000 (total TI) -
$75,000) (amount taxed at lower rates)).
(2)The tax-benefit amount inuring to the group
from using the 34 percent tax bracket. The group’s
total TI of $200,000 is less than the $15,000,000 in-
come threshold for imposing any 3 percent additional
tax on the group. Therefore, there is no tax benefit
inuring to the members of this group for using the 34
percent tax bracket.
(D)The computation of the additional tax.Since
the combined TI of the group exceeds $100,000, a
5 percent additional tax is imposed on the group.
That 5 percent additional tax is the lesser amount of
5 percent of the group’s taxable income exceeding
$100,000 or $11,750. Five percent of that excess
amount of taxable income is $5,000 (5% x $100,000
($200,000 - $100,000)). Since $5,000 is less than
$11,750, the group’s 5 percent additional tax is
$5,000.
(iii)Apportioning the amount of additional tax to
each applicable tax bracket.(A)The apportioned
tax under each bracket. The amount of tax owed by
each member under each tax bracket pursuant to the
apportionment plan is as follows:
Name of
Component
Member
Amount of tax owed
under the
15% tax bracket
Amount of tax
owed under the
25% tax bracket
Amount of tax
owed under the
34% tax bracket
X
$6,000
00
Y
$1,500$6,250$8,500
Z
00
$34,000
(B)Apportioning the 5 percent additional tax
among the component members of the controlled
gr
oup. Since the group did not elect to adopt the
FIFO method of apportionment, it is required to
apportion the $5,000 of its 5 percent additional tax
pu
rsuant to the proportionate method in the following
manner:
(1)Amount of the additional tax apportioned to
X.
Pursuant to the plan, X was liable for $6,000 of
the group’s $7,500 regular tax (80%) owed under the
15 percent tax bracket (and X is not liable for any reg-
u
lar tax under any higher tax bracket). SeeStep 1of
paragraph (a)(2)(ii)(A) of this section. X’s portion of
the group’s tax benefit which it derived from using
t
he 15 percent tax rate is $7,600 (0.8 x $9,500). See
Step 2. The tax benefit inuring to the entire group
from using the 15 percent and 25 percent tax brackets
is $11,750 ($9,500 (from the 15 percent tax bracket)
+ $2,250 (from the 25 percent tax bracket)). So, X’s
percentage portion of the group’s total tax benefit is
$7,600/$11,750 (64.68%). SeeStep 3. Thus, X’s al-
located portion of the 5 percent additional tax from
using the 15 percent tax bracket is $3,234 (0.6468 x
$5,000). SeeStep 4.
(2)Amount of the additional tax apportioned to
Y.(i)Regular tax apportioned to Y from using the 15
percent tax bracket. Pursuant to the plan, Y was liable
for the remaining $1,500 of the group’s $7,500 regu-
lar tax (20%) owed under the 15 percent tax bracket.
SeeStep 1. Y’s portion of the group’s tax benefit
which it derived from using the 15 percent tax rate
is $1,900 ($9,500 - $7,600, or 0.2 x $9,500). See
Step 2. So, Y’s percentage portion of the group’s to-
tal tax benefit is $1,900/$11,750 (16.17%). SeeStep
3. Thus, Y’s allocated portion of the 5 percent ad-
ditional tax from using the 15 percent tax bracket is
$809 (0.1617 x $5,000). SeeStep 4.
(ii)Regular tax apportioned to Y from using the
25 percent tax bracket. Pursuant to the plan, Y was
li
able for 100% of the group’s regular tax owed un-
der the 25 percent tax bracket, an amount of $6,250.
SeeStep 1. Y is, therefore, entitled to 100% of the
gr
oup’s tax benefit which it derived from using this
tax bracket, an amount of $2,250. SeeStep 2.So,
Y’s percentage portion of the group’s total tax ben-
e
fit is $2,250/$11,750 (19.15%). SeeStep 3.Thus,
Y’s allocated portion of the 5 percent additional tax
from using the 25 percent tax bracket is $957 (0.1915
x
$5,000). SeeStep 4. Y’s total allocated portion of
the additional tax is $1,766 ($809 + $957). SeeStep
5.
E
xample 2.(i)Facts. The facts are the same as in
Example 1, except that on August 31, 2007, X of the
X-Y-Z controlled group sold all of the stock of Z to
M of the M-N controlled group, a pair of corporations
unrelated to the X-Y group. Pursuant to the terms of
the sales agreement, the members of the M-N group
properly notified the members of the X-Y group on a
timely basis that Z’s taxable income for its 2007 tax
year, as based on the group’s December 31
st
testing
date, was $100,000.
(ii)Controlled group analysis. On December
31
st
, 2007, X and Y are members of the selling
controlledgroupandM,NandZaremembersofthe
buying controlled group. However, pursuant to sec-
tion 1563(b)(3), Z is treated as an additional member
of the X-Y group on December 31
st
2007, since it
was a member for at least one-half the number of
days (243 out of 364) during the period beginning
on January 1 and ending on December 30, 2007.
Conversely, pursuant to section 1563(b)(2)(A), Z is
treated as an excluded member of the M-N controlled
group. Therefore, on December 31
st
,2007,X,Y
and Z qualify as component members of the selling
group, and only M and N qualify as component
members of the buying group.
(ii
i)Additional tax analysis. With regard to X and
Y’s 2007 tax years, X and Y together owed $5,000
of additional tax, as calculated inExample 1.X’s
al
located portion of the additional tax is $3,234, as
calculated in the manner set forth inExample 1.Y’s
allocated portion of the additional tax is $1,766, also
as
calculated in the manner set forth inExample 1.
Example 3.(i)Facts. The facts are the same as
inExample 2,exceptthatin2012,pursuanttoanIRS
au
dit, Z’s 2007 taxable income was re-determined. It
was adjusted by an income increase of $10,000. Pur-
suant to the terms of the sales agreement, the mem-
b
ers of the M-N group timely notified the members
of the X-Y group of Z’s income adjustment.
(ii)Additional tax analysis. For 2007 the X-Y-Z
g
roup owed a revised additional tax in the amount
of $5,500, allocated as follows: $3,557.40 to X and
$1,942.60 to Y. X and Y each filed an amended 2007
t
ax return to report their portions of the $500 increase
to the group’s additional tax. Pursuant to their ap-
portionment plan for allocating their regular tax, and
as a result of defaulting to the proportionate method
for allocating the group’s additional tax, X reported
$323.40 as its share of the group’s increase to its ad-
ditional tax and Y reported $176.60 as its share of the
group’s increase to its additional tax.
Example 4.ThefactsarethesameasinExample
1, except that the members elected in their apportion-
ment plan to adopt the FIFO method for apportion-
ing the additional tax. Under the FIFO method, the
5 percent additional tax amount of $5,000 will be ap-
portioned entirely to those members who would ben-
efit from using the 15 percent tax bracket, by reason
that $5,000 of the group’s additional tax is less than
$9,500, which is the full tax-benefit amount inuring
2010–5 I.R.B.340February 1, 2010

to a controlled group from having a 15 percent tax rate
applied to the full income bracket subject to that rate.
Since X derived 80 percent of the group’s tax benefit
by its use of the 15 percent tax bracket, its share of
the group’s 5 percent additional tax is $4,000 (80% x
$5,000), and Y’s share of the group’s 5 percent addi-
tional tax is, therefore, $1,000, which is the remaining
amount of the group’s 5 percent additional tax, attrib-
utable to the 15 percent tax bracket.
(b)Reduction to the amount exempted
from the alternative minimum tax—(1)
Calculation. The alternative minimum
taxable incomes of the component mem-
bers of a controlled group of corporations
shall be taken intoaccount in calculating
the reduction set forth in section 55(d)(3)
to the amount exempted from the alterna-
tive minimum tax (the exemption amount).
For purposes of the preceding sentence,al-
ternative minimum taxable incomemeans
the positive alternative minimum taxable
income of a component member for its en-
tire tax year (even if it was not a member
of the group for each day of that tax year)
that includes the same December 31
st
testing date, which is also applicable to the
other component members of that same
controlled group.
(2)Apportionment. Any reduction to
the exemption amount shall be appor-
tioned to the component members of a
controlled group in the same manner that
the amount of the exemption (provided in
section 55(d)(2)) to the alternative min-
imum tax was allocated under section
1561(a). For rules to apportion the sec-
tion 55(d)(2) exemption amount among
the component members of a controlled
group, see §1.1561–3(b) or (c).
(3)Examples. The provisions of this
paragraph (b) may be illustrated by the fol-
lowing example:
Example.(i)Facts. A controlled group of cor-
porations consists of three members: X, Y and Z. X
owns all of the stock of Y and Z. Each corporation
files its separate return on a calendar year basis. For
calendar year 2007, the component members of this
controlled group have an apportionment plan in ef-
fect. The group has chosento apportion the entire
section 55(d)(2) exemption amount of $40,000 to Z.
For 2007, X had alternative minimum taxable income
(AMTI) of $40,000, Y had AMTI of $60,000 and Z
had AMTI of $100,000. Thus the total AMTI of the
group is $200,000.
(ii)Calculating the reduction to the exemption
amount. Section 55(d)(3)(A) provides that the sec-
tion 55(d)(2) exemption amount shall be reduced (but
not below zero) by an amount equal to 25 percent
of the amount by which the AMTI of a corporation
exceeds $150,000. For the purpose of computing
the group’s AMTI, the AMTI of each of the com-
ponent members, for their tax years that have the
same December 31
st
testing date, shall be taken into
account. In accordance withthese provisions, the
$40,000 exemption amount is reduced by $12,500
(25% x $50,000 ($200,000 - $150,000)). Pursuant to
the group’s allocation plan, the entire $12,500 reduc-
tion to the exemption amount is allocated to Z. Thus,
after such allocation, Z’s $40,000 exemption amount
is reduced to $27,500 ($40,000 - $12,500).
(c)Accumulated earnings credit.The
component members of a controlled group
of corporations are permitted to allocate
the amount of the accumulated earnings
credit unequally if they have an apportion-
ment plan in effect.
(d) [Reserved].
(e)Short taxable years not including a
December 31
st
date—(1)General rule.If
a corporation has a short taxable year not
including a December 31
st
date and, after
applying the rules of section 1561(b) and
paragraph (e)(2)(i) of this section, it qual-
ifies as a component member of the group
with respect to its short taxable year (short-
year member), then, for purposes of sub-
title A of the Internal Revenue Code, the
amount of any tax-benefit item described
in section 1561(b) allocated to that com-
ponent member’s short taxable year shall
be the amount specified in section 1561(a)
for that item, divided by the number of cor-
porations which are component members
of that group on the last day of that com-
ponent member’s short taxable year. The
component members of such group may
not apportion, by an apportionment plan,
an amount of such tax-benefit item to any
short-year member that differs from equal
apportionment of that item.
(2)Additional rules. For purposes of
paragraph (e)(1) of this section—
(i) Section 1563(b) shall be applied as if
the last day of the taxable year of a short-
year member were substituted for Decem-
ber 31
st
;and
(ii) The termshort taxable yeardoes not
refer to any portion of a tax year of a cor-
poration for which its income is required
to be included in a consolidated return pur-
suant to §1.1502–76(b).
(3)Calculation of the additional tax.
A short-year member (as defined in para-
graph (e)(1) of this section) for its short
taxable year calculates its additional tax li-
ability imposed by section 11(b)(1) only on
its own income, and therefore the subse-
quent calculation of the additional tax lia-
bility with regard to the remaining mem-
bers of the group will not include the in-
come of this short-year member.
(4)Calculation of the alternative
minimum tax. If a component member
has a tax year of less than 12 months,
whether or not such tax year includes a
December 31
st
date, see section 443(d)
for the annualization method required for
calculating the alternative minimum tax.
(5)Examples. The provisions of this
paragraph (e) may be illustrated by the fol-
lowing examples:
Example 1.Formation of a new member of a con-
trolled group.(i)Facts. On January 2, 2007, corpo-
ration X transfers cash to newly formed corporation
Y (which begins business on that date) and receives
all of the stock of Y in return. X also owns all of
the stock of corporation Z on each day of 2006 and
2007. X, Y and Z have an apportionment plan in ef-
fect, apportioning the 15 percent tax-bracket amount
as follows: 40% ($20,000) to each of X and Y and
20% ($10,000) to Z. X, Y and Z each file a separate
return with respect to the group’s December 31
st
2007
testing date. X is on a calendar tax year and Z is on a
fiscal tax year ending on March 31. Y adopts a fiscal
year ending on June 30 and timely files a tax return for
its short taxable year beginning on January 2, 2007,
and ending on June 30, 2007.
(ii)Y’s short taxable year. On June 30, 2007, Y
is a component member of a parent-subsidiary con-
trolled group of corporations composed of X, Y and
Z. Pursuant to paragraph (e)(1) of this section, the
group may not apportion any amount of the 15 per-
cent tax bracket to Y’s short taxable year ending on
June 30, 2007. Rather, Y is entitled to exactly
1
/3of
such bracket amount, or $16,667.
(iii)The members’ subsequent tax years.On
December 31
st
, 2007, X, Y and Z are component
members of a parent-subsidiary controlled group
of corporations. For their tax years that include
December 31
st
, 2007 (X’s calendar year ending
December 31
st
, 2007, Z’s fiscal year ending
March 31, 2008 and Y’s fiscal year ending June
30, 2008), X, Y and Z apportion among themselves
the full amount of all of the applicable tax brackets
pursuant to their apportionment plan. For example,
40% of the 15 percent tax-bracket amount, or
$20,000, was apportioned to each of X and Y, and the
remaining 10%, or $10,000, was apportioned to Z.
Example 2.Allocating a tax bracket to the short
taxable year of a liquidated member of a controlled
group(i)Facts. On January 1, 2007, corporation P
owns all of the stock of corporations S
1
,S
2
and S
3
(the P group). Each of these four component mem-
bers of the P group, with respect to the group’s De-
cember 31
st
, 2007 testing date, files its separate return
on a calendar year basis. These members have an ap-
portionment plan in effect (the P group plan) under
which S
1
and S
2
are each entitled to 40% of the 15
percent tax-bracket amount ($20,000), and P and S
3
are each entitled to 10% of the 15 percent tax-bracket
amount ($5,000). On May 31, 2007, S
1
liquidates and
therefore files a return for the short taxable year be-
ginning on January 1, 2007, and ending on May 31,
2007. On July 31, 2007, S
2
liquidates and therefore
files a return for the short taxable year beginning on
January 1, 2007 and ending on July 31, 2007. P and
S
3
each file a return for their 2007 calendar tax years.
February 1, 20103412010–5 I.R.B.

(ii)Apportionment of the 15 percent tax bracket
to S
1
for its short taxable year. On May 31, 2007, S
1
is a component member of the P group composed of
P, S
1
,S
2
and S
3
. Pursuant to paragraph (e)(1) of this
section, the group may not apportion any amount of
the 15 percent tax bracket to S
1
’s short taxable year
ending on June 30, 2007. Rather, S
1
is entitled to
exactly 1/4 of such bracket amount, or $12,500.
(iii)Apportionment of the 15 percent tax bracket
to S
2
for its short taxable year. On July 31, 2007,
S
2
is a component member of the P group composed
of P, S
2
and S
3
. Pursuant to paragraph (e)(1) of this
section, the group may not apportion any amount of
the 15 percent tax bracket to S
2
’s short taxable year
ending on June 30, 2007. Rather, S
2
is entitled to
exactly
1
/3of such bracket amount, or $16,667.
(iv)Apportionment of the 15 percent tax bracket
to P and S
3
for each of their calendar tax years.On
December 31
st
,2007,PandS
3
are component mem-
bers of the P group. Accordingly, for P and S
3
’s 2007
calendar tax year, they are each apportioned $25,000
of the 15 percent tax bracket, pursuant to the applica-
ble P group plan.
Example 3.Liquidation of member after its trans-
fer to another controlled group.(i)Facts. The facts
are the same as inExample 2, except that P, on April
30, 2007, sold all of the stock of S
2
to the M-N con-
trolled group. At the time of the sale, M and N are
both unrelated to any members of the P group. As
inExample 2,S
2
liquidates on July 31, 2007, and
therefore files a tax return for its short taxable year
beginning on January 1, 2007, and ending on July
31, 2007. Pursuant to the sales agreement, the N-M
group timely notified P that S
2
had liquidated.
(ii)Controlled group analysis. On April 30, 2007,
the date of the sale of S
2
, the P group reasonably ex-
pected that S
2
would be treated as an excluded mem-
ber with respect to its December 31
st
, 2007 testing
date. On that April 30
th
date, S
2
had been a mem-
ber of the P group for less than one-half the number
of days of what it expected would be a full 2007 cal-
endar tax year preceding December 31
st
, 2007 (120
days (January 1-April 30) out of 364 days (January
1-December 30)). Yet, as a result of S
2
’s subsequent
liquidation by the M-N group prior to December 31
st
,
2007, S
2
became a component member of the P group
with respect to the P group’s December 31
st
, 2007
testing date. With respect to that December 31
st
test-
ing date, S
2
thus was a member of the P group for
more than one-half of the number of days of its tax
year ending on July 31, 2007, which days proceeded
December 31
st
, 2007 (120 days (January 1-April 30
of 2007) out of 211 days (January 1-July 30 of 2007)).
The allocation of the 15 percent tax-bracket amount
to the P group members is determined in the same
manner as inExample 2and, therefore, the bracket
amounts allocated to P, S
1
,S
2
and S
3
are the same
as determined inExample 2. The allocation of the
bracket amounts would be the same if, at the time P
sold all of the S
2
stock, the parties had made a section
338(h)(10) election.
Example 4.Short tax year including a Decem-
ber 31
st
date. Corporation X owns all of the stock
of corporations Y and Z. X, Y and Z each file sep-
arate returns. X and Y are on a calendar tax year
and Z is on a fiscal tax year beginning October 1 and
ending September 30. On January 2, 2007, Z liqui-
dates. Because Z’s final tax year (beginning on Octo-
ber 1, 2006 and ending on January 2, 2007) includes
a December 31
st
date, that is, December 31, 2006, it
is therefore not subject to the short taxable year rule
provided by section 1561(b) and paragraph (e) of this
section. Accordingly, Z is a component member of
the X-Y-Z group, for the group’s December 31
st
,
2006 testing date. Thus, the rules of this paragraph
(e) do not limit the amount of any of the tax-benefit
items of section 1561(a) available to Z or to this con-
trolled group.
(f)Effective/applicability date.This
section applies to any tax year beginning
on or after December 21, 2009. How-
ever, taxpayers may apply this section to
any Federal income tax return filed on or
after December 21, 2009. For tax years
beginning before December 21, 2009, see
§1.1561–2T as contained in 26 CFR part 1
in effect on April 1, 2009.
§1.1561–2T [Removed]
Par. 13. Section 1.1561–2T is removed.
Par. 14. Section 1.1561–3 is added to
read as follows:
§1.1561–3 Allocation of the section
1561(a) tax items.
(a)Filing of form—(1)In general.For
each tax year that a corporation is a com-
ponent member of the same controlled
group of corporations on a December
31
st
(its testing date), or, in the case of a
short-year member (see section 1561(b)
and §1.1561–2(e)), the date substituted for
that December 31
st
date (its testing date),
such corporation and all the other com-
ponent members of such group each must
file the required form (that is, Schedule
O or any successor form) with the Fed-
eral income tax return for that component
member’s tax year that includes a partic-
ular testing date. Each such corporation
must file that form with its return whether
or not—
(i) An apportionment plan is in effect;
or
(ii) Any change is made to the group’s
apportionment of its section 1561(a) tax
benefit items from the previous year.
(2)Exception for component members
that are members of a consolidated group.
If any of the component members of a
controlled group of corporations are also
members of a consolidated group, the par-
ent of such consolidated group shall file
only one form on behalf of all such mem-
bers. Such form shall contain the informa-
tion required for each such member.
(b)No apportionment plan in effect.If
the component members of a controlled
group of corporations do not have an ap-
portionment plan in effect, the amounts of
the section 1561(a) items must be divided
equally among all such members. For pur-
poses of the preceding sentence, if any of
the component members of a controlled
group of corporations are also members of
a consolidated group, such members will
each be treated as a separate component
member of the controlled group.
(c)Apportionment plan in effect—(1)
Adoption of plan. The component mem-
bers of a controlled group of corporations
consent to the adoption (or amendment) of
an apportionment plan by checking the box
to that effect on such form. For purposes
of this paragraph (c)—
(i) An apportionment plan that is
adopted (including a plan that has been
amended) continues in effect until it is
terminated;
(ii) A consolidated group is treated
collectively as one component member
of such group. This treatment occurs
even where a member of that consolidated
group has joined or left the group, if af-
ter such corporation joins or leaves the
consolidated group, that group remains in
existence, pursuant to §1.1502–75(d); and
(iii) The members must allocate the
amounts of the section 1561(a) items be-
tween/among themselves as described in
the plan.
(2)Limitation on adopting a plan—(i)
Sufficient statute of limitations period for
making an assessment of tax.Themem-
bers may only adopt or amend such a plan
if there is at least one year remaining in the
statutory period (including any extensions
thereof) for the assessment of a deficiency
against every member the tax liability of
which would be increased by the adoption
of such a plan.
(ii)Insufficient statute of limitations pe-
riod for making an assessment of tax.If
any member cannot satisfy the require-
ment of paragraph (c)(2)(i) of this sec-
tion, the members may not adopt or amend
such a plan unless the member not satisfy-
ing such requirement has entered into an
agreement with the Internal Revenue Ser-
vice to extend the statute of limitations for
the limited purpose of assessing any defi-
ciency against such member attributable to
the adoption of such a plan.
2010–5 I.R.B.342February 1, 2010

(3)Termination of plan. An apportion-
ment plan that is in effect for the compo-
nent members of a controlled group with
respect to a preceding December 31
st
is ter-
minated with respect to the current Decem-
ber 31
st
if—
(i) Each member of such group consents
to the termination of such a plan for the
current December 31
st
by checking the box
to that effect on its form;
(ii) The controlled group ceases to re-
main in existence (within the meaning of
section 1563(a)) during the calendar year
ending on the current December 31
st
;
(iii) Any corporation which was a com-
ponent member of such group on the pre-
ceding December 31
st
is not a component
member of such group on the current De-
cember 31
st
;or
(iv) Any corporation which was not a
component member of such group on the
preceding December 31
st
is a component
member of such group on the current De-
cember 31
st
.
(d)Effective/applicability date.This
section applies to any tax year beginning
on or after December 21, 2009. How-
ever, taxpayers may apply this section to
any Federal income tax return filed on or
after December 21, 2009. For tax years
beginning before December 21, 2009, see
§1.1561–3T as contained in 26 CFR part 1
in effect on April 1, 2009.
§1.1561–3T [Removed]
Par. 15. Section 1.1561–3T is removed.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved December 17, 2009.
Michael Mundaca,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on December 22,
2009, 4:15 p.m., and published in the issue of the Federal
Register for December 28, 2009, 74 F.R. 68530)
February 1, 20103432010–5 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Update for Weighted Average
Interest Rates, Yield Curves,
and Segment Rates
Notice 2010–14
This notice provides guidance as to the
corporate bond weighted average interest
rate and the permissible range of interest
rates specified under § 412(b)(5)(B)(ii)(II)
of the Internal Revenue Code as in ef-
fect for plan years beginning before 2008.
It also provides guidance on the corpo-
rate bond monthly yield curve (and the
corresponding spot segment rates), the
24-month average segment rates, and
the funding transitional segment rates
under § 430(h)(2). In addition, this no-
tice provides guidance as to the interest
rate on 30-year Treasury securities un-
der § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008, the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the min-
imum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007.
CORPORATE BOND WEIGHTED
AVERAGE INTEREST RATE
Sections412(b)(5)(B)(ii)and
412(l)(7)(C)(i), as amended by the Pen-
sion Funding Equity Act of 2004 and by
the Pension Protection Act of 2006 (PPA),
provide that the interest rates used to cal-
culate current liability and to determine
the required contribution under § 412(l)
for plan years beginning in 2004 through
2007 must be within a permissible range
based on the weighted average of the rates
of interest on amounts invested conser-
vatively in long term investment grade
corporate bonds during the 4-year period
ending on the last day before the beginning
of the plan year.
Notice 2004–34, 2004–1 C.B. 848, pro-
vides guidelines for determining the cor-
porate bond weighted average interest rate
and the resulting permissible range of in-
terest rates used to calculate current liabil-
ity. That notice establishes that the corpo-
rate bond weighted average is based on the
monthly composite corporate bond rate de-
rived from designated corporate bond in-
dices. The methodology for determining
the monthly composite corporate bond rate
as set forth in Notice 2004–34 continues to
apply in determining that rate. See Notice
2006–75, 2006–2 C.B. 366.
The composite corporate bond rate for
December 2009 is 5.88 percent. Pursuant
to Notice 2004–34, the Service has de-
termined this rate as the average of the
monthly yields for the included corporate
bond indices for that month.
The following corporate bond weighted
average interest rate was determined for
plan years beginning in the month shown
below.
For Plan Years
Beginning inPermissible Range
MonthYear
Corporate
Bond Weighted
Average90%to100%
January20106.42
5.77
6.42
YIELD CURVE AND SEGMENT
RATES
Generally for plan years beginning af-
ter 2007 (except for delayed effective dates
for certain plans under sections 104, 105,
and 106 of PPA), § 430 of the Code spec-
ifies the minimum funding requirements
that apply to single employer plans pur-
suant to § 412. Section 430(h)(2) spec-
ifies the interest rates that must be used
to determine a plan’s target normal cost
and funding target. Under this provision,
present value is generally determined us-
ing three 24-month average interest rates
("segment rates"), each of which applies to
cash flows during specified periods. How-
ever, an election may be made under §
430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates. For
plan years beginning in 2008 and 2009, a
transitional rule under § 430(h)(2)(G) pro-
vides that the segment rates are blended
with the corporate bond weighted average
as specified above. An election may be
made under § 430(h)(2)(G)(iv) to use the
segment rates without applying the transi-
tional rule.
Notice 2007–81, 2007–2 C.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, the
24-month average corporate bond segment
rates, and the funding transitional segment
rates used to compute the target normal
cost and the funding target. Pursuant to
Notice 2007–81, the monthly corporate
bond yield curve derived from Decem-
ber 2009 data is in Table I at the end of
this notice. The spot first, second, and
third segment rates for the month of De-
cember 2009 are, respectively, 2.35, 5.65,
and 6.45. The three 24-month average
corporate bond segment rates applicable
for January 2010 under the election of §
430(h)(2)(G)(iv) are as follows:
First
Segment
Second
Segment
Third
Segment
4.60
6.65
6.76
2010–5 I.R.B.344February 1, 2010

The transitional segment rates under §
430(h)(2)(G) applicable for January 2010,
taking into account the corporate bond
weighted average of 6.42 stated above, are
as follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
2009
5.216.576.65
The transitional rule of § 430(h)(2)(G)
does not apply to plan years starting in
2010. Therefore, for a plan year starting
in 2010 with a lookback month to Jan-
uary 2010, the funding segment rates are
the three 24-month average corporate bond
segment rates applicable for January 2010,
listed above without blending for the tran-
sitional period.
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 417(e)(3)(A)(ii)(II) (prior to
amendment by PPA) defines the appli-
cable interest rate, which must be used
for purposes of determining the minimum
present value of a participant’s benefit
under § 417(e)(1) and (2), as the annual
rate of interest on 30-year Treasury se-
curities for the month before the date
of distribution or such other time as the
Secretary may by regulations prescribe.
Section 1.417(e)–1(d)(3) of the Income
Tax Regulations provides that the applica-
bleinterestrateforamonthistheannual
rate of interest on 30-year Treasury secu-
rities as specified by the Commissioner
for that month in revenue rulings, notices
or other guidance published in the Internal
Revenue Bulletin.
The rate of interest on 30-year Treasury
securities for December 2009 is 4.49 per-
cent. The Service has determined this rate
as the average of the daily determinations
of yield on the 30-year Treasury bond ma-
turing in November 2039.
Generally for plan years beginning
after 2007, § 431 specifies the mini-
mum funding requirements that apply to
multiemployer plans pursuant to § 412.
Section 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation
described in section 431(c)(6)(A), based
on the plan’s current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 percent
below the weighted average of the rates of
interest on 30-year Treasury securities dur-
ing the four-year period ending on the last
day before the beginning of the plan year.
Notice 88–73, 1988–2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The following rates
were determined for plan years beginning
in the month shown below.
For Plan Years
Beginning inPermissible Range
MonthYear
30-Year
Treasury
Weighted
Average
90%to
105%
January20104.373.93
4.58
MINIMUM PRESENT VALUE
SEGMENT RATES
Generally for plan years beginning af-
ter December 31, 2007, the applicable in-
terest rates under § 417(e)(3)(D) are seg-
ment rates computed without regard to a
24-month average. For plan years be-
ginning in 2008 through 2011, the appli-
cable interest rates are the monthly spot
segment rates blended with the applicable
rate under § 417(e)(3)(A)(ii)(II) as in ef-
fect for plan years beginning in 2007. No-
tice 2007–81 provides guidelines for de-
termining the minimum present value seg-
ment rates. Pursuant to that notice, the
minimum present value transitional seg-
ment rates determined for December 2009,
taking into account the December 2009
30-year Treasury rate of 4.49 stated above,
are as follows:
For Plan Y
ears
Beginnin
gin
First
Segment
Second
Segment
Third
Segment
20093.63
4.955.27
20103.21
5.195.67
DRAFTING INFORMATION
The principal author of this notice is
Tony Montanaro of the Employee Plans,
Tax Exempt and Government Entities Di-
vision. Mr. Montanaro may be e-mailed at
RetirementPlanQuestions@irs.gov.
February 1, 20103452010–5 I.R.B.

Table I
Monthly Yield Curve for December 2009
Derived from December 2009 Data
Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield
0.5
0.79
20.5
6.28
40.5
6.48
60.56.5580.5
6.59
1.01.1521.0
6.29
41.06.4861.06.5581.06.59
1.51.5021.5
6.30
41.5
6.48
61.56.5581.5
6.59
2.01.8622.06.3142.06.4862.0
6.55
82.06.59
2.5
2.22
22.5
6.31
42.5
6.49
62.56.5582.5
6.59
3.0
2.57
23.06.3243.0
6.49
63.0
6.55
83.06.59
3.5
2.91
23.5
6.33
43.5
6.49
63.56.5683.5
6.59
4.03.2324.06.3344.0
6.49
64.06.5684.06.59
4.53.5224.5
6.34
44.56.5064.56.5684.5
6.59
5.0
3.79
25.0
6.34
45.06.5065.06.5685.0
6.59
5.5
4.04
25.56.3545.56.5065.56.5685.5
6.59
6.04.2726.06.3646.0
6.50
66.0
6.56
86.06.59
6.5
4.48
26.5
6.36
46.56.5066.56.5686.5
6.59
7.04.6727.06.3747.06.5167.06.5687.06.59
7.54.8527.5
6.37
47.56.5167.56.5687.5
6.59
8.0
5.00
28.06.3848.0
6.51
68.0
6.57
88.06.59
8.55.1528.5
6.38
48.56.5168.56.5788.5
6.60
9.0
5.28
29.06.3949.0
6.51
69.0
6.57
89.0
6.60
9.5
5.40
29.5
6.39
49.5
6.52
69.5
6.57
89.56.60
10.05.5030.06.4050.06.5270.06.57
90.0
6.60
10.55.6030.5
6.40
50.56.52 70.56.57
90.56.60
11.0
5.68
31.06.41
51.06.52
71.0
6.57
91.0
6.60
11.55.7631.5
6.41
51.56.52 71.56.57
91.56.60
12.0
5.83
32.06.42
52.06.52
72.0
6.57
92.0
6.60
12.5
5.89
32.5
6.42
52.56.53 72.56.57
92.56.60
13.05.9433.06.4353.06.5373.06.57
93.0
6.60
13.5
5.99
33.5
6.43
53.56.53 73.56.57
93.56.60
14.06.0334.06.43
54.06.53
74.0
6.58
94.0
6.60
14.5
6.07
34.5
6.44
54.56.53 74.56.58
94.56.60
15.0
6.10
35.0
6.44
55.06.53 75.06.58
95.06.60
15.5
6.13
35.5
6.44
55.56.54 75.56.58
95.56.60
16.06.1536.06.4556.06.5476.06.58
96.0
6.60
16.5
6.18
36.56.4556.56.5476.56.58
96.56.60
17.0
6.19
37.06.46
57.06.54
77.0
6.58
97.0
6.60
17.5
6.21
37.5
6.46
57.56.54 77.56.58
97.56.60
18.06.2338.06.46
58.06.54
78.0
6.58
98.0
6.61
18.5
6.24
38.5
6.46
58.56.54 78.56.58
98.56.61
19.0
6.25
39.0
6.4759.06.55
79.0
6.58
99.0
6.61
19.56.2639.56.4759.5
6.55
79.5
6.58
99.56.61
20.06.2740.06.4760.0
6.55
80.0
6.58
100.06.61
2010–5 I.R.B.346February 1, 2010

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking an
dNoticeof
Public Hearin
g
Basis Reporti
ng by
Securities B
rokers and
Basis Determ
ination for Stock
REG–101896
–09
AGENCY: Int
ernal Revenue Service
(IRS), Trea
sury.
ACTION: Not
ice of proposed rulemaking
and notice o
f public hearing.
SUMMARY: Th
is document contains
proposed re
gulations relating to report-
ing sales o
f securities by brokers and
determini
ng the basis of securities. The
proposed r
egulations reflect changes in
the law mad
e by the Energy Improvement
and Exten
sion Act of 2008 that require
brokers w
hen reporting the sale of securi-
ties to th
e IRS to include the customer’s
adjusted
basis in the sold securities and to
classif
y any gain or loss as long-term or
short-t
erm. This document also contains
propose
d regulations reflecting changes in
the law t
hat alter how taxpayers compute
basis wh
en averaging the basis of shares
acquire
d at different prices and that ex-
pand th
e ability of taxpayers to compute
basis b
y averaging. The document also
propos
es regulations that provide brokers
and oth
ers until February 15 to furnish cer-
tain in
formation statements to customers.
This d
ocument also contains proposed
regul
ations that implement new reporting
requi
rements imposed upon persons that
trans
fer custody of stock and upon issuers
of sto
ck regarding organizational actions
that
affect the basis of the issued stock.
This
document also contains proposed
regu
lations reflecting changes in the law
that
alter how brokers report short sales of
secu
rities. Finally, this document provides
for
a notice of a public hearing on these
pro
posed regulations.
DAT
ES: Written or electronic comments
mus
t be received by February 8, 2010.
Out
lines of topics to be discussed at the
pub
lic hearing scheduled for February 17,
2010 must be re
ceived by February 8,
2010.
ADDRESSES: Se
nd submissions to:
CC:PA:LPD:PR
(REG–101896–09), room
5203, Interna
l Revenue Service, PO Box
7604, Ben Fran
klin Station, Washing-
ton, DC 20044
. Submissions may be
hand-delive
red Monday through Friday
between the h
oursof8a.m. and4p.m.
to CC:PA:LPD
:PR (REG–101896–09),
Courier’s D
esk, Internal Revenue
Service, 11
11 Constitution Avenue, NW,
Washington
, DC, or sent electronically
via the Fede
ral eRulemaking Portal
athttp://
www.regulations.gov(IRS
REG–10189
6–09). The public hearing
will be hel
d in the auditorium of the IRS
New Carrol
lton Federal Building, 5000
Ellin Road
, Lanham, Maryland 20706.
FOR FURTH
ER INFORMATION
CONTACT:
Concerning the pro-
posed reg
ulations under section 1012,
Edward C.
Schwartz of the Office of
Associat
e Chief Counsel (Income Tax
and Accou
nting) at (202) 622–4960;
concern
ing the proposed regulations under
section
s 3406, 6045, 6045A, 6045B, 6721,
and 6722
, Stephen Schaeffer of the Office
of Assoc
iate Chief Counsel (Procedure
and Adm
inistration) at (202) 622–4910;
concer
ning submissions of comments, the
public
hearing, and/or to be placed on the
buildi
ng access list to attend the public
hearin
g,FunmiTayloroftheOfficeof
Assoc
iate Chief Counsel (Procedure and
Admin
istration) at (202) 622–7180 (not
toll-
free numbers).
SUPPL
EMENTARY INFORMATION:
Paper
work Reduction Act
The co
llection of information contained
in thi
s notice of proposed rulemaking re-
lated
to the furnishing of information in
conne
ction with the transfer of securities
has b
een submitted to the Office of Man-
agem
ent and Budget in accordance with
the P
aperwork Reduction Act of 1995 (44
U.S.
C. 3507(d)). Comments on the col-
lect
ion of information should be sent to
the
Office of Management and Budget,
Att
n: Desk Officer for the Department
of t
he Treasury, Office of Information
and Regulator
y Affairs, Washington, DC
20503, with co
pies to theInternal Rev-
enue Service,
Attn: IRS Reports Clear-
ance Officer,
SE:W:CAR:MP:T:T:SP,
Washington, D
C 20224. Comments on
the collecti
on of information should be re-
ceived by Feb
ruary 16, 2010. Comments
are specific
ally requested concerning:
Whether the p
roposed collection of in-
formation is
necessary for the proper per-
formance of t
he functions of the IRS, in-
cluding whe
ther the information will have
practical u
tility;
The accurac
y of the estimated burden
associated
with the proposed collection of
informatio
n;
How the qual
ity, utility, and clarity of
the informa
tion to be collected may be en-
hanced;
How the burd
en of complying with the
proposed c
ollection of information may be
minimized
, including through the appli-
cation of a
utomated collection techniques
or other fo
rms of information technology;
and
Estimates
of capital or start-up costs
and costs
of operation, maintenance, and
purchase
of services to provide informa-
tion.
The colle
ction of information
in these p
roposed regulations in
§§1.6045
–1(c)(3)(xi)(C) and 1.6045A–1
concern
ing furnishing information in con-
nection
with a transfer of securities is
necessa
ry to allow brokers that effect sales
of trans
ferred covered securities to deter-
mine and
report the adjusted basis of the
securit
ies and whether any gain or loss
with re
spect to the securities is long-term
or shor
t-term in compliance with section
6045(g
) of the Internal Revenue Code
(Code)
. The collection of information is
requir
ed to comply with the provisions of
secti
on 403 of the Energy Improvement
and Ex
tension Act of 2008, Division B
of Pub
lic Law 110–343 (122 Stat. 3765,
3854 (
2008)). The likely respondents are
broke
rs of securities and issuers, transfer
agen
ts, and professional custodians of se-
curi
ties that do not effect sales.
Esti
mated total annual reporting bur-
den:
240,000 hours.
Esti
mated average annual burden per
resp
ondent: 8 hours.
February 1, 20103472010–5 I.R.B.

Estimated average burden per response:
4minutes.
Estimated number of respondents:
30,000.
Estimated frequency of responses:
4,000,000.
The burden for the collection of
information contained in proposed
regulation §1.6045–1 except for
§1.6045–1(c)(3)(xi)(C) will be reflected
in the burden on Form 1099-B,“Pro-
ceeds From Broker and Barter Exchange
Transactions,”when revised to request the
additional information in that proposed
regulation. The burden for the collection
of information contained in proposed reg-
ulation §1.6045B–1 will be reflected in
the burden on the form that the IRS will
create to request the information in that
proposed regulation.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Of-
fice of Management and Budget.
Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1), the Regulations
on Employment Tax and Collection of
Income Tax at the Source (26 CFR part
31), and the Regulations on Procedure and
Administration (26 CFR part 301) relating
to information reporting by brokers and
others as required by section 6045. The
document also contains proposed amend-
ments relating to the scope and computa-
tion of basis by the average basis method
under section 1012 and to new informa-
tion reporting requirements by brokers,
custodians, and issuers of securities under
sections 6045A and 6045B. These sections
were amended or added by section 403 of
the Energy Improvement and Extension
Act of 2008, Division B of Public Law
110–343 (122 Stat. 3765, 3854 (2008))
(the Act). These proposed regulations are
proposed to be issued under the authority
contained in sections 1012, 3406, 6045,
6045A, 6045B, and 7805.
1.Returns of Brokers
Section 6045(g) provides that every
broker that is required to file a return with
the IRS under section 6045(a) showing the
gross proceeds from the sale of a covered
security must include in the return the
customer’s adjusted basis in the security
and whether any gain or loss with respect
to the security is long-term or short-term.
Thus, a broker that is currently subject
to gross proceeds reporting under sec-
tion 6045(a) with respect to the sale of
a covered security is also subject to the
reporting of adjusted basis of that security
and whether any gain or loss with respect
to that security is long-term or short-term
under section 6045(g).
Section 1.6045–1(a)(1) provides that
the termbrokergenerally means any
U.S.orforeignpersonthat,intheordi-
nary course of a trade or business, stands
ready to effect sales to be made by others.
However, with respect to a sale (includ-
ingaredemptionorretirement) effected
at an office outside the United States, a
broker includes onlya person described
as a U.S. payor or U.S. middleman in
§1.6049–5(c)(5). Additionally, under
§1.6045–1(g)(1), reporting is not required
with respect to certain holders of securities
that are exempt foreign persons. U.S. and
foreign brokers that are subject to gross
proceeds reporting under the existing rules
will also be subject to reporting under the
rules of section 6045(g).
a.Covered Security
For purposes of reporting under sec-
tion 6045(g), section 6045(g)(3)(A) pro-
vides that a covered security is any spec-
ified security acquired on or after the ap-
plicable date if the security: (1) Was ac-
quired through a transaction in the account
in which the security was held; or (2) was
transferred to that account from an account
in which the security was a covered secu-
rity, but only if the broker receiving cus-
tody of the security receives a statement
under section 6045A (described later in
this preamble) with respect to the transfer.
b.Specified Security
Section 6045(g)(3)(B) provides that a
specified security is any: (1) Share of stock
in a corporation; (2) note, bond, deben-
ture, or other evidence of indebtedness; (3)
commodity, or a contract or a derivative
with respect to the commodity, if the Sec-
retary determines that adjusted basis re-
porting is appropriate; and (4) other fi-
nancial instrument with respect to which
the Secretary determines that adjusted ba-
sis reporting is appropriate.
c.Applicable Date
The applicable date of the reporting
requirements under section 6045(g) de-
pends on the type of specified security that
is sold. For stock in or of a corporation
(other than stock in a regulated invest-
ment company (RIC) or stock acquired in
connection with a dividend reinvestment
plan (DRP)), section 6045(g)(3)(C)(i) pro-
vides that the applicable date is January
1, 2011. For stock in a RIC (RIC stock)
or stock acquired in connection with a
DRP (DRP stock) (for which additional
rules are described later in this preamble),
section 6045(g)(3)(C)(ii) provides that
the applicable date is January 1, 2012.
For any other specified security, section
6045(g)(3)(C)(iii) provides that the appli-
cable date is January 1, 2013, or a later
date determined by the Secretary. The
reporting rules related to options trans-
actions apply only to options granted or
acquired on or after January 1, 2013, as
provided in section 6045(h)(3).
d.Reporting Method
A broker must report a customer’s ad-
justed basis under the following statutory
rules. Under section 6045(g)(2)(B)(i)(I),
a broker must report the adjusted basis
of any security (other than RIC stock or
DRP stock) using the first-in, first-out
(FIFO) basis determination method unless
the customer notifies the broker of the
specific stock to be sold or transferred by
means of making an adequate identifica-
tion of the stock sold or transferred at the
time of sale or transfer. Under section
6045(g)(2)(B)(i)(II), a broker must report
the adjusted basis of RIC stock or DRP
stock in accordance with the broker’s de-
fault method under section 1012 unless
the customer notifies the broker that the
customer elects another permitted method.
2.Determination of Basis
a.In General
For any sale, exchange, or other dispo-
sition of a specified security on or after the
applicable date, section 1012(c) provides
that the conventions prescribed by regula-
tions under section 1012 for determining
2010–5 I.R.B.348February 1, 2010

adjusted basis apply on an account by ac-
count basis.
b.RIC Stock
Section 1012(c)(2) provides that RIC
stock acquired before January 1, 2012, is
treated as held in a separate account from
RIC stock acquired on or after that date.
However, a RIC may elect (at the time
andintheformandmannerprescribedby
the Secretary), on a stockholder by stock-
holder basis, to treat all stock in the RIC
held by the stockholder as one account
without regard to when the stock was ac-
quired (single-account election). When
this election applies, the average basis of
a customer’s stock is computed by averag-
ing the basis of shares of identical stock
acquired before, on, and after January 1,
2012, and all the shares are treated as cov-
ered securities. If a broker holds RIC stock
as a nominee of the beneficial owner of the
shares, the broker makes the election.
c.DRP Stock
Ifstockisacquiredonorafter
January 1, 2011, in connection with a
DRP, section 1012(d)(1) provides that the
basis of that stock is determined under
one of the basis computation methods
permissible for RIC stock. Accordingly,
the average basis method may be used
for determining the basis of DRP stock.
This special rule for DRP stock, however,
applies only while the stock is held as part
of the DRP. If the stock is transferred to
another account, under section 1012(d)(2),
each share of stock has a cost basis in
that other account equal to its basis in the
DRP immediately before the transfer (with
adjustment for charges connected with the
transfer).
Section 1012(d)(4)(A) provides that a
DRP is any arrangement under which div-
idends on stock are reinvested in stock
identical to the stock on which the divi-
dends are paid. Stock is treated as acquired
in connection with a DRP if the stock is ac-
quired pursuant to the DRP or if the divi-
dends paid on the stock are subject to the
DRP. Under section 1012(d)(3), in deter-
mining basis under this rule, the account by
account rules of section 1012(c), includ-
ing the single-account election available to
RICs, apply.
3.Other Broker Reporting Provisions
a.Wash Sales
Section 6045(g)(2)(B)(ii) provides that,
unless the Secretary provides otherwise, a
customer’s adjusted basis in a covered se-
curity generally is determined for report-
ing purposes without taking into account
the effect on basis of the wash sale rules of
section 1091 unless the purchase and sale
transactions resulting in a wash sale occur
in the same account and are in identical se-
curities (rather than substantially identical
securities as required by section 1091).
b.S Corporations
Section 6045(g)(4) provides that, for
purposes of section 6045, an S corpora-
tion (other than a financial institution) is
treated in the same manner as a partner-
ship. This rule applies to any sale of a
covered security acquired by an S corpora-
tion (other than a financial institution) af-
ter December 31, 2011. When this rule
takes effect, brokers generally will be re-
quired to report gross proceeds and basis
information to customers that are S corpo-
rations for securities purchased on or after
January 1, 2012.
c.Short Sales
In the case of a short sale, section
6045(g)(5) provides that gross proceeds
and basis reporting under section 6045
generally is required for the year in which
the short sale is closed (rather than, as
under the present rule for gross proceeds
reporting, the year in which the short sale
is entered into).
d.Options
Section 6045(h)(1) provides that if a
covered security is acquired or disposed of
pursuant to the exercise of an option that
was granted or acquired in the same ac-
count as the covered security, the amount
received with respect to the grant or paid
with respect to the acquisition of such
option must be treated for reporting pur-
poses as an adjustment to gross proceeds
or as an adjustment to basis, as the case
may be. Section 6045(h)(2) provides
that gross proceeds and basis reporting
is required when there is a lapse of, or
a closing transaction with respect to, an
option on a specified security or an exer-
cise of a cash-settled option on a specified
security. Section 6045(h)(3) provides that
section 6045(h)(1) and (h)(2) do not apply
to any option granted or acquired before
January 1, 2013.
e.Time for Furnishing Statements
The Act amended section 6045(b) to
extend the due date from January 31 to
February 15 for furnishing certain infor-
mation statements to customers, effective
for statements required to be furnished
after December 31, 2008. Section 6045(b)
provides that the statements to which the
new February 15 due date applies are state-
ments required under section 6045 and
statements with respect to other reportable
items that are furnished with these state-
ments in a consolidated reporting state-
ment (as defined in regulations under sec-
tion 6045). See Notice 2009–11, 2009–5
I.R.B. 420, providing that, with respect
to reportable items from calendar year
2008, brokers had until February 17, 2009,
to report all items that they customarily
reported on their annual composite form
recipient statements.See§601.601(d)(2).
4.Transfer Statements
The Act added section 6045A, which
provides that a broker and any other per-
son specified in Treasury regulations (ap-
plicable person) that transfers to a broker
a security that is a covered security in the
hands of the transferring person must fur-
nish to the broker receiving custody of the
security (receiving broker) a written state-
ment that allows the receiving broker to
satisfy the basis reporting requirements of
section 6045(g). Section 6045A(c) pro-
vides that, unless the Secretary provides
otherwise, the statement required by this
rule must be furnished to the receiving bro-
ker not later than fifteen days after the
transfer of the covered security.
5.Issuer Reporting
The Act added section 6045B, which
provides that an issuer of specified secu-
rities must file a return according to forms
or regulations prescribed by the Secretary
describing any organizational action (such
as a stock split, merger, or acquisition)
February 1, 20103492010–5 I.R.B.

that affects the basis of the specified se-
curity, the quantitative effect on the basis
of that specified security, and any other in-
formation the Secretary requires. Section
6045B(b) provides that this return must be
filed within forty-five days after the date
of the organizational action, unless the ac-
tion occurs in December, in which case the
return must be filed by January 15th of the
following year.
Section 6045B(c) provides that an is-
suer must furnish, according to forms or
regulations prescribed by the Secretary, to
each nominee with respect to that security
(or to each certificate holder if there is no
nominee) a written statement showing: (1)
The name, address, and telephone number
of the information contact of the person re-
quired to file the return; (2) the information
required to be included on the return with
respect to the security; and (3) any other in-
formation required by the Secretary. This
statement must be furnished to the nomi-
nee or certificate holder on or before Jan-
uary 15th of the year following the calen-
dar year in which the organizational action
took place.
Section 6045B(e) provides that the
Secretary may waive the return filing and
information statement requirements if the
person to which the requirements apply
makes publicly available, in the form and
manner determined by the Secretary, the
name, address, telephone number, and
e-mail address of the information contact
of that person, and the information about
the organizational action and its effect on
basis otherwise required to be included in
the return.
6.Penalties
The Act amended the list of returns and
statements in section 6724(d) for which
sections 6721 and 6722 impose penalties
for any failure to file or furnish complete
and correct returns and statements. This
section imposes a penalty on brokers for a
failure to file returns or furnish complete
and correct statements after a sale of se-
curities as required by section 6045. Sec-
tion 6724(d) now also imposes penalties
with respect to the returns and statements
required by sections 6045A and 6045B.
7.Request for Comments
Notice 2009–17, 2009–8 I.R.B. 575,
published by the IRS on February 23,
2009, invited public comments regarding
guidance under the new reporting require-
ments in sections 6045, 6045A, and 6045B
and for determining the basis of certain
securities under section 1012. In particu-
lar, Notice 2009–17 requested comments
on the applicability of the reporting re-
quirements, basis method elections, DRPs,
reconciliation with customer reporting,
special rules and mechanical issues, trans-
fer reporting, issuer reporting, and broker
practices and procedures. Many com-
ments were received in response to Notice
2009–17. The comments were considered
in developing the proposed regulations.
See§601.601(d)(2).
Explanation of the Provisions and
Summary of Comments
The proposed regulations provide rules
for determining basis and for reporting
adjusted basis and whether any gain or
loss on a sale is long-term or short-term.
The proposed regulations also address the
new reporting requirements imposed upon
persons transferring custody of stock and
upon issuers of stock.
The proposed regulations do not ad-
dress rules regarding reporting for op-
tions, compensatory options, or other
equity-based compensation arrangements,
or reporting of adjusted basis for indebted-
ness, because indebtedness is only subject
to the requirements of section 6045(g) if
acquired on or after January 1, 2013, and
options are only subject to the require-
ments of section 6045(g) and (h) if granted
or acquired on or after January 1, 2013.
These rules are expected to be addressed
in future guidance.
The proposed regulations generally are
limited to the amendments to the Inter-
nal Revenue Code (Code) under the Act
in sections 1012, 6045, 6045A, 6045B,
and 6724 and do not address requests from
commentators regarding changes to sub-
stantive rules in other areas such as the
rules regarding allocation of a return of
capital. The proposed regulations also do
not address technical issues related to in-
formation reporting such as electronic de-
livery of returns by brokers to customers.
These comments are outside the scope of
the proposed regulations.
1.Returns of Brokers
Section 1.6045–1(c) requires brokers to
make a return of information with respect
to each sale by a customer of the broker ef-
fected by the broker in the ordinary course
of a trade or business in which the broker
stands ready to effect sales to be made by
others. Section 1.6045–1(d) sets forth the
information that the broker must include
on the return.
The proposed regulations amend the
definition ofbrokerin §1.6045–1(a)(1) to
modify the exception for non-U.S. payors
and non-U.S. middlemen. Under the re-
vised rule, a non-U.S. payor or non-U.S.
middleman would be a broker to the ex-
tent provided in a withholding agreement
described in §1.1441–1(e)(5)(iii) between
a qualified intermediary and the IRS or
similar agreement with the IRS. The Trea-
sury Department and IRS expect that such
agreements generally will provide that
the broker that is party to such agreement
will be subject to the broker reporting re-
quirements under section 6045 to the same
extent as U.S. payors and U.S. middlemen.
The Treasury Department and IRS request
comments regarding the usefulness of in-
formation received from non-U.S. payors
and non-U.S. middlemen, the costs to
non-U.S. payors and non-U.S. middlemen
of complying with such a requirement,
and other potential effects of such a re-
quirement in a withholding or reporting
agreement with the IRS.
a.Form and Manner of New Broker
Reporting Requirements
The proposed regulations provide that
brokers must report adjusted basis and
whether any gain or loss with respect to
the security is long-term or short-term on
Form 1099-B,“Proceeds From Broker
and Barter Exchange Transactions,”or
any successor form under section 6045(a)
when reporting the sale of a covered se-
curity. They clarify that the basis reported
by a broker is the total amount paid by a
customer or credited against a customer’s
account as a result of the acquisition of
securities adjusted for commissions and
the effects of other transactions occurring
within the account. The proposed regu-
lations also require brokers to adjust the
basis they report to take into account the
information received on a transfer state-
2010–5 I.R.B.350February 1, 2010

ment in connection with the transfer of a
covered security (including transfers from
a decedent and gift transfers) as well as
information received from issuers of stock
about the quantitative effect on basis from
corporate actions. The proposed regula-
tions generally do not require a broker to
adjust the reported basis for transactions,
elections, or events occurring outside the
account. For example, with respect to
wash sales (discussed in more detail later
in this preamble), the proposed regulations
require that a broker adjust the reported
basis in accordance with section 1091 if
both the purchase and sale transactions
occur with respect to identical securities
in the same account.
Commentators suggested that brokers
be required to report certain warnings or
indicators to a customer about potential
discrepancies between the broker-reported
basis and the basis the customer must re-
port on the customer’s income tax return.
For example, commentators suggested
that a flag be added to the information
return that would alert a customer that a
foreign issuer may not have reported to the
broker all issuer actions affecting basis.
The proposed regulations do not adopt
these suggestions but, as discussed with
respect to wash sales later in this pream-
ble, require a broker to report to customers
engaging in wash sales the amount of any
disallowed loss. Brokers may communi-
cate additional information on other state-
ments furnished to customers if desired.
The Treasury Department and IRS re-
quest further comments regarding whether
additional information items should be
required on the information return. A draft
of the 2011 Form 1099-B is available for
viewing and comment on the IRS Web site
athttp://www.irs.gov/pub/irs-dft/f1099b--
dft.pdf.
For a sale of securities that were ac-
quired on different dates or at different
prices, some commentators requested that
brokers be permitted to report the sale on a
single information return. Other commen-
tators asked that the proposed regulations
require separate reporting of the sale of
securities acquired on different dates or at
different prices. The proposed regulations
generally maintain the current require-
ment that brokers report a sale of securities
within an account on one return, even if
the sale involves multiple acquisitions, to
limit the number of separate returns filed
with the IRS and statements furnished
to customers. However, because brokers
must report whether any gain or loss on
the sale of a covered security is short-term
or long-term, and because noncovered se-
curities must be reported separately from
covered securities to avoid treatment as
covered securities, a single sale in an ac-
count could necessitate as many as three
returns if the sale included covered se-
curities held more than a year, covered
securities held one year or less, and non-
covered securities.
b.Scope of Covered Securities and
Treatment of Noncovered Securities
The proposed regulations clarify that a
broker is not required to report adjusted ba-
sis and whether any gain or loss on a sale is
long-term or short-term for securities that
are excepted from allreporting under sec-
tion 6045 at the time of their acquisition.
For example, the new basis reporting re-
quirements do not apply to a security pur-
chased by an organization that is tax-ex-
empt even if the organization later loses its
tax-exempt status and becomes subject to
gross proceeds reporting on the sale of se-
curities under section 6045(a).
With respect to a security transferred
into an account in a non-sale transaction,
the security is a covered security under the
proposed regulations if it was a covered se-
curity prior to transfer and the broker re-
ceives the statement required under section
6045A for the transfer (the transfer state-
ment, discussed in more detail later in this
preamble) indicating that the security is a
covered security. Conversely, a security
is a noncovered security if the broker re-
ceives a transfer statement indicating that
the security is a noncovered security. A
transferred security will be presumed to be
a covered security unless the transfer state-
ment expressly states that the security is a
noncovered security.
If the receiving broker does not receive
a transfer statement or receives a transfer
statement that does not contain all of the
required information, the proposed regu-
lations permit the broker to treat the se-
curity as a noncovered security if, as sug-
gested by commentators, the broker noti-
fies the person that effected the transfer
and requests a complete statement, and no
complete statement is provided in response
to this request before the broker reports
the sale or subsequent transfer of the se-
curity. The proposed regulations do not
require brokers to make this request more
than once.
If a broker receives the information re-
quired on the transfer statement after re-
porting the sale of the security, the pro-
posed regulations require the broker to file
a corrected Form 1099-B if the reporting
was incorrect or incomplete. Similarly,
if an issuer furnishes the return required
by section 6045B concerning corporate or-
ganizational actions (the issuer statement,
discussed in more detail later in this pre-
amble) after the broker has reported the
sale of the security, the proposed regula-
tions require the broker to file a corrected
Form 1099-B to report any adjustments to
basis not reflected previously. Commenta-
tors requested that corrected reporting not
be required forde minimisadjustments or
for statements furnished beyond a specific
period after the close of the calendar year.
The proposed regulations do not adopt ei-
ther suggestion. TheTreasury Department
and IRS request further comments regard-
ing corrected reporting.
Commentators expressed concern re-
garding the difficulty, in some cases, of
determining whether a security is stock
(for which basis must be reported for ac-
quisitions beginning in January 2011 or
January 2012) or indebtedness or another
financial instrument (for which basis does
not need to be reported for acquisitions
in 2011 or 2012). Some commentators
suggested that the proposed regulations
classify each security or require issuers
to file a classification report with the
IRStopermittheIRStopublishareport
identifying each security. The proposed
regulations do not adopt this approach.
Instead, the proposed regulations provide
that, solely for purposes of determining
the applicable date for basis reporting,
any security an issuer classifies as stock is
treated as stock. If no issuer classification
has been made, the security is not treated
as stock unless the broker knows, or has
reason to know, that the security is reason-
ably classified as stock under general tax
principles.
Some commentators expressed a de-
sire to report adjusted basis and whether
any gain or loss on a sale is long-term
or short-term for noncovered securities.
Other commentators requested that the
regulations prohibit such reporting on
February 1, 20103512010–5 I.R.B.

Form 1099-B and permit reporting only
of adjusted basis and whether any gain or
loss on a sale is long-term or short-term
to the customer on statements not filed
with the IRS. In orderto encourage more
reporting of information and simplify re-
porting by taxpayers on their income tax
returns, the proposed regulations allow
brokers the option of reporting adjusted
basis and whether any gain or loss on a
sale is long-term or short-term for noncov-
ered securities on a security by security
basis. Therefore, a broker may choose
to report this information for any given
noncovered security. The proposed reg-
ulations also provide that a broker that
chooses to report this information with
respect to a noncovered security is not
subject to penalties under section 6721 or
6722 for any failure to report such infor-
mation correctly, provided that the broker
indicates on Form 1099-B that the sale
reported is a sale of anoncovered secu-
rity. The instructions to the tax return will
inform taxpayers of their duty to verify
theinformationreportedbybrokersand
to adjust the reported information when
necessary to reflect the taxpayer’s correct
information. This duty applies equally to
covered and noncovered securities.
c.Determination of Basis Required To Be
Reported
Section 6045(g)(2)(B)(i)(I) provides
that, except for RIC stock or DRP stock,
a broker must report using the FIFO basis
determination method unless the customer
notifies the broker of the specific secu-
rity to be sold or transferred by means of
making an adequate identification of the
security sold or transferred at the time of
sale or transfer. With respect to RIC stock
or DRP stock, section 6045(g)(2)(B)(i)(II)
provides that a broker must report adjusted
basis in accordance with the broker’s de-
fault method under section 1012 unless
the customer notifies the broker that the
customer elects another permitted method.
The proposed regulations clarify that,
when a customer sells less than the entire
position of a security in an account, the
selling broker must follow the customer’s
instruction, if any, adequately identifying
the security sold or, when applicable, re-
questing that average basis be used to com-
pute the basis of eligible stock. Thus, un-
der the proposed regulations, a broker must
report basis using any permitted lot iden-
tification and basis determination method
the customer chooses when the customer
provides a valid instruction (discussed in
more detail later in this preamble). Ab-
sent a valid instruction from the customer,
the proposed regulations clarify that a bro-
ker must report basis of a security (other
than stock eligible for averaging) using the
FIFO basis determination method when re-
porting the sale. The proposed regulations
also clarify that, absent a valid instruction
to use another method, a broker must re-
port basis for stock eligible for averaging
using the broker’s default basis determina-
tion method.
Commentators requested that brokers
and customers be permitted to report basis
by different methods and that brokers be
permitted to report basis for all sales using
only one of the permitted basis determi-
nation methods, for example, the average
basis method. The proposed regulations
do not adopt these requests because sec-
tion 1012 permits customers to report basis
by a different permissible method than the
default method selected by the broker and
section 6045 requires brokers to follow in-
structions from customers regarding this
selection. The requested rules are incon-
sistent with the goal of conforming broker
reporting with taxpayer basis determina-
tion method elections to facilitate and pro-
mote compliance in taxpayer reporting of
income.
2.Average Basis Method
Section 1.1012–1(e) provides rules for
computing the basis of RIC stock by av-
eraging the cost of all shares in the ac-
count (the average basis method). Tax-
payers may elect to use the average basis
method for RIC stock acquired at differ-
ent prices and maintained by a custodian
or agent in an account for the periodic ac-
quisition, redemption, sale, or other dispo-
sition of the stock.
Consistent with section 1012(d)(1), the
proposed regulations extend the average
basis method to shares of stock acquired
after December 31, 2010, in connection
with a DRP, and clarify that shares are eli-
gible for averaging only if they are identi-
cal.
Commentators suggested that stock
should be eligible for averaging together if
it has the same Committee on Uniform Se-
curity Identification Procedures (CUSIP)
number. The proposed regulations adopt
this suggestion and defineidentical shares
of stockas stock with the same CUSIP
number (or other security identifier num-
ber as permitted in additional guidance of
general applicability,see§601.601(d)(2)).
However, for purposes of defining a DRP,
the proposed regulations provide that the
stock of a successor entity or entities that
result from certain corporate actions such
as mergers, consolidations, split-offs, or
spinoffs, is identical to the stock of the pre-
decessor entity. Thus,corporate actions
will not cause stock acquired in connection
with a DRP to become ineligible for av-
eraging because, for example, a dividend
declared before the action and paid after
the action is completed is not reinvested
in stock with the same CUSIP number.
The proposed regulations further provide,
however, that shares of stock acquired in
connection with a DRP are not identical
to shares of stock with the same CUSIP
number that are not acquired in connection
with a DRP.
3.Broker’s Default Basis Determination
Method
Consistentwithsection
6045(g)(2)(B)(i)(II), the proposed regula-
tions provide that the basis of RIC stock
and DRP stock is determined in accor-
dance with a broker’s default method,
unless a taxpayer elects another permitted
method.
a.Consistency in Use of Average Basis
Method
Commentators suggested that the pro-
posed regulations should not require bro-
kers to compute basis for a DRP using
the average basis method for taxpayers
electing this method. The proposed regu-
lations do not adopt this recommendation
because it is inconsistent with the statu-
tory requirement that the average basis
method be available to any taxpayer that
desires to use it for a DRP, as well as with
the goal of conforming broker reporting
with taxpayer basis determination method
elections to facilitate and promote com-
pliance in taxpayer reporting of income.
The proposed regulations specify that a
broker must compute basis using the basis
determination method the taxpayer elects.
2010–5 I.R.B.352February 1, 2010

The proposed regulations also provide that
the taxpayer must report gain or loss on
its return using the method the taxpayer
elects or, if the taxpayer fails to make an
election, the broker’s default method.
b.Default Method
Commentators suggested that a bro-
ker should be allowed to determine a
default basis determination method when
a taxpayer fails to elect a method for
determining the basis of RIC stock or
DRP stock. Consistent with section
6045(g)(2)(B)(i)(II), the proposed regu-
lations do not prescribe a broker default
method, which each broker may deter-
mine.
c.Communicating Default Method to
Taxpayers
A commentator suggested that the pro-
posed regulations should require that a
broker notify a taxpayer of the broker’s
default method by the earlier of opening a
new account or January 1 of the year the
average basis methodelection is effective.
Other commentators suggested, however,
that the proposed regulations should not
specify how brokers communicate their
default basis determination method to tax-
payers. The proposed regulations do not
require a specific method or time for this
communication.
4.Definition of Dividend Reinvestment
Plan
a.Issuer and Non-Issuer Plans
A commentator requested that the pro-
posed regulations broadly definedividend
reinvestment planto include both broker
administered plans and issuer, or corpo-
rate, administered plans. Other commenta-
tors suggested, however, that if brokers are
required to use the average basis method,
the definition should include only issuer-
administered plans. The proposed regu-
lations define dividend reinvestment plan
to include a written arrangement, plan, or
program administered by an issuer or non-
issuer of stock. Neither the statute nor
the legislative history indicates any Con-
gressional intent to limit the average basis
method to issuer-administered plans.
b.Reinvestment of Dividends
A commentator suggested that a plan
requiring reinvestment of only a portion of
the dividends paid should qualify as a DRP
under the proposed regulations. The pro-
posed regulations provide that a plan quali-
fies as a DRP if the plan documents require
that at least 10 percent of any dividend paid
be reinvested in identical stock. Assuming
this 10 percent requirement is met, a plan
may reinvest different percentages of div-
idends in different stocks.
A commentator opined that a plan
should not be considered a DRP if the
stock is not paying dividends when the
issuer offers the plan. Another commen-
tator verbally stated that the proposed
regulations should provide that a plan may
qualify as a DRP even if the stock has
never issued dividends or ceases to pay
dividends. This commentator noted that
the stock of a start-up company may be
included in a DRP in the expectation of
paying dividends in the future, and that a
company that traditionally pays dividends
may be required to temporarily suspend
dividends, for example in the case of
bankruptcy reorganization. The proposed
regulations provide that a stock may be
held in a DRP even if no dividends have
ever been declared or paid or the issuer
has ceased paying dividends.
A commentator suggested that the term
dividendsshould include all income from
stock for purposes of a DRP. The proposed
regulations do not define dividends. Spe-
cific comments are requested on whether
and how the regulations should define div-
idends, such as whether the regulations
should define the term by reference to sec-
tion 316, or more broadly to include any
payment or distribution from stock, in-
cluding ordinary dividends, capital gains
dividends or distributions, non-taxable re-
turns of capital, and cash dividends in lieu
of fractional shares. Comments may ad-
dress industry practices that relate to this
definition.
c.Acquired in Connection With a DRP
Commentators suggested that subse-
quent additions to a DRP, such as pur-
chases or transfers of stock, be eligible for
the average basis method. A commentator
recommended that subsequent additions
be separated into separate averaging pools.
Another commentator suggested that a
single averaging pool should be allowed
for all post-effective date identical stock.
One commentator stated that brokers have
difficulty distinguishing non-DRP pur-
chases of stock from purchases of stock
with the same CUSIP number in a DRP,
and therefore brokers should be allowed
to apply the same basis determination
method to all stock with the same CUSIP
number in an account.
Consistent with section 1012(d)(4), the
proposed regulations provide that stock
isacquiredinconnectionwithaDRPif
the stock is acquired under the DRP or
the dividends paid are subject to the DRP.
StockacquiredinconnectionwithaDRP
includes the initial purchase of stock in
the DRP, subsequent transfers of identical
stock into the DRP, additional periodic
purchases of identical stock through the
DRP, and all identical stock acquired
through reinvestment of dividends paid
under the DRP.
d.Withdrawal From or Termination of a
DRP
A commentator asked about the con-
sequences if a DRP is terminated or a
taxpayer transfers shares from a DRP at
one broker to a broker that does not offer
a DRP. The proposed regulations provide
that, if a taxpayer withdraws from a DRP
or the plan administrator terminates the
DRP, shares of identical stock acquired
after the withdrawal or termination are
notacquiredinconnectionwithaDRP.
After the withdrawal or termination, the
taxpayer may no longer use the average
basis method for the stock, but the basis of
each share of stock immediately after the
change is the same as the basis immedi-
ately before the change.
5.Computing Average Basis
a.Elimination of Double-Category
Method
Under §1.1012–1(e)(3) and (4), tax-
payers compute average basis using ei-
ther a double-category method, which
divides stock by holding period and av-
erages long-term shares separately from
short-term shares, or a single-category
method, which averages all shares together
regardless of holding period.
February 1, 20103532010–5 I.R.B.

Commentators suggested that the
proposed regulations eliminate the dou-
ble-category method and noted that it is
not widely used. One commentator stated
that problems may occur when shares are
transferred between accounts that use dif-
ferent methods. The proposed regulations
adopt this suggestion and eliminate the
double-category method. The proposed
regulations provide that average basis is
computed by averaging the basis of all
identical stock in an account regardless
of holding period and include a transi-
tion rule that requires taxpayers using the
double-category method to average the
basis of all identical stock in an account
on the date of publication of final regu-
lations. Specific comments are requested
on whether the double-category method
should be retained.
Section 1.1012–1(e)(4)(iii) provides
that the single-category method may not
be used if it appears that the taxpayer’s
purpose is to convert long-term gain or
loss into short-term gain or loss, orvice
versa. Consistent with the elimination
of the double-category method, the pro-
posed regulations remove this provision.
The proposed regulations include ordering
rules that specify that the holding period
of stock to which the average basis method
applies is determined on a FIFO basis.
b.Wash Sales
Section 1.1012–1(e)(4)(iv) provides
that section 1091(d) and the associated
regulations apply to wash sales of stock
from an account using the single-category
method of computing average basis. Com-
mentators suggested that brokers should
not be required to apply these rules to
stock held in separate accounts.
Section 6045(g)(2)(B)(ii) provides that,
for purposes of reporting, brokers must ap-
ply the wash sale rules only to acquisition
and sale transactions in the same account
and for identical securities. The rules for
brokers are discussed later in this pream-
ble.
For a taxpayer using the average ba-
sis method, the proposed regulations pro-
vide that the taxpayer must apply section
1091 and the associated regulations (deal-
ing with wash sales of substantially identi-
cal securities) in computing average basis
regardless of whether the stock or security
sold or otherwise disposed of and the stock
acquired are in the same account or in dif-
ferent accounts.
c.Basis After Change From Average
Basis Method
The proposed regulations provide that,
except for a revocation of the average ba-
sis method election (discussed later in this
preamble), if a taxpayer changes from the
average basis method to another basis de-
termination method for any reason, the ba-
sis of each share of stock immediately after
the change is the same as the basis imme-
diately before the change.
6.Time and Manner of Making the
Average Basis Method Election
Section 1.1012–1(e)(6) provides that a
taxpayer elects to use the average basis
method on an income tax return for the
first taxable year the taxpayer wants the
election to apply.
a.Manner of Making the Average Basis
Method Election
Under the proposed regulations, a tax-
payer elects the average basis method for
covered securities by notifying the custo-
dian or other agent for the taxpayer’s ac-
count in writing. The taxpayer makes a
separate election for each account holding
stock for which the average basis method
is permissible. A taxpayer uses the proce-
dures under the current regulations to elect
the average basis method for noncovered
securities.
Commentators requested that the pro-
posed regulations provide guidance on
how taxpayers must inform brokers of
their basis determination method. Com-
mentators suggested that brokers may
obtain this information through documents
provided to a taxpayer opening an account
and urged that the rules be flexible and
allow electronic communication. The pro-
posed regulations require that a taxpayer
must notify a custodian or agent in writing
of an average basis method election, but
otherwise do not specify how a taxpayer
must communicate a basis determination
method.
b.Time for Making the Average Basis
Method Election
Some commentators suggested that
taxpayers should be allowed or required to
choose a basis determination method when
opening an account or when acquiring
stock for which the average basis method
is permitted. Other commentators stated
that taxpayers should choose a method by
the date of a sale. The proposed regula-
tions provide that taxpayers may elect the
average basis method at any time, effec-
tive for sales after the date of the election.
c.Revocation of Average Basis Method
Election
A commentator asked for clarification
on how long brokers must retain basis
information. Another commentator sug-
gested that any revocation period should
end by the earlier of the date of first sale,
the end of the calendar year, or one year
from the first purchase of stock.
In order to minimize broker record-
keeping requirements, the proposed regu-
lations provide that a taxpayer may revoke
the average basis method election by the
earlier of one year from the date of making
the election or the first sale or other dispo-
sition of the stock following the election.
A broker may extend the one-year period
but no longer than the first sale. A revo-
cation applies to all identical stock in an
account and is effective when the taxpayer
notifies the broker or other custodian of
the revocation. If a taxpayer revokes the
election, the basis of each share of stock
in the account is determined using another
permissible method.
d.Change From Average Basis Method
Section 1.1012–1(e)(6)(ii) provides
that a taxpayer that elects to use the av-
erage basis method may not revoke the
election without the consent of the Com-
missioner. Under Rev. Proc. 2008–52,
2008–36 I.R.B. 587, Section 30 of the
Appendix, a taxpayer within the scope
of Rev. Proc. 2008–52 uses the auto-
matic consent procedures to change to the
basis determination method described in
§1.1012–1(c)(1) (FIFO or specific identi-
fication, discussed later in this preamble).
The revenue procedure provides that the
automatic consent procedures do not apply
to RIC stock or to a change from FIFO to
specific identification or vice versa, which
is not a change in method of accounting.
See§601.601(d)(2).
A commentator recommended that tax-
payers should not be able to change from
2010–5 I.R.B.354February 1, 2010

the average basis method except by open-
ing a new account. Other commentators
opined that taxpayers should have broad
discretion to change from the average ba-
sis method. Severalcommentators sug-
gested that brokers should not be required
to recreate a stock’s original basis if a
taxpayer changes from the average basis
method.
The proposed regulations provide that a
taxpayer may change from the average ba-
sismethodtoanotherpermissible method
at any time. A taxpayer’s change in ba-
sis determination method applies to stock
acquired on or after January 1, 2012, in a
different manner than to stock acquired be-
fore January 1, 2012. Consistent with the
account by account rules, discussed later
in this preamble, a change in basis deter-
mination method applies to identical stock
a taxpayer acquires on or after January 1,
2012, that the taxpayer holds in the same
account. By contrast, a taxpayer’s change
in basis determination method applies to
all identical stock the taxpayer acquires
before January 1, 2012, that the taxpayer
holds in any account. Unless the taxpayer
revokes the average basis method election,
discussed earlier in this preamble, the tax-
payer must change from the average basis
method prospectively. Thus, the basis of
each share of stock to which the change
applies is the basis immediately before the
change.
A commentator requested clarification
on how often a taxpayer may change a
basis method election. Commentators sug-
gested that changes should be limited, for
example to once per year. The proposed
regulations do not limit the number of
times or frequency a taxpayer may change
basis determination methods.
A commentator suggested that the pro-
posed regulations should require taxpayers
to obtain the Commissioner’s permission
to change basis determination methods.
Another commentator recommended that
taxpayers be allowed to change from the
average basis method without the Com-
missioner’s permission. The proposed
regulations clarify that a change in ba-
sis determination method is a change
in method of accounting to which the
provisions of sections 446 and 481 and
the associated regulations apply. A tax-
payer may change its basis determination
method by obtaining the consent of the
Commissioner under applicable adminis-
trative procedures. The IRS may publish
additional guidance of general applica-
bility, see §601.601(d)(2), that provides
broad consent for taxpayers to change ba-
sis determination methods.
7.Applying Average Basis Method
Account by Account
Section 1.1012–1(e)(2) provides that
a taxpayer must use the same basis de-
termination method for all of the tax-
payer’s accounts in the same RIC. Section
1.1012–1(e)(6)(ii) provides that a tax-
payer must apply an average basis method
election to all shares (except certain gift
shares) of a particular RIC that the tax-
payer holds in any account.
a.Definition of Account
Commentators requested that the pro-
posed regulations define the term “ac-
count.” Commentators noted that each
fund of a RIC is treated as a single account,
while a broker may hold other securities
with different CUSIP numbers in a single
account. Commentators suggested that
accounts should be treated as separate
accounts if they have different account
numbers, and that subaccounts such as
cash and margin accounts should not be
treated as separate accounts.
The proposed regulations do not define
the term account. Instead, the proposed
regulations provide rules prescribing when
stock must be treated as held in separate
accounts and the result of that treatment.
b.Basis Determination Methods Applied
Account by Account
Commentators suggested that the pro-
posed regulations allow a taxpayer to make
separate basis calculations for the same
stock held in two separate accounts, even
ifheldbythesamebroker. Theproposed
regulations adopt this suggestion. Con-
sistent with section 1012(c), the proposed
regulations provide that the average ba-
sis method election applies to all identi-
cal RIC stock or DRP stock in an account.
For sales or other dispositions of stock af-
ter 2011, a taxpayer may use different basis
determination methods for identical stock
held in two separate accounts, even if held
by the same broker. A taxpayer also may
use different basis determination methods
for shares of stock held in the same account
that are not identical.
For sales or other dispositions before
2012 of RIC stock or DRP stock for which
a taxpayer has used the average basis
method, the proposed regulations retain
the rules requiring that the taxpayer use
the average basis method for identical
stock held in separate accounts. However,
a taxpayer may use different basis deter-
mination methods for shares of stock held
in the same account that are not identical.
c.Separate Accounts
Consistent with section 1012(c)(2)(A),
the proposed regulations provide that, ab-
sent a single-account election (explained
later in this preamble), RIC stock or DRP
stock that a taxpayer acquires before Jan-
uary 1, 2012, is treated as held in a sepa-
rate account from any stock acquired on or
after that date. The proposed regulations
further provide that any stock that is a cov-
ered security (within the meaning of sec-
tion 6045(g)(3)) is treated as held in a sep-
arate account from any stock that is a non-
covered security regardless of when ac-
quired, as is consistent with Congressional
intent. The proposed regulations include
an example in which a security acquired
on or after January 1, 2012, is a noncov-
ered security.
8.Single-Account Election
Section 1012(c)(2) provides that, with
respect to RIC stock, a RIC may elect (at
the time and in the form and manner pre-
scribed by the Secretary), on a stockholder
by stockholder basis, to treat all stock in
the RIC held by the stockholder as one ac-
count without regard to when the stock was
acquired (single-account election). Sec-
tion 1012(d)(3) provides that the account
by account rules of section 1012(c), in-
cluding the single-account election avail-
able to RICs, also apply to DRP stock.
a.Application and Scope of Election
The proposed regulations provide that
a RIC or DRP may make a single-account
election to treat identical RIC stock or
identical DRP stock held in separate ac-
counts for which the taxpayer has elected
to use the average basis method as held
February 1, 20103552010–5 I.R.B.

in a single account. If a broker holds the
stock as a nominee, the broker, and not the
RIC or DRP, makes the election. The sin-
gle-account election is irrevocable. Com-
mentators opined that a single-account
election should not encompass stock a
taxpayer acquires before January 1, 2012,
if the basis information is unreliable. A
commentator requested that the proposed
regulations include a standard of reliability
or, alternatively, allow brokers to exclude
stock for which reliable basis information
is not available from the single-account
election. Another commentator requested
penalty relief if reliable basis informa-
tion is not available for pre-effective date
shares.
The proposed regulations provide that
a RIC, DRP, or broker may make a single-
account election only for stock for which
it has accurate basis information. A RIC,
DRP, or broker has accurate basis infor-
mation if the RIC, DRP, or broker nei-
ther knows nor has reason to know that the
basis information is inaccurate.Seealso
section 6724 and the regulations thereun-
der regarding standards for relief from in-
formation reporting penalties. Stock for
which accurate basis information is un-
available may not be included in the sin-
gle-account election and must be treated as
held in a separate account.
The proposed regulations provide that,
once the single-account election is made, it
applies to all identical stock that is a cov-
ered security a taxpayer later acquires in
an account. If a taxpayer acquires identi-
cal stock that is a noncovered security in
an account, a RIC, DRP, or broker may
make another single-account election if the
RIC, DRP, or broker has accurate basis in-
formation. In addition to allowing a RIC,
DRP, or broker to make a single-account
election for some taxpayers and not others,
consistent with section 1012(c)(2)(B), the
proposed regulations allow a RIC, DRP, or
broker to make the election for some iden-
tical stocks held for a taxpayer and not for
other stocks.
b.Time and Manner for Making the
Single-Account Election
The proposed regulations provide that a
RIC, DRP, or broker makes the single-ac-
count election by clearly noting it on its
books and records. The books and records
must reflect the date of the election; the
taxpayer’s name, account number, and tax-
payer identification number; the stock sub-
ject to the election; and the taxpayer’s ba-
sis in the stock. The books and records re-
flecting the election must be provided to
the taxpayer upon request. The proposed
regulations provide that the single-account
election may be madeat any time and more
than once for a specific stock.
The proposed regulations require a
RIC, DRP, or broker to use reasonable
means to notify a taxpayer of a single-ac-
count election. Reasonable means include
mailings, circulars, and electronic mail.
The notification may be sent separately
to the taxpayer or included with the tax-
payer’s account statement, or by other
means calculated to provide actual notice.
The notice must identify the securities
subject to the election and advise the tax-
payer that the stock will be treated as
covered securities without regard to the
date acquired.
9.FIFO and Specific Identification
Methods
Section 1.1012–1(c)(1) provides that
if a taxpayer acquires shares of stock on
different dates or at different prices and
sells or transfers some of those shares, and
does not adequately identify the lot from
which the shares are sold or transferred,
the shares deemed sold or transferred are
the earliest acquired shares (the FIFO
rule). If a taxpayer makes an adequate
identification of the shares sold under
§1.1012–1(c)(2), (3), or (4), the shares
treated as sold are the shares the taxpayer
identified.
a.FIFO Rule
A commentator verbally requested
that the proposed regulations clarify how
the FIFO rule of §1.1012–1(c)(1) applies
to stock splits. The commentator asked
whether shares acquired from the split
are treated as acquired on the date of the
purchase of the original shares or on the
date of the split. In general, the shares
that are first acquired are the shares with
the longest holding period. Therefore,
this question is addressed by rules under
sections 307 and 1223 and the associated
regulations and is outside the scope of
these regulations.
A commentator requested clarification
on whether the FIFO rule applies to stock
that is part of a stock certificate that in-
cludes multiple lots. In response to this
comment, the proposed regulations clarify
that the FIFO rule also applies to multiple
lots represented by a single stock certifi-
cate.
b.Timing of Lot Selection
Commentators suggested that taxpay-
ers that wish to identify a specific lot of
stock to be sold should be required to do so
atthetimeoftrade. Somecommentators
recommended that taxpayers should be al-
lowed to wait to identify stock until the set-
tlement date or until the end of the year.
Other commentators opined that post-sale
changes to specific identification of stock
should not be allowed.
Rev. Rul. 67–436, 1967–2 C.B. 266,
holds that an identification of stock by the
time of delivery, which was within four
days of the sale date, complied with the
requirement to identify stock at the time
ofthesaleortransfer. Consistentwith
Rev. Rul. 67–436, the proposed regula-
tions provide that a taxpayer makes an ad-
equate identification of stock at the time
of sale, transfer, delivery, or distribution
if the taxpayer identifies the stock no later
than the earlier of the settlement date or the
time for settlement under Securities and
Exchange Commission regulations. Rev.
Rul. 67–436 will be obsoleted when these
regulations are published as final regula-
tions.See§601.601(d)(2).
c.Standing Lot Selection Orders
Several commentators recommended
that the proposed regulations allow tax-
payers to specify a lot selection method to
their brokers through standing orders such
as last-in-first-out or highest-in-first-out.
In response to these comments, the pro-
posed regulations clarify that taxpayers
may establish a lot selection method by
standing order.
d.Method of Communicating Lot
Selection
To provide maximum flexibility, the
proposed regulations do not designate how
taxpayers must communicate lot selection
to brokers. Any reasonable method of
communication, including electronic and
oral communication, is permissible.
2010–5 I.R.B.356February 1, 2010

e.Confirmation of Sales
Section 1.1012–1(c)(3)(i)(b) and (ii)(b)
requires a broker or agent to provide writ-
ten confirmation of the sale of stock a tax-
payer has specifically identified within a
reasonable time after sale. Commentators
suggested that the broker or agent should
determine whether to provide a confirma-
tion and its form, and that current technol-
ogy renders the confirmation requirement
obsolete. Another commentator suggested
that the proposed regulations allow bro-
kers to provide lot information to taxpay-
ers either by trade confirmation, monthly
statements, or year-end reports. The pro-
posed regulations do not amend the cur-
rent confirmation requirement, which en-
sures that taxpayers receive necessary in-
formation in a timely manner. What is rea-
sonable depends on the facts and circum-
stances.
f.Writing in Electronic Format
Commentators suggested that the pro-
posed regulations specifically authorize
electronic written confirmation or record-
keeping. In response to these comments,
the proposed regulations clarify that a
written confirmation, record, document,
instruction, or adviceincludes a writing in
electronic format.
g.Identification by Trustee or Executor
Section 1.1012–1(c)(4) provides that a
trusteeofatrustorexecutororadministra-
tor of an estate makes an adequate identifi-
cation if the trustee, executor, or adminis-
trator specifies the stock in writing in the
books and records of the trust or estate.
If the stock is distributed, the trustee, ex-
ecutor, or administrator must identify the
stockinwritingtothedistributee.
A commentator verbally noted that this
rule does not require a trustee, executor,
or administrator to identify stock to a bro-
ker or other agent selling the stock. The
proposed regulations add the requirement
that the trustee, executor, or administrator
identify the stock to the broker or agent.
10.Reporting of Wash Sales
Section 6045(g)(2)(B)(ii) provides that,
unless the Secretary instructs otherwise, a
broker is required to report the adjusted
basis of a covered security without taking
into account the effect on basis of the wash
sale rules of section 1091 unless the pur-
chase and sale transactions resulting in a
wash sale occur in the same account and
are for identical securities (rather than sub-
stantially identical securities).
The proposed regulations provide that
a broker is required to report adjusted ba-
sis in accordance with section 1091 only
if both the purchase and sale transactions
occur with respect to covered securities in
the same account with the same CUSIP
number (or other security identifier num-
ber that the Secretary may designate by
publication in theFederal Registeror in
the Internal Revenue Bulletin). If a bro-
ker is required to apply section 1091 for
reporting purposes, the broker must re-
port the amount of the disallowed loss in
addition to adjusted basis and gross pro-
ceeds for the sold security. The proposed
regulations further provide that the broker
must adjust the basis of the purchased se-
curity by the amount of the disallowed loss
when reporting the eventual sale of the pur-
chased security.
Commentators requested exceptions
from reporting wash sales resulting inde
minimisadjustments and wash sales trig-
gered by scheduled periodic investments
such as in an employee stock purchase
plan or by automatic dividend reinvest-
ment. Because the underlying substantive
rules disallow losses in these situations,
the proposed regulations do not adopt
these recommendations. In addition, com-
mentators requested an exception from
reporting for wash sales for high frequency
traders such as day traders based on the
belief that high frequency traders gener-
ally make timely and valid elections to use
the mark-to-market method of accounting
under section 475(e) or (f) and that section
475(d)(1) therefore exempts them from
the wash sale rules. Commentators also
requested that the regulations provide a
general exception from basis reporting for
high frequency traders based on the belief
that section 475 makes basis reporting su-
perfluous for most high frequency traders.
The proposed regulations do not adopt
these recommendations, in part because
the proposed regulations provide gener-
ally that reporting should occur without
regard to the mark-to-market method of
accounting. The Treasury Department and
IRS request further comments on the treat-
ment of high frequency traders, including
specifics about the burden that basis re-
porting may impose, and how brokers can
identify customers that have made valid
and timely mark-to-market accounting
method elections under section 475(e) or
(f) and which transactions by these persons
are subject to the provisions of section
475.
Commentators asserted that identical
securities could have separate CUSIP
numbers, potentially after a change to
the name of the issuer. To facilitate ad-
ministration of wash sale reporting, the
proposed regulations interpret identical
securities to mean securities with the same
CUSIP number (or other security identifier
number that the Secretary may designate
by publication in theFederal Registeror
in the Internal Revenue Bulletin).
11.Reporting of Short Sales
In the case of a short sale, section
6045(g)(5) provides that gross proceeds
and basis reporting under section 6045 is
generally required for the year in which
the short sale is closed rather than, as un-
der the present law rule for gross proceeds
reporting, the year in which the short sale
is entered into.
The proposed regulations implement
this change to reporting of short sales by
requiring brokers to report all short sales
opened on or after January 1, 2010, for the
year in which the short sale is closed. For
sales that are opened and closed in 2010,
the proposed regulations require brokers
to report only gross proceeds information
with respect to the securities sold to open
the short sale, which is consistent with
how brokers currently report short sale
transactions. For sales closed on or after
January 1, 2011, using covered securities,
however, the proposed regulations require
brokers to report both the information
concerning the securities sold to open the
short sale and the information concerning
the securities acquired to close the short
sale on a single return of information. For
sales closed on or after January 1, 2011,
using noncovered securities, the proposed
regulations require brokers to report only
the information concerning the securities
sold to open the short sale and permit,
but do not require, brokers to report ad-
justed basis for the securities acquired
to close the short sale and whether any
gain or loss on the short sale is long-term
February 1, 20103572010–5 I.R.B.

or short-term. The proposed regulations
provide that reporting adjusted basis and
whether any gain or loss on the short sale
is long-term or short-term is not subject
to penalty under section 6721 or 6722 if
the Form 1099-B indicates that the sale
reported is a sale of a noncovered security.
These requirements are in line with the re-
porting beginning with calendar year 2011
of both adjusted basis and gross proceeds
on Form 1099-B.
Under section 1233, satisfaction of a
short sale obligation through other bor-
rowed property does not close a short sale.
The proposed regulations address this sit-
uation and provide that, if an obligation
arising from a short sale is satisfied by the
receipt of transferred securities that them-
selves are borrowed from or through the
person effecting the transfer, the receiving
broker should not file a Form 1099-B but
should instead provide the information re-
garding the short sale of the borrowed se-
curities to the person effecting the transfer.
Under the proposed regulations, the per-
son effecting the transfer must file Form
1099-B when the obligation is finally sat-
isfied and the short sale is closed.
The proposed regulations modify the
backup withholding rules for short sales to
provide that backup withholding can occur
only at the time the short sale is closed and
becomes subject to reporting under section
6045(g)(5).
Commentators requested that brokers
not be responsible for the additional re-
porting requirements related to short sales
that are opened before January 2011 but
also requested clear guidance on how to
implement reporting for short sales opened
prior to January 2011 to prevent duplicate
reporting. The proposed regulations pre-
vent duplicate reporting by requiring bro-
kers to report short sales opened prior to
January 2011 under current rules except
for short sales opened in 2010 that re-
main open into 2011. Instead of reporting
the sale for calendar year 2010, the pro-
posed regulations require that brokers re-
port these sales for the year in which the
sale is closed.
Finally, commentators requested that
the reporting of short sales not require bro-
kers to apply the constructive sale rules of
section 1259, which can trigger the recog-
nition of gain if the investor also holds
or acquires an appreciated position in the
same securities, or the rules under section
1233(h) concerning limitations imposed
on investors that own property substan-
tially identical to the short sale property.
The proposed regulations provide for these
exclusions from reporting.
12.Reporting of Sales by S Corporations
Under §1.6045–1(c)(3)(i)(B)(1), a bro-
ker currently is not required to report sales
of securities by corporations. Section
1.6045–1(c)(3)(i)(C) currently permits a
broker to treat a customer as a corporation
if the broker has actual knowledge that the
customer is a corporation, if the customer
files a Form W–9,“Request for Taxpayer
Identification Number and Certification,”
exemption certificate claiming an exemp-
tion as a corporation, or, absent knowledge
to the contrary, if the name of the customer
contains an unambiguous expression of
corporate status such as “Corporation” or
“Incorporated.”
To comply with the new requirement
under section 6045(g)(4) that brokers re-
port sales by customers that are S corpora-
tions of covered securities acquired on or
after January 1, 2012, the proposed reg-
ulations exclude S corporations from the
list of exempt Form 1099-B recipients, but
only for sales of covered securities ac-
quired on or after January 1, 2012. The
proposed regulations also curtail the abil-
ity of brokers to rely solely on the name
of the customer to determine whether the
customer is a corporation exempt from re-
porting, but only for sales of covered se-
curities acquired on or after January 1,
2012. Commentators requested that the
proposed regulations retain this rule be-
cause its removal potentially requires bro-
kers to seek a certification from all corpo-
rate customers. The proposed regulations
do not adopt this recommendation, how-
ever, because brokerscannot infer from a
customer’s name whether the customer is
taxed as an S corporation or C corpora-
tion. Commentators also requested that ac-
counts opened by corporations before Jan-
uary 2012 be excepted from reporting. The
proposed regulations do not adopt this re-
quest as contrary to the statute.
Commentators requested that Form
W–9 be updated to facilitate a customer’s
statement to its broker of its current elec-
tion to be taxed as an S corporation and
that the proposed regulations require bro-
kers to solicit or re-solicit Form W–9 from
each existing corporate customer. The
IRS is currently considering the requested
modification to Form W–9. The proposed
regulations do not impose a requirement
to solicit or re-solicit Form W–9 from
all existing corporate customers because,
under §1.6045–1(c)(3)(i)(C), Form W–9
is only one method by which brokers may
determine whether a corporate customer
is exempt from all reporting beginning
in 2012. However, if a broker does not
have actual knowledge that a corporate
customer is taxed as a C corporation or is
otherwise exempt (for example, because
it is a bank or organization exempt from
tax under section 501(a)), a broker must
request a Form W–9 exemption certificate
or else must make a return of information
for any sales by the corporation of covered
securities acquired on or after January 1,
2012. A broker also may be required to
backup withhold on gross proceeds paid
to the customer.
Commentators requested that brokers
be permitted to report other Form 1099 in-
formation such as interest and dividends
for S corporations because reporting of
the sales of securities is done on compos-
ite statements containing all such informa-
tion. The proposed regulations do not ad-
dress this topic directly because no penalty
is imposed for the act of filing a nonre-
quired return.
13.ReportingtoTrustInterestHolders
inaWHFIT
Commentators requested that the pro-
posed regulationsexcept trustees and
middlemen from any requirement to re-
port information under sections 6045(g) to
trust interest holders in a widely held fixed
investment trust (WHFIT) with respect to
both the securities held by a WHFIT and
trust interests in a WHFIT because the
WHFIT rules in §1.671–5 already provide
a framework for communicating similar
information to trust interest holders. These
proposed regulations clarify that the sale
of a trust interest in a WHFIT by a trust
interest holder is required to be reported
under section 6045(a). However, to the
extent that a trustee or middleman has a
requirement to provide information under
section 6045(g), the trustee or middleman
is deemed to meet those requirements
by complying with the WHFIT rules
in §1.671–5. The Treasury Department
2010–5 I.R.B.358February 1, 2010

and IRS request additional comments
on whether any basis reporting rules are
needed in addition to those provided under
§1.671–5 to accommodate trust interest
holders in a WHFIT.
14.Due Date for Payee Statements
Furnished in a Consolidated Reporting
Statement
Section 6045(b) extends the due date
to furnish all of the payee statements re-
quired under section 6045 to customers
from January 31 to February 15, effective
for statements required to be furnished
after December 31, 2008. Thus, in ad-
dition to Form 1099-B,“Proceeds From
Broker and Barter Exchange Transac-
tions,”the February 15 due date applies
to Form 1099-S,“Proceeds From Real
Estate Transactions,”and, when report-
ing payments to attorneys or substitute
payments by brokers in lieu of dividends
or interest, Form 1099-MISC,“Miscel-
laneous Income.”This February 15 due
date also applies to any other statement
required to be furnished on or before Jan-
uary 31 of a calendar year if furnished with
a statement required under section 6045
in a consolidated reporting statement. The
Act did not define consolidated reporting
statement but provided that the term would
be defined in regulations.SeeNotice
2009–11, 2009–5 I.R.B. 420, providing
that, with respect to reportable items from
calendar year 2008, brokers had until Feb-
ruary 17, 2009, to report all items that
they customarily reported on their annual
composite form recipient statements. See
§601.601(d)(2).
The proposed regulations definecon-
solidated reporting statementas a group-
ing of statements furnished to the same
customer or same group of customers on
thesamedatewhetherornotthestate-
ments are furnished with respect to the
same or different accounts or transactions.
Importantly, the proposed regulations re-
quire that the grouping of statements be
limitedtothosefurnishedtothecustomer
based on the same relationship as the
statement furnished under section 6045
(for example, broker, payor, or real estate
settlement agent), and not as a result of
any other relationship between the parties
such as debtor to creditor or employer to
employee. Based on this limitation, the
followingformsmaybefurnishedina
consolidated reporting statement with a
statement required under section 6045:
Form 1099-DIV,“Dividends and Dis-
tributions”;Form 1099-INT,“Interest
Income”; Form 1099-MISC,“Miscella-
neous Income”; Form 1099-OID,“Orig-
inal Issue Discount”; Form 1099-PATR,
“Taxable Distributions Received From
Cooperatives”; Form 1099-Q,“Payments
From Qualified Education Programs (Un-
der Sections 529 and 530)”; Form 1099-R,
“Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc.”; Form 3921,
“Exercise of an Incentive Stock Option
Under Section 422(b)” (in development);
Form 3922,“Transfer of Stock Acquired
Through an Employee Stock Purchase
Plan Under Section 423(c)” (in develop-
ment); and Form 5498,“IRA Contribution
Information.”The Treasury Department
and IRS request further comments regard-
ing whether any other forms should be
included in the definition of consolidated
reporting statement.
For statements filed by brokers with re-
spect to sales, the proposed regulations ac-
knowledge that a customer may not sell se-
curities in an account in every year and,
thus, may not receiveForm 1099-B every
year. The proposed regulations provide
that a broker may treat any customer as
receiving a required statement under sec-
tion 6045 if the customer has an account
for which a statement would be required to
be furnished under section 6045 had a sale
occurred during the year.
15.ReportingRequiredinConnection
With Transfers of Securities
Under new section 6045A, a broker and
any other person specified in Treasury reg-
ulations (applicable person) that transfers
to a broker a security that is a covered se-
curity in the hands of the applicable per-
son must furnish to the receiving broker a
written statement for purposes of enabling
the receiving broker to satisfy the reporting
requirements of section 6045(g). Section
6045A(c) provides that, unless the Secre-
tary provides otherwise, the statement re-
quired by this rule must be furnished to the
receiving broker not later than fifteen days
after the transfer of the covered security.
a.Transfer Reporting Generally
The proposed regulations create a pre-
sumption that every transfer of custody ef-
fected by an applicable person to a bro-
ker or other professional custodian of any
share of stock in a corporation on or af-
ter January 1, 2011, that is not a sale is
a transfer of a covered security subject
to reporting. Thus, the proposed regu-
lations provide that a transfer statement
must be furnished for every such trans-
fer. This duty applies even if the secu-
rity transferred is a noncovered security
or is treated as a noncovered security be-
cause it was excepted from all reporting
under section 6045 (for example, because
the customer was an exempt recipient) at
the time of its acquisition. In either situa-
tion, the transfer statement is not required
to include any other required information
provided that the transfer statement indi-
cates that the securitytransferred is a non-
covered security. This presumption that
all transferred securities are covered se-
curities and the requirement to provide a
transfer statement for noncovered or ex-
cepted securities solely for the purpose of
establishing that the security is a noncov-
ered or excepted security will reduce un-
certainty for receiving brokers and custo-
dians. The person initiating the transfer of
custody is permitted, but not required, to
provide other information about the non-
covered or excepted security.
The proposed regulations place the duty
to furnish the transfer statement on the
person effecting the transfer of custody if
the person is an applicable person. Un-
der the proposed regulations, anapplica-
ble personis a broker within the meaning
of §1.6045–1(a)(1), any person that acts
as a custodian of securities in the ordinary
course of a trade or business, any issuer of
securities, and any agent of these persons.
An applicable person does not include the
beneficial owner of the securities, any gov-
ernmental unit or agency or instrumental-
ity of a governmental unit with respect
to escheated securities, or any person that
acts solely as a clearing house for the trans-
fer.
Under the proposed regulations, an ap-
plicable person has a duty to furnish a
transfer statement if that person effects the
transfer of custody of the securities. For
securities held by direct registration with
the issuer, includingcertificated shares,
February 1, 20103592010–5 I.R.B.

the person effecting the transfer is the is-
suer or its transfer agent. For securities
held in street name, the person effecting
the transfer is the broker or other firm car-
rying the securities.
Although the person responsible for
providing a transfer statement will often
be a broker or other applicable person
that effects sales, the proposed regulations
also impose this duty on issuers, trans-
fer agents, professional custodians, and
other applicable persons that may not ef-
fect sales. For these applicable persons,
this duty is limited to a duty to receive
the statement when receiving custody of
transferred securities and then to retrans-
mit the information on the statement when
transferring custody of those securities to
a broker (or, if no statement is received,
to furnish a statement that the securities
are noncovered securities). The proposed
regulations regarding transfer statements
do not impose a duty on those that do not
effect sales to update basis in response to
adjustments announced by issuers under
section 6045B or to compute basis by
average cost under section 1012. These
computations apply only to basis reporting
at the time of sale under section 6045 and,
thus, apply only to brokers effecting sales.
The Treasury Department and IRS request
further comments regarding the scope of
the transfer statement requirement.
Because the transfer statement is not
filed with the IRS, no official form or for-
mat will be required. Instead, the pro-
posed regulations specify the information
required on the statement. At the request
of commentators, the proposed regulations
permit flexibility in the format and method
by which the information is furnished pur-
suant to agreement of the parties. The
Treasury Department and IRS request fur-
ther comments about the form and format
for the transfer statement and any substi-
tutes thereto.
Under the proposed regulations, the
transfer statement must identify the appli-
cable person furnishing the statement, the
broker receiving the statement, the owner
or owners transferring the securities, and,
if different, the owner or owners of the se-
curities after any transfer other than a sale,
such as a transfer of gifted or inherited se-
curities. The transfer statement must also
identify the securities being transferred
and information about the transfer such as
the date the transfer was initiated and the
settlement date of the transfer (if known
when reporting).
Under the proposed regulations, a trans-
fer statement must include the total ad-
justed basis of the securities, the original
date of acquisition, and the date for deter-
mining whether any gain or loss with re-
spect to the security would be long-term or
short-term at the time of sale. The transfer
statement must also indicate the extent to
which the reported basis amount has been
adjusted to reflect any corporate actions
that affect the basis of the security by re-
porting the number from the issuer state-
ment required under section 6045B (dis-
cussed later in this preamble) of the most
recent corporate action that is reflected on
the transfer statement. Additionally, if
the average basis method is used to deter-
mine basis, the proposed regulations per-
mit reporting an original acquisition date
of “VARIOUS” for securities owned at
least five years.
Commentators suggested that addi-
tional information items be required on
the statement such as the original purchase
amount, the reason why the securities are
(or are treated as) noncovered securities
(if applicable), and the basis method used
by the taxpayer immediately prior to the
transfer. The proposed regulations do not
require this additional information on the
statement because the proposed regula-
tions do not require this information to
be reported on Form 1099-B. Additional
information may be communicated with
the statement, even if not required.
If an applicable person furnishing a
transfer statement later receives a state-
ment for an earlier transfer that reports
that the transferred securities are covered
securities and includes information incon-
sistent with the subsequent transfer state-
ment, the proposed regulations require
that a corrected statement be furnished to
correct the inconsistent information within
fifteen days following the receipt of the
prior transfer statement.
b.ReportingRequiredinConnection
With Transfers of Gifted and Inherited
Securities
Under section 6045(g)(3)(A)(ii), a cov-
ered security includes stock or indebted-
ness acquired on or after the applicable
date if the security is transferred from an
account in which the security was a cov-
ered security (butonly if the receiving
broker or other professional custodian re-
ceives a transfer statement). Therefore,
under the proposed regulations, gifted and
inherited securities that were covered se-
curities in the account of the donor or dece-
dent remain covered securities when trans-
ferred to the recipient’s account and ac-
companied by a transfer statement.
Under the proposed regulations, when
covered securities are transferred from a
decedent, the transfer statement must indi-
cate that the securities are inherited. The
transfer statement must also report the date
of death as the acquisition date and must
report adjusted basis in accordance with
the instructions and valuations provided
by an authorized representative of the es-
tate. The proposed regulations require that
the selling broker take these basis adjust-
ments into account in reporting adjusted
basis upon the subsequent sale or other dis-
position of these securities.
When covered securities are transferred
to a different owner as a gift, the proposed
regulations require the statement to indi-
cate that the transfer consists of gifted se-
curities and to state the adjusted basis of
the securities in the hands of the donor
and the donor’s original acquisition date
of the securities. The transfer statement
must also report the date of the gift (if
known when furnishing the statement) and
the fair market value of the gift on that date
(if known or readily ascertainable). Upon
the subsequent sale or other disposition of
these securities, the selling broker must ap-
ply the relevant basis rules for gifts when
reporting adjusted basis.
Commentators opposed subjecting
transfers of gifted and inherited securities
to the requirements of transfer reporting
because the substantive rules governing
basis computation for these securities
are complex. The proposed rules do not
exclude transfers of gifted and inherited
securities, however, because these trans-
fers fall within the plain language of the
statute. The proposed regulations provide
workable rules to minimize complexity.
Issuers and transfer agents commented
that they often do not know the reason for
the transfer of shares from one owner to
another. The proposed regulations provide
that, if the request to transfer ownership
between different people is silent as to the
reason for the transfer, the transfer should
generally be treated as a gift.
2010–5 I.R.B.360February 1, 2010

Commentators expressed concern re-
garding gifted and inherited securities
about the potential burden to value pri-
vately traded securities or other securities
for which fair market value is not easily
determined. For inherited securities, the
proposed regulations allow the applica-
ble person effecting the transfer to rely
on the authorized estate representative to
provide the instructions and valuations
necessary to report correct basis for any
transferred securities. If the applicable
person effecting the transfer does not re-
ceive instructions and valuations from the
authorized estate representative, the appli-
cable person must request this information
from the authorized estate representative
before preparing the transfer statement.
If this information is not provided before
the transfer statement is prepared, then
the transfer statement must indicate that
the transfer consists of an inherited se-
curity but must report the security as a
noncovered security. If this information
is provided after the transfer statement is
sent, the applicable person effecting the
transfer must send a corrected transfer
statement.
For gifted securities, the proposed reg-
ulations only require the applicable person
effecting the gift transfer to report the date
of the gift if known at the time the transfer
statement is prepared and the fair market
value of the securities on the date of the gift
if known or readily ascertainable at that
time. However, the proposed regulations
provide that, if the gifted securities are sub-
sequently transferred to a different account
of the same owner, the applicable person
must include the date of the gift on the sub-
sequent transfer statement and, if known or
readily ascertainable at the time the sub-
sequent transfer statement is prepared, the
fair market value of the securities as of the
date of the gift. The proposed regulations
provide a special reporting rule for brokers
that applies on the sale of a gifted security
when the security’s adjusted basis depends
upon its fair market value as of the date of
the gift but the transfer statement received
by the selling broker does not report this
amount and this amount is not readily as-
certainable by the broker. Under these cir-
cumstances, the proposed regulations pro-
vide that the broker must report adjusted
basis equal to the gross proceeds from the
sale.
c.ReportingRequiredinConnectionWith
Transfers of Borrowed Securities
To facilitate the correct reporting of
short sales involving transfers of borrowed
securities, the proposed regulations re-
quire the transfer statement to indicate that
the transferred securities are borrowed and
provide instructions on how the receiving
broker can provide information to the ap-
plicable person effecting the transfer about
any short position potentially being closed
by the transfer or other sale of the securi-
ties. This information is required to alert
the receiving broker that, if the transferred
securities are used to satisfy a short sale
obligation, the short sale remains open and
should not be reported as closed to the IRS
or to the customer.
16.Reporting by Issuers of Actions
Affecting Basis of Securities
If an organizational action (such as a
stock split or a merger or acquisition) by
an issuer affects the basis of a specified se-
curity, new section 6045B requires the is-
suer to file a return with the IRS and fur-
nish to each nominee (or to each certifi-
cate holder if there is no nominee) a writ-
ten statement regarding the action. The re-
turn filing and information statement re-
quirements may be waived under section
6045B(e) if the issuer makes the informa-
tion about the action publicly available, in
the form and manner determined by the
Secretary.
The proposed regulations require a re-
porting issuer to identify itself and the se-
curity on the return and provide informa-
tion about the organizational action and the
quantitative effect on the basis resulting
from the action. The proposed regulations
also require the issuer to assign and report
a sequential number determined separately
by security for each information report the
issuer files.
The proposed regulations require a do-
mestic or foreign issuer to furnish a writ-
ten statement to each holder of record that
is not an exempt recipient as defined in
§1.6045B–1(b)(5) as of the record date
of the corporate action and all subsequent
holders of record through the date the is-
suer furnishes the statement. The Treasury
Department and IRS request comments as
to the extent to which foreign issuers will
be able to comply with such a reporting re-
quirement, and whether it may be appro-
priate to limit foreign issuers’ reporting re-
quirements (such as, for example, limiting
foreign issuers’ reporting requirements to
securities that are traded on a securities ex-
change in the United States).
If the security is held in the name of
someone other than the holder of record
on the books of the issuer, the proposed
regulations require the issuer to furnish
the statement to the nominee listed on its
books unless such nominee is the issuer or
the issuer’s agent. For example, an issuer
must furnish statements to the participants
of the issuer’s direct stock purchase plan
even if the plan is listed as a nominee for
the participants. The proposed regulations
permit an issuer to furnish to its holders
and nominees a copy of the return that it
files with the IRS.
The proposed regulations provide that
both the return filing and information
statement requirements under section
6045B are waived if an issuer posts a
statement with the required information in
a readily accessible format in an area of its
primary public website dedicated to this
purpose by the same due date for reporting
the organizational action to the IRS and
keeps the form accessible to the public.
Under the proposed regulations, this pub-
lic reporting relieves the issuer of its duty
both to file the return with the IRS and to
furnish the statement to its nominees and
certificate holders.
Commentators have questioned how is-
suers could report the effect on basis within
45 days of a corporate action when the ef-
fect may not be determinable until the con-
clusion of other events such as the end of
the issuer’s fiscal year. Any request to ex-
tend the due date was not adopted as incon-
sistent with the 45-daystatutory due date.
The proposed regulations provide that an
issuer may make reasonable assumptions
about facts that cannot be determined prior
to this due date and must file a corrected
return once the facts are determined if nec-
essary to report the correct quantitative ef-
fect on basis. Under the proposed regula-
tions, it is expected that an issuer will treat
a payment that may be a dividend consis-
tently with its treatment of the payment un-
der section 6042(b)(3) and §1.6042–3(c).
Some commentators suggested that the
IRS establish a central repository on its
website for posting information statements
from issuers that wish to report publicly
February 1, 20103612010–5 I.R.B.

in lieu of filing returns. This suggestion
was not adopted in the proposed regula-
tions due to IRS resource and system con-
straints. The Treasury Department and
IRS request comments on the definition of
public reporting including rules about re-
taining the returns on the website and al-
ternatives other than the use of a central
repository.
Commentators requested that the pro-
posed regulations except actions by S
corporations from reporting under section
6045B because adjustments are specific to
the shareholder and are reported on Sched-
ule K–1 (Form 1120S),“Shareholder’s
Share of Income, Deductions, Credits,
etc.”The proposed regulations do not ex-
cept reporting by S corporations, but deem
an S corporation to satisfy the require-
ments under section 6045B if it reports the
effect of the organizational action on the
proper Schedule K–1 for each shareholder,
timely files the schedules with the IRS,
and timely furnishes the schedules to all
proper parties.
17.Penalty Provisions
The current regulations impose penal-
ties on brokers for failing to file or furnish
complete and correctreturns and state-
ments after the sale of a security. The
proposed regulations expand the list of
required statements and returns filed with
the IRS in §301.6721–1 and the list of
required statementsfurnished to payees in
§301.6722–1 to include the new penalties
associated with the new transfer state-
ments and issuer statements. The proposed
regulations also update the full list of re-
turns and statements included in section
6724(d).
Commentators expressed concern that
the IRS would assert penalties against a
broker for reportingan incorrect adjusted
basis or incorrectly reporting whether any
gain or loss on a sale is long-term or short-
term after relying on incorrect informa-
tion provided by others. Under the pro-
posed regulations, brokers generally must
adjust basis reported for covered securities
to reflect: (1) Information received on any
transfer statement under section 6045A;
and (2) information reported by the issuer
under section 6045B regarding the effect
on basis of any organizational actions. The
proposed regulations provide that any fail-
ure to report correct information that arises
solely from this reliance is deemed to be
due to reasonable cause with respect to the
penalties under sections 6721 and 6722.
The proposed regulations permit, but do
not require, a broker to adjust the reported
basis in accordance with information that
is not reflected on a transfer statement or
issuer statement, including any informa-
tion the broker has about securities held by
the same customer in other accounts with
the broker. The proposed regulations deem
that a broker that takes into account infor-
mation received from a customer or third
party other than information reflected on
a transfer statement or issuer statement re-
lies upon such informationingoodfaith
in accordance with existing rules found
in §301.6724–1(c)(6) if the broker neither
knows nor has reason to know that the in-
formation is incorrect.
Proposed Effective and Applicability
Dates
These regulations are proposed to take
effect when published in theFederal Reg-
isteras final regulations except as follows.
The regulations regarding reporting basis
and whether any gain or loss on a sale
is long-term or short-term under section
6045(g) are proposed to apply to: (1) Any
share of stock other than RIC stock or DRP
stock acquired on or after January 1, 2011;
and (2) any share of RIC stock or DRP
stockacquiredonorafterJanuary1,
2012. The regulations regarding the
determination of basis under section 1012
areproposedtoapplyfor taxable years
beginning after the date the regulations
are published as final regulations in the
Federal Register. However, the rules
in §1.1012–1(e)(1)(i), in part, apply to
stockacquiredonorafterJanuary1,
2011, the rules in §1.1012–1(e)(2) and
(e)(9), in part, apply to stock acquired on
or after January 1, 2012, and the rules
in §1.1012–1(e)(7)(i), in part, and in
§1.1012–1(e)(10), in part, apply to sales,
exchanges, or other dispositions of stock
on or after January 1, 2012.
The regulations regarding transfer
statement reportingunder section 6045A
are proposed to apply to: (1) Transfers of
stock other than RIC stock or DRP stock
that occur on or after January 1, 2011; and
(2) transfers of RIC stock or DRP stock
that occur on or after January 1, 2012.
The regulations regarding issuer report-
ing under section 6045B are proposed to
apply to: (1) Organizational actions af-
fecting basis of stock other than RIC stock
that occur on or after January 1, 2011;
and (2) organizational actions affecting
basis of RIC stock that occur on or
after January 1, 2012. The regulations
regarding the timing for reporting short
sales of securities under section 6045
and for collecting backup withholding in
connection with short sales under section
3406 are proposed to apply to short sales
opened on or after the date the final
regulations are published in theFederal
Registerbut no earlier than January 1,
2010.
Effect on Other Documents
Rev. Rul. 67–436 will be obsoleted as
of the date these regulations are published
as final regulations in theFederal Regis-
ter.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to this regulation.
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby certi-
fied that this regulation will not have a sig-
nificant economic impact on a substantial
number of small entities, because any ef-
fect on small entities by the rules proposed
in this document flows directly from sec-
tion 403 of the Energy Improvement and
Extension Act of 2008, Division B of Pub-
lic Law 110–343 (122 Stat. 3765, 3854
(2008)).
Section 403(a) of the Act modifies sec-
tion 6045 to require that brokers report the
adjusted basis of the securities and whether
any gain or loss with respect to the secu-
rities is long-term or short-term when re-
porting the sale of a covered security. It is
anticipated that this statutory requirement
will fall only on financial services firms
with annual receipts greater than $7 mil-
lion and, therefore, on no small entities.
Further, in implementing the statutory re-
quirement, the regulation proposes to limit
reporting to the information described in
2010–5 I.R.B.362February 1, 2010

the Act: Adjusted basis and whether any
gain or loss with respect to the securities is
long-term or short-term.
Section 403(c) of the Act adds new sec-
tion 6045A, which requires applicable per-
sons to furnish a transfer statement in con-
nection with the transfer of custody of a
covered security. In implementing this
statutory requirement, the regulation pro-
poses to define applicable person to in-
clude brokers, professional custodians of
securities, and issuers of securities. This
definition effectuates the Act by giving
the broker who receives the transfer state-
ment the information necessary to deter-
mine and report adjusted basis and whether
any gain or loss with respect to the secu-
rity is long-term or short-term as required
by section 6045 when the security is subse-
quently sold. Consequently, the regulation
does not add to the impact on small entities
imposed by the statutory scheme. Instead,
it limits reporting to only these necessary
entities. It also limits the information to be
reported to only those items necessary to
effectuate the statutory scheme.
Section 403(d) of the Act adds new sec-
tion 6045B, which requires issuer report-
ing by all issuers of specified securities re-
gardless of size and even when the securi-
ties are not publicly traded. In implement-
ing this statutory requirement, the regula-
tion proposes to limit reporting to those
items necessary to meet the Act’s require-
ments. Additionally,the regulation pro-
poses to mitigate the burden imposed by
the Act by providing rules to permit is-
suers to report each action publicly as per-
mitted by the Act instead of filing a return
and furnishing each nominee or holder a
statement about the action. The regulation
therefore does not add to the statutory im-
pact on small entities but instead eases this
impact to the extent the statute permits.
Therefore, because this regulation will
not have a significant economic impact
on a substantial number of small entities,
a regulatory flexibility analysis is not re-
quired. The Treasury Department and IRS
request comments on the accuracy of this
statement. Pursuant to section 7805(f) of
the Code, this regulation has been sub-
mitted to the Chief Counsel for Advocacy
of the Small BusinessAdministration for
comment on its impact on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies) or electronic com-
ments that are timely submitted to the IRS.
The Treasury Department and IRS request
comments on the clarity of the proposed
regulations and how they can be made eas-
ier to understand. All comments will be
available for public inspection and copy-
ing.
A public hearing has been scheduled for
February 17, 2010, beginning at 10 a.m.,
in the auditorium of the IRS New Car-
rollton Federal Building, 5000 Ellin Road,
Lanham, Maryland 20706. All visitors
must present photo identification to enter
the building. Because of access restric-
tions, visitors will not be admitted beyond
the immediate entrance area more than 30
minutes before the hearing starts. For in-
formation about having your name placed
on the building access list to attend the
hearing,seethe “FOR FURTHER INFOR-
MATION CONTACT” section of this pre-
amble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written or electronic comments by
February 8, 2010 and an outline of the top-
icstobediscussedandthetimetobede-
voted to each topic (a signed original and
eight (8) copies) by February 8, 2010. A
period of ten minutes will be allotted to
each person for making comments. An
agenda showing the scheduling of speak-
ers will be prepared after the deadline for
receiving outlines haspassed. Copies of
theagendawillbeavailablefreeofcharge
at the hearing.
Drafting Information
The principal authors of these proposed
regulations are Edward C. Schwartz,
Amy J. Pfalzgraf, and William L. Candler,
Office of Associate Chief Counsel
(Income Tax and Accounting),
and Stephen Schaeffer, Office of
Associate Chief Counsel (Procedure
and Administration). However, other
personnel from the IRS and the Treasury
Department participated in their
development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 31, and
301 are proposed to be amended as fol-
lows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding entries in nu-
merical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6045A–1 also issued under
26 U.S.C. 6045A(a), (b), (c).
Section 1.6045B–1also issued under
26 U.S.C. 6045B(a), (c), (e). * * *
Par. 2. Section 1.408–7 is amended
by adding two new sentences at the end of
paragraph (d)(2) to read as follows:
§1.408–7 Reports on distributions from
individual retirement plans.
*****
(d) * * *
(2)***However,ifthestate-
ment is furnished in a consolidated re-
porting statement under section 6045,
the February 15 due date set forth in
section 6045 applies to the statement.
See§§1.6045–1(k)(3), 1.6045–2(d)(2),
1.6045–3(e)(2), 1.6045–4(m)(3), and
1.6045–5(a)(3)(ii).
*****
Par. 3. Section 1.1012–1 is amended
by:
1. Revising paragraphs (c)(1), (c)(4),
(c)(7)(ii), and (c)(7)(iii)(a).
2. Adding new paragraphs (c)(8),
(c)(9), and (c)(10).
3. Revising the heading of paragraph
(e), and paragraphs (e)(1), (e)(2), (e)(3),
(e)(4), (e)(6), and (e)(7).
4. Revising the heading of paragraph
(e)(5).
5. Adding new paragraphs (e)(8),
(e)(9), (e)(10), (e)(11), and (e)(12).
The additions and revisions read as fol-
lows:
§1.1012–1 Basis of property.
*****
(c)Sale of stock—(1)In general.Ex-
cept as provided in paragraph (e)(2) of
this section (dealing with stock for which
the average basis method is permitted),
if a taxpayer sells or transfers shares of
February 1, 20103632010–5 I.R.B.

stock in a corporation that the taxpayer
purchased or acquired on different dates or
at different prices and the taxpayer does
not adequately identify the lot from which
the stock is sold or transferred, the stock
sold or transferred is charged against the
earliest lot the taxpayer purchased or ac-
quired to determine the basis and holding
period of the stock for purposes of sub-
chapter P, chapter 1 of the Internal Rev-
enue Code. If the earliest lot purchased
or acquired is held in a stock certificate
that represents multiple lots of stock, and
the taxpayer does not adequately identify
the lot from which the stock is sold or
transferred, the stock sold or transferred
is charged against the earliest lot included
in the certificate. See paragraphs (c)(2),
(c)(3), and (c)(4) of this section for rules
on what constitutes an adequate identifica-
tion.
*****
(4)Stock held by a trustee, executor, or
administrator. (i) A trustee or executor
or administrator of an estate holding stock
(not left in the custody of a broker) makes
an adequate identification if the trustee, ex-
ecutor, or administrator—
(a) Specifies in writing in the books and
records of the trust or estate the particular
stocktobesold,transferred, or distributed;
(b) In the case of a distribution, fur-
nishes the distributee with a written doc-
ument identifying the particular stock dis-
tributed; and
(c) In the case of a sale or transfer
through a broker or other agent, specifies
to the broker or agent the particular stock
to be sold or transferred, and within a rea-
sonable time thereafter the broker or agent
confirms the specification in a written doc-
ument.
(ii) The stock the trust or estate identi-
fies under paragraph(c)(4)(i) of this sec-
tion is the stock treated as sold, transferred,
or distributed, even if the trustee, executor,
or administrator delivers stock certificates
from a different lot.
*****
(7) * * *
(ii) In applying paragraph (c)(3)(i)(b)
of this section to a sale or transfer of a
book-entry security pursuant to a tax-
payer’s written instruction, a confirmation
is made by furnishing to the taxpayer a
written advice of transaction from the Re-
serve Bank or other person through whom
the taxpayer sells or transfers the secu-
rities. The confirmation document must
describe the securities and specify the date
of the transaction and amount of securities
sold or transferred.
(iii) * * *
(a) For purposes of this paragraph
(c), the termbook-entry securitymeans a
transferable Treasury bond, note, certifi-
cate of indebtedness, or bill issued under
the Second Liberty Bond Act (31 U.S.C.
774(2)), as amended, or other security of
theUnitedStates(asdefinedinparagraph
(c)(7)(iii)(b) of this section) in the form
of an entry made as prescribed in 31 CFR
Part 306, or other comparable Federal reg-
ulations, on the records of a Reserve Bank.
(8)Time for making identification.For
purposes of this paragraph (c), an adequate
identification of stock is made at the time
of sale, transfer, delivery, or distribution if
the identification is made no later than the
earlier of the settlement date or the time
for settlement required by Rule 15c6–1 un-
der the Securities Exchange Act of 1934,
17 CFR 240.15c6–1 (or its successor). A
standing order or instruction for the spe-
cific identification of stock is treated as an
adequate identification made at the time of
sale, transfer, delivery, or distribution.
(9)Method of writing. A written confir-
mation, record, document, instruction, or
advice includes a writing in electronic for-
mat.
(10)Effective/applicability date. Para-
graphs (c)(1), (c)(4), (c)(8) and (c)(9) of
this section apply for taxable years begin-
ning after these regulations are published
as final regulations in theFederal Regis-
ter.
*****
(e)Election to use average basis
method—(1)In general. Notwithstanding
paragraph (c) of this section, and except
as provided in paragraph (e)(8) of this sec-
tion, a taxpayer may use the average basis
method described in paragraph (e)(7) of
this section to determine the cost or other
basis of identical shares of stock if—
(i) The taxpayer leaves shares of stock
in a regulated investment company (as de-
fined in paragraph (e)(5) of this section)
or shares of stock acquired after Decem-
ber 31, 2010, in connection with a dividend
reinvestment plan (as defined in paragraph
(e)(6) of this section) with a custodian or
agent in an account maintained for the ac-
quisition or redemption, sale, or other dis-
position of shares of the company; and
(ii) The taxpayer acquires identical
shares of stock at different prices or bases
in the account.
(2)Determination of method.(i)Ifa
taxpayer places shares of stock described
in paragraph (e)(1)(i) of this section ac-
quired on or after January 1, 2012, in the
custody of a broker (as defined by section
6045(c)(1)), including by transfer from
an account with another broker, the basis
of the shares is determined in accordance
with the broker’s default method, unless
the taxpayer notifies the broker that the
taxpayer elects another permitted method.
The taxpayer must report gain or loss us-
ing the method the taxpayer elects or, if
the taxpayer fails to make an election, the
broker’s default method.
(ii) The provisions of this paragraph
(e)(2) are illustrated by the following ex-
ample:
Example. (i) In connection with a dividend rein-
vestment plan, Taxpayer B acquires 100 shares of G
Company in 2012 and 100 shares of G Company in
2013, in an account B maintains with R Broker. B
notifies R in writing that B elects to use the average
basis method to compute the basis of the shares of G
Company. In 2014, B transfers the shares of G Com-
pany to an account with S Broker. B does not notify
S of the basis determination method B chooses to use
for the shares of G Company, and S’s default method
is first-in, first-out. In 2015, B instructs S to sell 100
shares of G Company.
(ii) Because B does not notify S of a basis deter-
mination method for the shares of G Company, under
paragraph (e)(2)(i) of this section, the basis of the 100
shares of G Company S sells for B in 2015 must be de-
termined under S’s default method, first-in, first-out.
(3)Shares of stock. For purposes of
this paragraph (e), securities issued by unit
investment trusts (as defined in the Invest-
ment Company Act of 1940, as amended)
are treated as shares of stock and the term
shareorsharesincludes fractions of a
share.
(4)Identical stock. For purposes of
this paragraph (e),identical shares of
stockmeans stock with the same Com-
mittee on Uniform Security Identification
Procedures (CUSIP) number or other se-
curity identifier number as permitted in
published guidance of general applica-
bility, see §601.601(d)(2) of this chapter.
However, shares of stock in a dividend
reinvestment plan are not identical to
shares of the same stock that are not in
a dividend reinvestment plan even if the
shares have the same CUSIP number.
2010–5 I.R.B.364February 1, 2010

(5)Regulated investment company.**
*
(6)Dividend reinvestment plan—(i)In
general. For purposes of this paragraph
(e), the termdividend reinvestment plan
means any written plan, arrangement, or
program under which at least 10 percent
of every dividend on any share of stock is
reinvested in stock identical to the stock
on which the dividend is paid. A plan is
a dividend reinvestment plan if the plan
documents require that at least 10 percent
of any dividend paid is reinvested in iden-
tical stock even if the plan includes stock
on which no dividends have ever been
declared or paid or on which an issuer
ceases paying dividends. A plan that holds
one or more different stocks may permit a
taxpayer to reinvest a different percentage
of dividends in the stocks held. The term
dividend reinvestment plan includes both
issuer administered dividend reinvestment
plans and non-issueradministered divi-
dend reinvestment plans.
(ii)Acquisition of stock. Stock is ac-
quired in connection with a dividend rein-
vestment plan if the stock is acquired un-
der that plan, arrangement, or program,
or if the dividends paid on the stock are
subject to that plan, arrangement, or pro-
gram. Shares of stock acquired in connec-
tion with a dividend reinvestment plan in-
clude the initial purchase of stock in the
dividend reinvestment plan, transfers of
identical stock into the dividend reinvest-
ment plan, additional periodic purchases
of identical stock in the dividend reinvest-
ment plan, and identical stock acquired
through reinvestment of the dividends paid
under the plan.
(iii)Dividends paid after reorganiza-
tion. For purposes of this paragraph (e)(6),
dividends declared before or pending a
corporate action (such as a merger, consol-
idation, acquisition, split-off, or spin-off)
involving the issuer of the dividend and
subsequently paid and reinvested in shares
of stock in the successor entity or entities
are treated as reinvested in shares of stock
identical to the shares of stock of the issuer
of the dividends.
(iv)Withdrawal from or termination of
plan. If a taxpayer withdraws stock from
a dividend reinvestment plan or the plan
administrator terminates the dividend rein-
vestment plan, the shares of identical stock
the taxpayer acquires after the withdrawal
or termination are not acquired in con-
nection with a dividend reinvestment plan.
The taxpayer may not use the average ba-
sis method after the withdrawal or termina-
tion but may use any other permissible ba-
sis determination method. See paragraph
(e)(7)(v) of this section for the basis of the
shares after withdrawal or termination.
(7)Computation of average basis—(i)
In general. Average basis is determined by
averaging the basis of all shares of identi-
cal stock in an account regardless of hold-
ing period. The basis of each share of iden-
tical stock in the account is the aggregate
basis of all shares of that stock in the ac-
count divided by the aggregate number of
shares. A taxpayer may not average to-
gether the basis of identical stock held in
separate accounts that the taxpayer sells,
exchanges, or otherwise disposes of on or
after January 1, 2012.
(ii)Order of disposition of shares sold
or transferred. In the case of the sale or
transfer of shares of stock to which the av-
erage basis method election applies, shares
sold or transferred are deemed to be the
shares first acquired. Thus, the first shares
sold or transferred are those with a hold-
ingperiodofmorethan1year(long-term
shares) to the extent that the account con-
tains long-term shares. If the number of
shares sold or transferred exceeds the num-
ber of long-term shares in the account,
the excess shares sold or transferred are
deemed to be shares with a holding pe-
riod of 1 year or less (short-term shares).
Any gain or loss attributable to shares held
for more than 1 year constitutes long-term
gain or loss, and any gain or loss attribut-
able to shares held for 1 year or less con-
stitutes short-term gain or loss. For exam-
ple, if a taxpayer sells 50 shares from an
account containing 100 long-term shares
and 100 short-term shares, the shares sold
or transferred are all long-term shares. If,
however, the account contains 40 long-
term shares and 100 short-term shares, the
taxpayer has sold 40 long-term shares and
10 short-term shares.
(iii)Transition rule from double cat-
egory method. This paragraph (e)(7)(iii)
applies to stock for which a taxpayer
uses the double-category method under
§1.1012–1(e)(3) (April 1, 2009) that the
taxpayer acquired before the date these
regulations are published as final regu-
lations in theFederal Registerand the
taxpayer sells, exchanges, or otherwise
disposes of after that date. The taxpayer
must calculate the average basis of this
stock by averaging together all identical
shares of stock in the account on the date
these regulations are published as final
regulations in theFederal Registerre-
gardless of holding period.
(iv)Wash sales. A taxpayer must ap-
ply section 1091 and the associated regula-
tions (dealing with wash sales of substan-
tially identical securities) in computing av-
erage basis regardless of whether the stock
or security sold or otherwise disposed of
and the stock acquired are in the same ac-
count or in different accounts.
(v)Basis after change from average
basis method. Unless a taxpayer revokes
an average basis method election under
paragraph (e)(9)(iii) of this section, if a
taxpayer changes from the average basis
method to another basis determination
method (including a change resulting from
a withdrawal from or termination of a
dividend reinvestment plan), the basis
of each share of stock immediately af-
ter the change is the same as the basis
immediately before the change. See para-
graph (e)(9)(iv) of this section for rules for
changing from the average basis method.
(vi) The provisions of this paragraph
(e)(7) are illustrated by the following ex-
amples:
Example 1. (i) In 2011, Taxpayer C acquires 100
shares of H Company and enrolls them in a dividend
reinvestment plan administered by T Custodian. C
elects to use the average basis method for the shares
of H Company enrolled in the dividend reinvestment
plan. T also acquires for C’s account 50 shares of
H Company and does not enroll these shares in the
dividend reinvestment plan.
(ii) Under paragraph (e)(4) of this section, the 50
shares of H Company not in the dividend reinvest-
ment plan are not identical to the 100 shares of H
Company enrolled in the dividend reinvestment plan,
even if they have the same CUSIP number. Accord-
ingly, under paragraphs (e)(1) and (e)(7)(i) of this sec-
tion, C may not average the basis of the 50 shares of H
Company with the basis of the 100 shares of H Com-
pany. Under paragraph (e)(1)(i) of this section, C may
not use the average basis method for the 50 shares of
H Company because the shares are not acquired in
connection with a dividend reinvestment plan.
Example 2. (i) Taxpayer D enters into an agree-
ment with W Custodian establishing an account for
the periodic acquisition of shares of L Company, a
regulated investment company. W acquires for D’s
account shares of L Company stock on the following
dates and amounts:
February 1, 20103652010–5 I.R.B.

Date
NumberofsharesCost
January 8, 2009
25 shares
$200
February 8, 200924 shares200
March 8, 200920 shares200
April 8, 200920 shares200
(ii) At
D’s direction, W sells 40 shares from the
account on January 15, 2010, for $10 per share or a to-
tal of $400. D elects to use the average basis method
for th
e shares of L Company. The average basis for
the shares sold on January 15, 2010, is $8.99 (total
cost of shares, $800, divided by the total number of
share
s, 89).
(iii) Under paragraph (e)(7)(ii) of this section, the
shares sold are the shares first acquired. Thus, D
reali
zes $25.25 ($1.01 * 25) long-term capital gain
for the 25 shares acquired on January 8, 2009, and
$15.15 ($1.01 * 15) short-term capital gain for 15 of
the s
hares acquired on February 8, 2009.
Example 3. (i) The facts are the same as inExam-
ple 2, except that on February 8, 2010, D changes to
the f
irst-in, first-out basis determination method. W
purchases 25 shares of L Company for D on March 8,
2010, at $12 per share. D sells 40 shares on May 8,
201
0, and 34 shares on July 8, 2011.
(ii) Because D uses the first-in, first-out method,
the 40 shares sold on May 8, 2010 are 9 shares pur-
cha
sedonFebruary8,2009,20sharespurchasedon
March 8, 2009, and 11 shares purchased on April 8,
2009. Because, under paragraph (e)(7)(v) of this sec-
tio
n, the basis of the shares D owns when D changes
from the average basis method remains the same, the
basis of the shares sold on May 8, 2010, is $8.99 per
sh
are, not the original cost of $8.34 for the shares
purchased on February 8, 2009, or $10 per share for
the shares purchased on March 8, 2009, and April 8,
20
09. The basis of the shares sold on July 8, 2011,
is $8.99 for 9 shares purchased on April 8, 2009, and
$12 per share for 25 shares purchased on March 8,
2
010.
(8
)Limitation on use of average basis
m
ethod for certain gift shares. (i) Except
a
s provided in paragraph (e)(8)(ii) of this
s
ection, a taxpayer may not use the aver-
a
ge basis method for shares of stock a tax-
p
ayer acquires by gift after December 31,
1
920, if the basis of the shares (adjusted
for the period before the date of the gift as
provided in section 1016) in the hands of
the donor or the last preceding owner by
whom the shares were not acquired by gift
was greater than the fair market value of
the shares at the time of the gift. This para-
graph (e)(8)(i) does not apply to shares the
taxpayer acquires as a result of a taxable
dividend or capital gain distribution on the
gift shares.
(ii) Notwithstanding paragraph (e)(8)(i)
of this section, a taxpayer may use the av-
erage basis method if the taxpayer states
in writing that the taxpayer will treat the
basis of the gift shares as the fair market
value o
f the shares at the time the tax-
payer a
cquires the shares. The taxpayer
must p
rovide this statement when the tax-
payer
makes the election under paragraph
(e)(9
)ofthissectionorwhentransferring
the sh
ares to an account for which the tax-
payer
has made this election, whichever
occu
rs later. The statement must be effec-
tive
for any gift shares identical to the gift
shar
es to which the average basis method
elec
tion applies that the taxpayer acquires
at an
y time and must remain in effect as
lon
g as the election remains in effect.
(iii
) The provisions of this paragraph
(e)
(8) are illustrated by the following ex-
amp
les:
Example 1. (i) Taxpayer E owns an account for
the periodic acquisition of shares of M Company, a
reg
ulated investment company. On April 15, 2010,
E acquires identical shares by gift and transfers those
shares into the account. These shares had an adjusted
bas
is in the hands of the donor that was greater than
the fair market value of the shares on that date. On
June 15, 2010, E sells shares from the account and
el
ects to use the average basis method.
(ii) Under paragraph (e)(8)(ii) of this section, E
may elect to use the average basis method for shares
so
ld or transferred from the account if E includes a
statement with E’s election that E will treat the basis
of the gift shares in the account as the fair market
v
alue of the shares at the time E acquired them.See
paragraph (e)(9)(ii) of this section.
Example 2. (i)Thefactsarethesameasin
E
xample 1, except E acquires the gift shares on
April 15, 2012, transfers those shares into the
account, and used the average basis method for sales
o
f shares of M Company before acquiring the gift
shares. E sells shares of M Company on June 15,
2012.
(
ii) Under paragraph (e)(8)(ii) of this section, the
basis of the gift shares may be averaged with the ba-
sis of the other shares of M Company in E’s account
if,whenEtransfersthegift shares to the account, E
provides a statement to E’s broker that E will treat the
basis of the gift shares in the account as the fair mar-
ket value of the shares at the time E acquired them.
See paragraph (e)(9)(i) of this section.
(9)Time and manner for making the av-
erage basis method election—(i)In gen-
eral. A taxpayer makes an election to
use the average basis method for shares
of stock described in paragraph (e)(1)(i)
of this section that are covered securities
(within the meaning of section 6045(g)(3))
by notifying the custodian or agent in writ-
ing by any reasonable means. The tax-
payer m
ay make the average basis method
electi
on at any time, effective for sales or
other
dispositions of stock occurring af-
ter th
e taxpayer notifies the custodian or
agent
. The taxpayer makes the election
separ
ately for each account holding stock
for wh
ich the average basis method is per-
miss
ible. If the election applies to gift
shar
es, the taxpayer must provide the state-
ment
required by paragraph (e)(8)(ii) of
this
section, if applicable, to the custodian
or ag
ent with the taxpayer’s election.
(ii)
Average basis method election for
secu
rities that are noncovered securities.
Ata
xpayer makes an election to use the
ave
rage basis method for shares of stock
des
cribed in paragraph (e)(1)(i) of this sec-
tio
n that are noncovered securities (as de-
scr
ibed in §1.6045–1(a)(16)) on the tax-
pa
yer’s income tax return for the first tax-
ab
le year for which the election applies.
At
axpayer may make the election on an
am
ended return filed no later than the time
pr
escribed (including extensions) for filing
t
he original return for the taxable year for
w
hich the election applies. The taxpayer
m
ust indicate on the return that the tax-
p
ayer used the average basis method in re-
p
orting gain or loss on the sale or other dis-
p
osition. A taxpayer must attach to the re-
turn the statement described in paragraph
(e)(8)(ii) of this section, if applicable. A
taxpayer making the election must main-
tain records necessary to substantiate the
average basis reported.
(iii)Revocation of election. A taxpayer
may revoke an election under paragraph
(e)(9)(i) of this section by the earlier of one
year after the taxpayer makes the election
or the date of the first sale or other dis-
position of that stock following the elec-
tion. A custodian or agent may extend the
one-year period but a taxpayer may not re-
voke an election after the first sale or other
disposition of the stock. A revocation ap-
plies to all stock the taxpayer holds in an
account that is identical to the shares of
stock for which the taxpayer revokes the
election. A revocation is effective when
the taxpayer notifies, by any reasonable
2010–5 I.R.B.366February 1, 2010

means, the custodian or agent holding the
stock to which the revocation applies. Af-
ter revocation, the taxpayer’s basis in the
shares of stock to which the revocation ap-
plies is determined using another permis-
sible basis determination method.
(iv)Change from average basis method.
(a) A taxpayer may change basis deter-
mination methods from the average basis
method to another method prospectively at
any time. A change from the average ba-
sis method applies to all identical stock the
taxpayer sells or otherwise disposes of be-
fore January 1, 2012, that was held in any
account. A change from the average ba-
sis method applies on an account by ac-
count basis (within the meaning of para-
graph (e)(10) of this section) to all iden-
tical stock the taxpayer sells or otherwise
disposes of on or after January 1, 2012.
Unless paragraph (e)(9)(iii) of this section
applies, the basis of each share of stock
to which the change applies is the basis
immediately before the change. See para-
graph (e)(7)(v) of this section.
(b) Unless paragraph (e)(9)(iii) of this
section applies, a change in basis deter-
mination method is a change in method
of accounting to which the provisions
of sections 446 and 481 and the associ-
ated regulations apply. A taxpayer that
wishes to change its basis determination
method must obtain the consent of the
Commissioner in accordance with ap-
plicable administrative procedures,see
§601.601(d)(2) of this chapter.
(v)Example. The provisions of this
paragraph (e)(9) are illustrated by the fol-
lowing example:
Example. (i) Taxpayer F enters into an agreement
with W Custodian establishing an account for the pe-
riodic acquisition of shares of N Company, a regu-
lated investment company. W acquires for F’s ac-
count shares of N Company on the following dates
and amounts:
D
ate
NumberofsharesCost
January 8, 2012
25 shares
$200
February 8, 201224 shares200
March 8, 201220 shares200
(ii)
F elects, under paragraph (e)(9)(i) of this sec-
tion, to use the average basis method for the shares of
N Company. On May 8, 2012, F revokes the average
bas
is method election under paragraph (e)(9)(iii) of
this section. On June 1, 2012, F sells 60 shares of N
Company using the first-in, first-out basis determina-
tio
n method.
(iii) Under paragraph (e)(9)(iii) of this section, the
basis of the N Company shares upon revocation, and
for
purposes of determining gain on the sale, is $8.00
per share for each of the 25 shares purchased on Jan-
uary 8, 2012, $8.34 per share for each of the 24 shares
pu
rchased on February 8, 2012, and $10 per share for
the remaining 11 shares purchased on March 8, 2012.
(10)Application of average basis
method account by account—(i)In gen-
eral. For sales, exchanges, or other dis-
positions on or after January 1, 2012, of
any stock described in paragraph (e)(1)(i)
of this section, the average basis method
applies on an account by account basis.
A taxpayer may use the average basis
method for stock in a regulated investment
company or stock acquired in connec-
tion with a dividend reinvestment plan
in one account but use a different basis
determination method for the identical
stock in a different account. If a taxpayer
uses the average basis method for a stock
described in paragraph (e)(1)(i) of this
section, the taxpayer must use the aver-
age basis method for all identical stock
within that account. The taxpayer may
use different basis determination methods
for stock within an account that is not
identical. Except as provided in paragraph
(e)(10)(ii) of this section, a taxpayer must
make separate elections to use the average
basi
s method for stock held in separate
acc
ounts.
(ii)
Account rule for stock sold be-
for
e2012. A taxpayer’s election to use
the
average basis method for shares of
sto
ck described in paragraph (e)(1)(i)
of t
his section that a taxpayer sells, ex-
cha
nges, or otherwise disposes of before
Ja
nuary 1, 2012, applies to all identical
sh
ares of stock the taxpayer holds in any
ac
count.
(i
ii)Separate account. Unless the
si
ngle-account election described in para-
gr
aph (e)(11)(i) of this section applies, any
st
ock described in paragraph (e)(1)(i) of
th
is section that a taxpayer acquires before
J
anuary 1, 2012, is treated as held in a
s
eparate account from any stock acquired
o
n or after that date, and any stock that
i
s a covered security (within the meaning
o
f section 6045(g)(3)) is treated as held
in a separate account from any stock that
is a noncovered security (as described in
§1.6045–1(a)(16)) regardless of when ac-
quired.
(iv)Examples. The provisions of this
paragraph (e)(10) are illustrated by the fol-
lowing examples:
Example 1. (i) In 2012, Taxpayer G enters into an
agreement with Y Broker establishing three accounts
(G–1, G–2, and G–3) for the periodic acquisition of
shares of P Company, a regulated investment com-
pany. Y makes periodic purchases of P Company for
each of G’s accounts. G elects to use the average ba-
sis method for account G–1. On July 1, 2013, G sells
shares of P Company from account G–1.
(ii) G is not required to use the average basis
method for the shares of P Company that G holds
in ac
counts G–2 and G–3 because, under paragraph
(e)(10)(i) of this section, the average basis method
electionappliestosharessoldafter2011onanac-
cou
nt by account basis.
Example 2. ThefactsarethesameasinExam-
ple 1, except that G also instructs Y to acquire shares
of Q
Company, a regulated investment company, for
account G–1. Under paragraph (e)(10)(i) of this sec-
tion, G may use any permissible basis determination
met
hod for the shares of Q Company because, under
paragraph (e)(4) of this section, the shares of Q Com-
pany are not identical to the shares of P Company.
Ex
ample 3. (i) The facts are the same as inExam-
ple 1, except that G establishes the accounts in 2011
and Y sells shares of P Company from account G–1
on
July 1, 2011.
(ii) G must use the average basis method for the
shares of P Company in accounts G–2 and G–3 be-
ca
use, under paragraph (e)(10)(ii) of this section, for
sales before 2012, G’s election applies to all accounts
in which G holds identical stock. G must average to-
g
ether the basis of the shares in all accounts.
Example 4. (i) In 2011, Taxpayer H acquires
80 shares of R Company and enrolls them in R
C
ompany’s dividend reinvestment plan. In 2012, H
acquires 50 shares of R Company in the dividend
reinvestment plan. H elects to use the average basis
m
ethod for the shares of R Company in the dividend
reinvestment plan. R Company does not make the
single-account election under paragraph (e)(11)(i) of
this section.
(ii) Under paragraph (e)(10)(iii) of this section,
the80sharesacquiredin2011aretreatedasheldina
separate account from the 50 shares acquired in 2012.
H must make a separate average basis method elec-
tion for each account and must average the basis of
the shares in each account separately from the shares
in the other account.
Example 5. (i) B, a broker within the meaning
of section 6045(c)(1), maintains an account for Tax-
payer J for the periodic acquisition of shares of S
Company, a regulated investment company. In 2013,
B purchases shares of S Company for J’s account that
February 1, 20103672010–5 I.R.B.

are covered securities within the meaning of section
6045(g)(3). On April 15, 2014, J inherits shares of S
Company that are noncovered securities and transfers
the shares into the account with B.
(ii) Under paragraph (e)(10)(iii) of this section,
J must treat the purchased shares and the inherited
shares of S Company as held in separate accounts. J
may elect to apply the average basis method to all the
shares of S Company, but must make a separate elec-
tion for each account, and must average the basis of
the shares in each account separately from the shares
in the other account.
(11)Single-account election—(i)In
general. Paragraph (e)(10)(iii) of this sec-
tion does not apply if a regulated invest-
ment company or dividend reinvestment
plan elects to treat all identical shares of
stock described in paragraph (e)(1)(i) of
this section as held in a single account
(single-account election). The single-ac-
count election applies only to stock for
which a taxpayer elects to use the aver-
age basis method that is held in separate
accounts or treated as held in separate
accounts maintained for the taxpayer. If a
broker (as defined by section 6045(c)(1))
holds the stock as a nominee, the broker,
and not the regulated investment company
or dividend reinvestment plan, makes the
election. The single-account election is
irrevocable.
(ii)Scope of election. A company, plan,
or broker may make a single-account elec-
tion for one or more taxpayers for which
it maintains an account, and for one or
more stocks it holds for a taxpayer. The
company, plan, or broker may make the
election only for the shares of stock for
which it has accurate basis information. A
company, plan, or broker has accurate ba-
sis information if the company, plan, or
broker neither knows nor has reason to
know that the basis information is inaccu-
rate. See also section 6724 and the regu-
lations thereunder regarding standards for
relief from information reporting penal-
ties. Stock for which accurate basis infor-
mation is unavailable may not be included
in the single-account election and must be
treated as held in a separate account.
(iii)Effect of single-account election.If
a company, plan, or broker makes the sin-
gle-account election, the basis of all iden-
tical shares of stock to which the elec-
tion applies must be averaged together re-
gardless of when the taxpayer acquires the
shares, and all the shares are treated as
covered securities. Once made, the sin-
gle-account election applies to all identical
stock a taxpayer later acquires in the ac-
count that is a covered security (within the
meaning of section 6045(g)(3)). A com-
pany, plan, or broker may make another
single-account election if a taxpayer ac-
quires identical stock in the account that
is a noncovered security (as described in
§1.6045–1(a)(16)) for which the company,
plan, or broker has accurate basis informa-
tion.
(iv)Time and manner for making the
single-account election. A company, plan,
or broker makes the single-account elec-
tion by clearly noting it on its books and
records. The books and records must re-
flect the date of the election; the taxpayer’s
name, account number, and taxpayer iden-
tification number; the stock subject to the
election; and the taxpayer’s basis in the
stock. The company, plan, or broker must
provide copies of the books and records re-
garding the election to the taxpayer upon
request. A company, plan, or broker may
make the single-account election at any
time.
(v)Notification to taxpayer.Acom-
pany, plan, or broker making the single-ac-
count election must use reasonable means
to notify the taxpayer of the election. Rea-
sonable means include mailings, circulars,
or electronic mail sent separately to the
taxpayer or included with the taxpayer’s
account statement, or other means reason-
ably calculated to provide actual notice to
the taxpayer. The notice must identify the
securities subject to the election and ad-
vise the taxpayer that the securities will be
treated as covered securities regardless of
when acquired.
(vi)Examples. The provisions of this
paragraph (e)(11) are illustrated by the fol-
lowing examples:
Example 1. (i) C Broker maintains an account
for Taxpayer K for the acquisition and disposition of
shares of T Company, a regulated investment com-
pany, and shares of V Company that K enrolls in C’s
dividend reinvestment plan. In 2011, C purchases for
K’s account 100 shares of T Company in multiple lots
and80sharesofVCompanyinmultiplelotsthatare
enrolled in the dividend reinvestment plan. C has ac-
curate basis information for all 100 shares of T Com-
pany and 80 shares of V Company. In 2012, C ac-
quires for K’s account 150 shares of T Company and
160 shares of V Company that are enrolled in the div-
idend reinvestment plan. K elects to use the average
basis method for all the shares of T Company and V
Company.
(ii) Under paragraphs (e)(11)(i) and (ii) of this
section, C may make a single-account election for the
T Company stock or the V Company stock, or both.
After making a single-account election for each stock,
under paragraph (e)(11)(iii) of this section, the basis
of all T Company stock is averaged together and the
basis of all V Company stock is averaged together,
regardless of when acquired, and all the shares of T
Company and V Company are covered securities.
Example 2.ThefactsarethesameasinExample
1, except that K transfers the 100 shares of T Com-
pany acquired in 2011 from an account with another
broker into K’s account with C. C does not have ac-
curate basis information for 30 of the 100 shares of
T Company, which K had acquired in two lots. Un-
der paragraph (e)(11)(ii) of this section, C may make
the single-account election only for the 70 shares of
T Company stock for which C has accurate basis in-
formation. The 30 shares of T Company for which
C does not have accurate basis information must be
treated as held in a separate account. K may use the
average basis method for the 30 shares of T Company,
but must make a separate average basis method elec-
tion for these shares and must average the basis of
these shares separately from the 70 shares subject to
C’s single-account election.
Example 3.ThefactsarethesameasinExample
1, except that in 2013 K acquires additional shares of
T Company that are covered securities in K’s account
with C. Under paragraph (e)(11)(iii) of this section,
these shares of T Company are subject to C’s single-
account election.
Example 4. ThefactsarethesameasinExam-
ple 1, except that following C’s single-account elec-
tion, in 2013, K inherits shares of T Company that are
noncovered securities and transfers the shares into the
account with C. C has accurate basis information for
these shares. Under paragraph (e)(11)(iii) of this sec-
tion, C may make a second single-account election to
include the inherited T Company shares.
(12)Effective/applicability date.Ex-
cept as otherwise provided in paragraphs
(e)(1), (e)(2), (e)(7), (e)(9), and (e)(10) of
this section, this paragraph (e) applies for
taxable years beginning after the date these
regulations are published as final regula-
tions in theFederal Register.
*****
Par. 4. Section 1.6039–2 is amended
by adding two new sentences at the end of
paragraph (c)(1) to read as follows:
§1.6039–2 Statements to persons with
respect to whom information is reported.
*****
(c) * * *
(1)***However,ifthestate-
ment is furnished in a consolidated re-
porting statement under section 6045,
the February 15 due date set forth in
section 6045 applies to the statement.
See§§1.6045–1(k)(3), 1.6045–2(d)(2),
1.6045–3(e)(2), 1.6045–4(m)(3), and
1.6045–5(a)(3)(ii).
*****
2010–5 I.R.B.368February 1, 2010

Par. 5. Section 1.6042–4 is amended
by adding two new sentences at the end of
paragraph (e)(1) to read as follows:
§1.6042–4 Sta
tements to recipients of
dividend paym
ents.
*****
(e) * * *
(1) * * * If the statement is fur-
nished in a consolidated reporting state-
ment under section 6045, the Feb-
ruary 15 due date set forth in sec-
tion 6045 applies to the statement.
See§§1.6045–1(k)(3), 1.6045–2(d)(2),
1.6045–3(e)(2), 1.6045–4(m)(3), and
1.6045–5(a)(3)(ii).
*****
Par. 6. Section 1.6044–5 is amended
by adding two new sentences at the end of
paragraph (b) to read as follows:
§1.6044–5 Statements to recipients of
patronage dividends.
*****
(b) * * * If the statement is fur-
nished in a consolidated reporting state-
ment under section 6045, the Feb-
ruary 15 due date set forth in sec-
tion 6045 applies to the statement.
See§§1.6045–1(k)(3), 1.6045–2(d)(2),
1.6045–3(e)(2), 1.6045–4(m)(3), and
1.6045–5(a)(3)(ii).
*****
Par. 7. Section 1.6045–1 is amended
by:
1. Revising paragraphs (a)(1) and
(a)(9), and adding paragraphs (a)(14),
(a)(15), and (a)(16).
2.Revising paragraphs (c)(2),
(c)(3)(i)(B)(1), and (c)(3)(i)(C).
3. Removing paragraph (c)(3)(xii)
and redesignating paragraph (c)(3)(xi) as
(c)(3)(xii) and adding a new paragraph
(c)(3)(xi).
4. AddingExamples 7,8,9,10,and11
to paragraph (c)(4).
5. Revising paragraphs (d)(1), (d)(2),
and (d)(5).
6. Redesignating paragraphs (d)(6) and
(d)(7) as (d)(8) and (d)(9) respectively and
adding new paragraphs (d)(6) and (d)(7).
7. Revising newly designated para-
graphs (d)(8) and (d)(9).
8. Revising paragraphs (e)(2)(i), (f)(1),
(f)(2)(i), (k)(1), and (k)(2).
9. Redesignating paragraph (k)(3) as
(k)(4) and adding a new paragraph (k)(3).
10. Removing paragraphs (p) and (q)
and redesignating paragraph (r) as (p).
The additions and revisions read as fol-
lows:
§1.6045–1 Returns of information of
brokers and barter exchanges.
(a) * * *
(1) The termbrokermeans 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 calen-
dar 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 redemp-
tion or retirement) effected at an office
outside the United States, except as other-
wise provided in a withholding agreement
with the Internal Revenue Service under
§1.1441–1(e)(5)(iii), 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 re-
tires an obligation of which it is the issuer.
*****
(9) The termsalemeans any disposition
for cash of securities, commodities, reg-
ulated futures contracts, or forward con-
tracts, and includes redemptions of stock,
retirements of indebtedness, and enterings
into short sales when these actions are con-
ducted for cash. In the case of a regulated
futures contract or a forward contract, the
term “sale” means 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, if delivery is made, such de-
livery is a separate sale. When a closing
transaction in a forward contract involves
making or taking delivery, the delivery is
a sale without separation of the profit or
loss on the contract from the profit or loss
on the delivery, except that taking deliv-
ery for United States dollars is not a sale.
The term “sale” does not include grants or
purchases of options, exercises of call op-
tions, or enterings into contracts that re-
quire delivery of personal property or an
interest therein. For purposes of this sec-
tion only, the term “sale” does not include
aconstructivesaleunder section 1259 or
a mark to fair market value under section
475.
*****
(14) The termspecified securitymeans
any share of stock (including a certifi-
cate of beneficial interest) in a corpora-
tion (foreign or domestic) described in
§301.7701–2(b) of this chapter. Solely
for purposes of this paragraph (a)(14), a
security classified as stock by the issuer is
treated as stock. If no issuer classification
has been made, the security is not treated
as stock unless the broker knows, or has
reason to know, that the security is rea-
sonably classified as stock under general
Federal tax principles.
(15) The termcovered securitymeans
the following specified securities:
(i) Any specified security acquired
through a sale transaction in an account on
or after January 1, 2011, except for stock
in a regulated investment company (as
described in §1.1012–1(e)(5)) and stock
that is considered acquired in connection
with a dividend reinvestment plan (as de-
scribed in §1.1012–1(e)(6)) on the date of
acquisition.
(ii) Stock in a regulated investment
company if acquired through a sale trans-
action in an account on or after January 1,
2012.
(iii) Stock acquired in connection with
a dividend reinvestment plan if acquired
through a sale transaction in an account on
or after January 1, 2012.
(iv) Any specified security transferred
to an account in a non-sale transaction pro-
vided that 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.
(16) The termnoncovered security
means any security that is not a covered
security.
*****
(c) * * *
(2)Sales required to be reported.Ex-
ceptasprovidedinparagraphs (c)(3),
(c)(5), and (g) of this section, a broker is
required to make a return of information
with respect to 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
February 1, 20103692010–5 I.R.B.

others, the broker effects the sale or closes
the short position opened by the sale.
(3) * * *
(i) * * *
(B)***
(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 a corporation for
which an election under section 1362(a) is
in effect;
*****
(C)Exemption certificate.Abroker
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), on the bro-
ker’s actual knowledge that the payee is a
person described in paragraph (c)(3)(i)(B)
of this section, or on the applicable indi-
cators described in §1.6049–4(c)(1)(ii)(A)
through (M), except a broker must not
treat a person described in paragraph
(c)(3)(i)(B) of this section as an exempt
recipient based on the indicator described
in §1.6049–4(c)(1)(ii)(A) (relating to cor-
porations) with respect to sales of covered
securities acquired on or after January 1,
2012. 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.
*****
(xi)Short sales. A return of information
for a short sale of a security entered into on
or after January 1, 2010, is not made until
the year in which securities are acquired or
delivered to close the short sale. The return
must be made without regard to the con-
structive sale rule in section 1259 and, if
the short sale remains open, without regard
to section 1233(h). The return is required
to include the following information:
(A) With respect to short sales closed by
covered securities (other than short sales
described in paragraph (c)(3)(xi)(C) of this
section), a broker is required to report, on a
single return of information, the informa-
tion required by paragraph (d)(2)(i) of this
section including the relevant information
regarding the securities sold to open the
short sale and the adjusted basis for the se-
curities acquired or 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) With respect to short sales closed
by noncovered securities (other than short
sales described in paragraph (c)(3)(xi)(C)
of this section), a broker is required to re-
port the relevant information required by
paragraph (d)(2)(i) of this section for the
securities sold to open the short sale. Ad-
justed basis and whether any gain or loss
on the closing of a short sale is long-term
or short-term (within the meaning of sec-
tion 1222) are not reportable for short sales
closed before January 1, 2011. With re-
spect to short sales closed on or after Jan-
uary 1, 2011, 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 for noncovered se-
curities acquired or delivered to close a
short sale provided that the broker indi-
cates on Form 1099 or any successor form
that the securities acquired or delivered to
close a short sale are noncovered securi-
ties. A broker that chooses to report this in-
formation with respect to short sales closed
by noncovered securities is not subject to
penalties under section 6721 or 6722 for
any failure to report such information cor-
rectly, provided that the broker indicates
on Form 1099 or any successor form that
securities acquired or delivered to close a
short sale are noncovered securities.
(C) With respect to short sales closed
by securities transferred into a customer’s
account accompanied by a transfer state-
ment (as described in §1.6045A–1) indi-
cating that the securities were borrowed
from or through the applicable person ef-
fecting the transfer (within the meaning
of §1.6045A–1(a)(3)), the broker receiv-
ing custody of the securities must not file
a return of information. In this situation,
the broker receiving custody of the secu-
rities must furnish a statement to the ap-
plicable person effecting the transfer that
reports the amount of gross proceeds re-
ceived from the short sale, the date the
short sale was opened, and the CUSIP or
other security identifier number that the
Secretary may designate by publication in
theFederal Registeror in the Internal
Revenue Bulletin (see §601.601(d)(2) of
this chapter) of the securities that opened
the short sale. The statement must also
contain the date that the transfer was ini-
tiated as reported on the transfer statement
and the name and contact information of
the broker receiving custody of the secu-
rities, the applicableperson that effected
the transfer, and the customer. The ap-
plicable person that effected the transfer
must take the information furnished by the
broker receiving custody of the securities
under this paragraph (c)(3)(xi)(C) into ac-
count when making the return of informa-
tion required by this section at the time the
short sale is closed unless the applicable
person that effected the transfer knows that
the information on the statement is incor-
rect. Any failure to report correct informa-
tion that arises solely from this reliance is
deemed to be due to reasonable cause with
respect to penalties under sections 6721
and 6722.See§301.6724–1(a)(1) of this
chapter. This paragraph (c)(3)(xi)(C) ap-
plies only if a short sale is not considered
closed under section 1233 by the delivery
of property borrowed from a lender.
(4) * * *
*****
Example 7. On April 17, 2009, H, an individual
who is not an exempt recipient, opens a short sale of
stock in an account with M, a broker. Because the
short sale is entered into prior to January 1, 2010,
paragraph (c)(3)(xi) of this section does not apply.
Under paragraphs (c)(2) and (j) of this section, M
must make a return of information for the year of the
sale regardless of when the short sale is closed.
Example 8. (i) On June 24, 2010, H opens a short
sale of stock in an account with M, a broker. H closes
the short sale with M on August 25, 2010, by pur-
chasing stock of the same corporation in the account
in which H opened the short sale.
(ii) Because the short sale is entered into on or
after January 1, 2010, under paragraphs (c)(2) and
(c)(3)(xi) of this section, the broker closing the short
sale must make a return of information reporting the
sale for the year in which the short sale is closed.
Thus, M is required to report the sale for 2010.
(iii) Because the stock used to close the short sale
was acquired before January 1, 2011, the stock is a
noncovered security under paragraph (a)(16) of this
section, and paragraph (c)(3)(xi)(B) of this section
applies. Under paragraph (c)(3)(xi)(B) of this sec-
tion, because the short sale was closed prior to Jan-
uary 1, 2011, M must report the relevant information
for the sold stock. The adjusted basis and whether
any gain or loss on the closing of the short sale is
long-term or short-term (within the meaning of sec-
tion 1222) are not reportable for transactions occur-
ring prior to January 1, 2011.
Example 9. (i) On December 20, 2010, H opens
a short sale of stock that is not stock in a regulated
investment company in an account with M, a broker.
H closes the short sale with M on January 20, 2011,
by purchasing stock of the same corporation in the
account in which H opened the short sale. The pur-
chased stock is not considered to be acquired in con-
nection with a dividend reinvestment plan.
2010–5 I.R.B.370February 1, 2010

(ii) Because the short sale is entered into on or
after January 1, 2010, underparagraphs (c)(2) and
(c)(3)(xi) of this section, the broker closing the short
sale must make a return of information reporting the
sale for the year in which the short sale is closed.
Thus, M is required to report the sale for 2011.
(iii) Because the stock used to close the short sale
is not stock in a regulated investment company or
acquired in connection with a dividend reinvestment
plan and was acquired on or after January 1, 2011, the
stock is a covered security under paragraph (a)(15)(i)
of this section, and paragraph (c)(3)(xi)(A) of this
section applies. Under paragraph (c)(3)(xi)(A) of this
section, M must report on a single return the relevant
information for the sold stock, the adjusted basis of
the acquired stock, 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). Thus, M must
report the information about the transactions opening
and closing the short sale on a single return for tax-
able year 2011.
Example 10. Assume the same facts as inExam-
ple 9except that H satisfies the short sale obligation
with M by delivering stock of the same corporation
that H acquired on December 29, 2010. Because the
stock used to close the short sale was acquired before
January 1, 2011, the stock is a noncovered security
under paragraph (a)(16) of this section and paragraph
(c)(3)(xi)(B) of this section applies. Under paragraph
(c)(3)(xi)(B) of this section, because the short sale
was closed on or after January 1, 2011, M must re-
port the relevant information for the sold stock and
is permitted to report the adjusted basis of the stock
acquired 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).
Whether M chooses to report the last two items or to
leave these two fields blank, M will not be subject to
penalties for failing to report the correct adjusted ba-
sis or whether any gain or loss on the closing of the
short sale is long-term or short-term provided that M
indicates on Form 1099 or any successor form that
the securities acquired or delivered to close the short
sale are noncovered securities.
Example 11. Assume the same facts as inExam-
ple 9except that H satisfies the short sale obligation
with M by borrowing stock of the same corporation
from another broker, N, and transferring the borrowed
stock from the custody of N to M. N indicates on
the transfer statement that the transferred stock was
borrowed from or through N. Because H is not con-
sidered to have closed H’s short sale under section
1233, under paragraph (c)(3)(xi)(C) of this section,
M is not permitted to file the return of information
required under this section. Instead, M must furnish
a statement to N that reports the gross proceeds from
the short sale, the date the short sale was opened, and
the CUSIP number or other security identifier number
for the sale of the stock borrowed from M to open the
short sale on December 20, 2010, along with the date
N initiated the transfer as reported by N on the trans-
fer statement and the name and contact information of
H, M, and N. N must reportthe gross proceeds from
the short sale, the date the short sale was opened, the
adjusted basis of the stock acquired 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) on the return of information
N is required to file under paragraph (c)(2) of this sec-
tion when H closes the short sale in the account with
N.
*****
(d)Information required—(1)In gen-
eral. A broker that is required to make a
return of information under paragraph (c)
of this section during a reporting period
is required to report on a separate Form
1096, “Annual Summary and Transmittal
of U.S. Information Returns,” or any suc-
cessor form for each filing group, show-
ing such information as may be required
by Form 1096, in the form, manner, and
number of copies required by Form 1096.
(2)Transactional reporting—(i)Re-
quired information. For each sale for
which a broker is required to make a return
of information under this section, the bro-
ker, except as provided in paragraph (c)(5)
of this section, must report on Form 1099
or any successor form the name, address,
and taxpayer identification number of the
customer, the property sold, the Commit-
tee on Uniform Security Identification
Procedures (CUSIP) number of the secu-
rity sold (if applicable) or other security
identifier number that the Secretary may
designate by publication in theFederal
Registeror in the Internal Revenue Bul-
letin (see §601.601(d)(2) of this chapter),
the adjusted basis of the security sold,
whether any gain or loss with respect to
the security sold is long-term or short-term
(within the meaning of section 1222), the
gross proceeds of the sale, the sale date,
andsuchotherinformation as may be re-
quired by Form 1099, in the form, manner,
and number of copies required by Form
1099.
(ii)Specific identification of securities.
In the case of a sale of securities acquired
on different dates or at different prices but
involving less than the entire position of
the security held in an account, a broker
must report the sale on a first-in, first-out
basis within the account unless the cus-
tomer notifies the broker by means of mak-
ing an adequate and timely identification
of the securities to be sold. If the cus-
tomer makes an adequate and timely iden-
tification of the securities to be sold, the
broker must report the sale consistently
with the customer’s identification. For
rules governing the requirements and tim-
ing for making an adequate identification,
see§1.1012–1(c).
(iii)Sales of noncovered securities and
certain excepted securities. In the case of a
sale of a noncovered security, reporting of
the adjusted basis of the security sold and
whether any gain or loss with respect to
the security sold is long-term or short-term
(within the meaning of section 1222) is not
required provided that a broker indicates
on Form 1099 or any successor form that
the sale is a sale of a noncovered secu-
rity. A broker that chooses to report this
information with respect to a noncovered
security is not subject to penalties under
section 6721 or 6722 for any failure to re-
port such information correctly, provided
that the broker indicates on Form 1099 or
any successor form that the sale is a sale
of a noncovered security. For purposes
of this paragraph (d)(2)(iii), a security that
was excepted from all reporting under this
section as described in paragraph (c)(3) of
this section at the time of its acquisition is
treated in the same manner as a noncov-
ered security.
(iv)Information from other parties
and other accounts—(A)Transfer and
issuer statements. When reporting the
sale of a covered security, a broker must
take into account all information reported
on any transfer statement (as described
in §1.6045A–1) received in connection
withthetransferofthesecuritytothe
customer’s account with the broker, and
all information reported on any issuer
statement (as described in §1.6045B–1)
regarding the effect on the security of any
organizational actions prior to the sale of
the security unless the broker knows that
the information presented on the transfer
statement or issuer statement is incorrect.
With respect to penalties under sections
6721 and 6722, any failure to report cor-
rect information that arises solely from
this reliance is deemed to be due to rea-
sonable cause.See§301.6724–1(a)(1) of
this chapter.
(B)Other information.Abrokeris
permitted, but not required, to take into
account any information with respect to
a covered security that is not reflected on
a transfer statement or issuer statement,
including any information the broker has
about securities held by the same customer
in other accounts with the broker. With
respect to penalties under sections 6721
and 6722, a broker that takes into account
information received from a customer or
third party other than information reflected
February 1, 20103712010–5 I.R.B.

on a transfer statement or issuer statement
is deemed to have relied upon it in good
faith if the broker neither knows nor has
reason to know that the information is
incorrect.See§301.6724–1(c)(6) of this
chapter.
(v)Failures by other parties.Abroker
that does not receive a complete transfer
statement by the transfer statement due
date (as described in §1.6045A–1(a)(5)
and (b)) in connection with the receipt
of transferred securities must notify the
person effecting the transfer and request
a complete statement. The broker is not
required to make this request more than
once. If the broker does not receive a com-
plete transfer statement after making the
request, the broker may treat the security
as noncovered when sold. If the broker
receives a complete transfer statement af-
ter the sale indicating that the security was
a covered security, the broker must file a
corrected Form 1099 within thirty days of
receiving the statement unless the required
information was reported on the original
Form 1099 consistently with the com-
plete transfer statement. Similarly, if an
issuer does not furnish a complete issuer
statement (as described in §1.6045B–1) re-
garding a corporate organizational action
that occurs prior to the sale of a covered
security until after the broker has reported
the sale of the security, the broker must
file a corrected Form 1099 within thirty
days of receiving the statement unless the
required information was reported on the
original Form 1099 consistently with the
complete issuer statement.
(vi)Examples. The following examples
illustrate the rules of this paragraph (d)(2):
Example 1. (i) J is an organization exempt from
taxation under section 501(a). On February 22, 2012,
JpurchasesstockinanaccountwithF,abroker.On
October 1, 2012, J loses its exemption under section
501(a). On January 15, 2013, J sells the shares of
stock.
(ii) Because J was exempt from reporting under
section 6045 at the time it acquired the shares of
stock, under paragraph (d)(2)(iii) of this section, F is
not required to report the adjusted basis of the stock
andwhetheranygainorlossonthesaleislong-term
or short-term (within the meaning of section 1222).
Whether F chooses to report this information or to
leave these fields blank, under paragraph (d)(2)(iii) of
this section, F is not subject to penalties for failing to
report the correct adjusted basis or whether any gain
or loss on the sale is long-term or short-term provided
that F indicates on Form 1099 that the sale is a sale of
a noncovered security.
Example 2. (i) On March 1, 2012, K sells 100
shares of stock of C, a corporation, at a loss in an
account held with F, a broker. On March 15, 2012,
K purchases 100 shares of stock of the same corpo-
ration in an account with G, a different broker. Be-
cause the shares purchased on March 15, 2012, are
acquired through a sale transaction in an account af-
ter January 1, 2012, under paragraph (a)(15) of this
section, the shares are covered securities. K asks G
to increase K’s adjusted basis in the shares to account
for the application of the wash sale rules under section
1091 to the loss transaction in the account held with
F.
(ii) Under paragraph (d)(2)(iv)(B) of this section,
G is not required to take into account the information
provided by K when subsequently reporting the ad-
justed basis and whether any gain or loss on the sale
is long-term or short-term (within the meaning of sec-
tion 1222). If G chooses to take this information into
account, under paragraph (d)(2)(iv)(B) of this sec-
tion, G is deemed to have relied upon the information
received from K in good faith on any subsequent re-
porting for purposes of penalties under section 6721
and 6722 if G neither knows nor has reason to know
that the information provided by K is incorrect.
Example 3. (i) L purchases shares of stock of
the same corporation in an account with F, a bro-
ker, on November 21, 1962, November 21, 2012,
November 21, 2013, and November 21, 2014. In
January 2015, L sells all the stock.
(ii) Under paragraph (d)(2)(i) of this section, F
must separately report the gross proceeds and ad-
justed basis attributable to those shares purchased in
2014, for which the gain or loss on the sale is short-
term, and the combined gross proceeds and adjusted
basis attributable to those shares purchased in 2012
and 2013, for which the gain or loss on the sale is
long-term. Under paragraph (d)(2)(iii) of this section,
F must also separately report the gross proceeds at-
tributable to the shares purchased in 1962 as the sale
of noncovered securities in order to avoid treatment
of this sale as the sale of covered securities.
Example 4. (i) On June 1, 2015, M makes a gift
to N of shares of stock originally purchased by M on
March 1, 2013, in an account with F, a broker. In con-
nection with the transfer, F provides a complete trans-
fer statement (as described in §1.6045A–1) to G, N’s
broker, stating that the shares are covered securities.
N subsequently sells the shares.
(ii) Because G received a complete transfer state-
ment stating that the shares are covered securities,
under paragraph (d)(2)(iv)(A) of this section, G must
take into account the information reported on the
transfer statement in reporting N’s subsequent sale
of the shares unless G knows that the information
is incorrect. Under paragraph (d)(2)(iv)(A) of this
section, any failure to report correct information that
arises solely from this reliance is deemed to be due
to reasonable cause.
Example 5. Assume the same facts as inExample
4except that G does not receive a complete transfer
statement by the transfer statement due date. Under
paragraph (d)(2)(v) of this section, G must notify F
and request a complete statement. If G still does not
receive a complete statement, G may treat the securi-
ties as noncovered securities at the time of sale.
*****
(5)Gross proceeds. For purposes of
this section,gross proceedsonasaleare
the total amount paid to the customer or
credited to the customer’s account as a re-
sult of such sale reduced by the amount
of any interest reported under paragraph
(d)(3) of this section and increased by any
amount not so paid or credited by reason
of repayment of margin loans. In the case
of a closing transaction which results in a
loss, gross proceeds are the amount deb-
ited from the customer’s account. A bro-
ker may, but is not required to, take com-
missions into account in determining gross
proceeds, provided the treatment chosen
is consistent with the books of the broker.
For securities sold pursuant to the exer-
cise of an option granted or acquired be-
fore January 1, 2013, a broker may, but is
not required to, take the option premiums
into account in determining the gross pro-
ceeds of the securities sold pursuant to the
exercise of the option, provided the treat-
ment chosen is consistent with the books
of the broker.
(6)Adjusted basis—(i)In general.For
purposes of this section, the adjusted basis
of a security is determined from the basis
determined under paragraph (d)(6)(ii) of
this section as of the date the security is ac-
quired in an account, increased by the com-
missions and transfer taxes related to its
sale to the extent not accounted for in gross
proceeds as described in paragraph (d)(5)
of this section. When reporting adjusted
basis, a broker must take into account or-
ganizational actions affecting the basis of
the security if reported on any issuer state-
ment (as described in §1.6045B–1) but is
not otherwise required to consider trans-
actions, elections, or events occurring out-
side the account.
(ii)Initial basis—(A)Cost basis.For
a security acquired through a sale transac-
tion in an account, the initial basis is the
total amount paid by the customer or cred-
ited against the customer’s account for the
security, increased bythe commissions and
transfer taxes related to its acquisition to
the extent not accounted for in gross pro-
ceeds as described in paragraph (d)(5) of
this section. For securities purchased or
acquired pursuant to the exercise of an op-
tion granted or acquired before January 1,
2013, a broker may, but is not required to,
take option premiums into account in de-
termining the adjusted basis of the securi-
ties purchased or acquired pursuant to the
exercise of the option. A broker may, but
is not required to, take into account income
recognized upon the exercise of a compen-
2010–5 I.R.B.372February 1, 2010

satory option or other equity-based com-
pensation arrangement before January 1,
2013, in determining adjusted basis.
(B)Transferred basis—(1)In general.
In the case of a security acquired through a
non-sale transfer, the initial basis is gener-
ally the basis reported on the transfer state-
ment (as described in §1.6045A–1).
(2)Securities acquired by gift.Ifthe
transfer statement indicates that the secu-
rity is acquired as a gift, the broker must
apply the relevant basis rules under this Ti-
tle for property acquired by gift in deter-
mining the initial basis, except that the bro-
ker is not required to account for adjust-
ments to basis arising solely from gift tax
paid with respect to the gift. If the appli-
cation of the relevant basis rules for prop-
erty acquired by gift prevents both gain
and loss from being recognized, or if the
initial basis of the security depends upon
its fair market value as of the date of the
gift but the transfer statement does not re-
port its fair market value as of the date of
the gift and this amount is not readily as-
certainable by the broker, the broker must
treat the initial basis as equal to the gross
proceeds from the sale determined under
paragraph (d)(5) of this section.
(iii)Adjustments for wash sales.Abro-
ker must apply the wash sale rules under
section 1091, but only if both the sale and
purchase transactions occur with respect
to covered securities in the same account
with the same CUSIP number or other se-
curity identifier number that the Secretary
may designate by publication in theFed-
eral Registeror in the Internal Revenue
Bulletin (see§601.601(d)(2) of this chap-
ter). When reporting the sale transaction
that triggered the wash sale, the broker
must report the amount of loss that is disal-
lowedbysection1091inadditiontogross
proceeds and adjusted basis for the sale
transaction. Additionally, the broker must
take the amount of loss disallowed on the
sale transaction into account in determin-
ing the adjusted basis of the purchased se-
curities.
(iv)No constructive sale or mark-to-
market adjustments. A broker must report
adjusted basis for a security without regard
to the provisions of section 1259 (regard-
ing constructive sales) or section 475 (re-
garding the mark-to-market method of ac-
counting).
(v)Average basis method adjustments.
For securities for which basis may be de-
termined by the average basis method, a
broker must compute basis using the av-
erage basis method if the owner validly
elects that method for the securities sold
or, in the absence of any instruction from
the customer, if the broker chooses that
method as its defaultbasis determination
method.See§1.1012–1(e).
(vi)Examples. The following exam-
ples, in which all the securities are covered
securities, illustrate the rules of this para-
graph (d)(6):
Example 1. (i) M makes a gift to N of shares of
stock which M holds in an account with F, a broker.
The shares are stock of a publicly traded company
with a readily ascertainable fair market value. In con-
nection with the transfer, F provides a transfer state-
ment (as described in §1.6045A–1) to G, N’s broker,
reporting that the transfer was a gift of covered securi-
ties originally acquired on April 2, 2012. G receives
custody of the shares on June 4, 2015. G sells the
shares on March 24, 2016.
(ii) Because the transfer statement reported the
transfer as a gift, under paragraph (d)(6)(ii)(B)(2)of
this section, G must apply the relevant basis rules for
propertyacquiredbygiftindeterminingadjustedba-
sis when reporting the sale of the shares. Depending
on the gross proceeds of the sale, G may determine the
reported adjusted basis from the basis reported on the
transfer statement, the fair market value of the gifted
shares on June 4 that G determines from readily as-
certainable records, or the gross proceeds determined
from the sale.
Example 2. Assume the same facts as inExam-
ple 1except that the shares are stock of a privately
held company with no readily ascertainable fair mar-
ket value and the transfer statement did not report a
fair market value of the securities as of the date of the
gift to N. Under paragraph (d)(6)(ii)(B)(2) of this sec-
tion, if G must determine the reported adjusted basis
from the fair market value of the shares, G must treat
the gross proceeds from the sale as the adjusted ba-
sis. Under paragraph (d)(2)(iv)(B) of this section, G
may instead rely on a fair market value provided by
N in determining basis under the relevant basis rules
for property acquired by gift and is deemed to have
relied upon the fair market value provided by N in
good faith on any subsequent reporting for purposes
of penalties under sections 6721 and 6722 if G nei-
ther knows nor has reason to know that the fair mar-
ket value provided by N is incorrect.
Example 3. (i) On September 21, 2012, P pur-
chases 100 shares of common stock of C, a corpo-
ration, in an account with J, a broker. In the same
account with J, on December 14, 2012, P purchases
50 shares of C common stock. All of the C common
stock purchased by P has the same CUSIP number.
On January 4, 2013, P sells the 100 shares purchased
on September 21, 2012 at a loss.
(ii) J must apply the rules of paragraph (d)(6)(iii)
of this section for reporting the basis of the covered
securities sold in a wash sale when reporting the Jan-
uary 4, 2013 sale of the shares purchased on Septem-
ber 21, 2012, because this sale and the purchase of
shares on December 14, 2012, occurred with respect
to covered securities in the same account with the
same CUSIP number.
(iii) Under the rules of paragraph (d)(6)(iii) of
this section for reporting the basis of covered secu-
rities sold in a wash sale, for the January 4, 2013
sale, J must report the amount of the disallowed loss
determined under section 1091 in addition to gross
proceeds and adjusted basis of the September 21,
2012 stock. If P later sells the shares acquired on
December 14, 2012, J must take the amount of loss
disallowedontheJanuary4,2013saletransaction
into account in determining adjusted basis.
Example 4.AssumethesamefactsasinExample
3except that the December 14, 2012 purchase occurs
in another account maintained by P with J. Because
the December 14, 2012 purchase did not occur in the
same account as the sale of the September 21, 2012
stock, under paragraph (d)(6)(iii) of this section, J is
not required to apply the wash sale reporting rules to
determine amounts to be reported for the sale of stock
acquired on September 21, 2012, or December 14,
2012. Under paragraph (d)(2)(iv)(B) of this section,
J may choose to apply the wash sale rules as if the
transactions occurred in the same account and report
the sales of the securities as inExample 3.
Example 5. On January 20, 2012, Q purchases
shares of stock of C, a corporation, in an account with
K, a broker. In 2014, C makes a distribution to share-
holders that it classifies as a nondividend (nontax-
able) distribution on an issuer statement (as described
in §1.6045B–1). On July 1, 2015, Q sells the shares.
Under section (d)(6)(i) of this section, K must take
into account the reduction to adjusted basis based on
the 2014 distribution when reporting the sale of the
shares.
Example 6. (i) L, a regulated investment com-
pany, offers two funds for sale, Fund D and Fund E.
On April 22, 2012, R purchases shares of Fund D and
pays a separate load charge. By reason of the payment
of the load charge, R acquires a reinvestment right in
shares of Fund E. On April 23, 2012, at the request of
R, Fund D redeems the shares. R uses the proceeds to
purchase shares of Fund E in a separate account. As a
result of the reinvestment right acquired by R, R pays
no load charge on the purchase of shares of Fund E.
Without the reinvestment right, R would have paid a
load charge on the purchase of the shares of Fund E.
(ii) Under paragraph (d)(6)(i) of this section,
when reporting adjusted basis at the time of sale, L
is not required to take into account any deferral of
the load charge under section 852(f), because the
transactions concerningFund D and Fund E occur in
separate accounts. Under paragraph (d)(2)(iv)(B) of
this section, L may choose to apply the provisions of
section 852(f).
Example 7
. S,anemployeeofC,acorpo-
ration, participates in C’s stock option plan. On
April 2, 2012, C grants S a nonstatutory option
under the plan to buy 100 shares of stock. The
option becomes substantially vested on April 2,
2013. On October 2, 2013, S exercises the option
and purchases 100 shares. On December 2, 2013, S
sells the 100 shares acquired through the plan. Under
paragraphs (d)(2)(i) and (d)(6)(ii)(A) of this section,
C is required to report adjusted basis based on the
amount paid by S under the terms of the option.
Under paragraph (d)(6)(ii)(A) of this section, C is
not required to take any amount includible as wage
income by S with respect to the October 2, 2013,
purchase of the shares into account when reporting
adjusted basis, but has the choice to take income
February 1, 20103732010–5 I.R.B.

recognized upon the exercise of the compensatory
option into account when determining adjusted basis.
The same result would occur if C had granted S a
statutory option.
(7)Long-term or short-term gain or
loss—(i)In general. For purposes of this
section, a broker determines whether any
gain or loss on the sale of a security is
long-term or short-term within the mean-
ing of section 1222. In making this deter-
mination, a broker is not required to con-
sider transactions, elections, or events oc-
curring outside the account except for the
following:
(A) Information reported on the transfer
statement (as described in §1.6045A–1), if
any, received in connection with a non-sale
transfer of a security to the account. For a
security acquired from a decedent, a broker
must apply the relevant rules under this Ti-
tle for property acquired from a decedent.
For a security acquired (or treated as ac-
quired) as a gift, a broker must apply the
relevant rules under this Title for property
acquiredbygiftincoordinationwiththe
application of the rules in paragraph (d)(6)
of this section.
(B) Information reported on any issuer
statement (as described in §1.6045B–1) re-
garding the effect on the security of any or-
ganizational actions.
(ii)Adjustments for wash sales.When
reporting the sale of a security whose ac-
quisition triggers a wash sale, a broker
must apply section 1091 when determin-
ing whether any gain or loss on the sale of
a security is long-term or short-term within
the meaning of section 1222, but only if
both the sale and purchase transactions oc-
cur with respect to covered securities in the
same account with the same CUSIP num-
ber or other security identifier number that
the Secretary may designate by publication
in theFederal Registeror in the Internal
Revenue Bulletin (see§601.601(d)(2) of
this chapter).
(iii)No constructive sale or mark-to-
market adjustments. A broker must de-
termine whether any gain or loss on the
sale of a security is long-term or short-term
within the meaning of section 1222 with-
out regard to the provisions of section 1259
(regarding constructive sales) or section
475 (regarding the mark-to-market method
of accounting).
(iv)Examples. The following examples
illustrate the rules of this paragraph (d)(7):
Example 1. (i) M makes a gift to N of shares of
stock that M holds in an account with F, a broker. The
shares are stock of a publicly traded company with a
readily ascertainable fair market value. In connection
with the transfer, F provides a transfer statement (as
described in §1.6045A–1) to G, N’s broker, reporting
that the transfer was a gift of covered securities orig-
inally acquired on April 2, 2012. G receives custody
of the shares on June 4, 2015. N sells the shares on
March 24, 2016.
(ii) Because the transfer statement reported the
transfer as a gift, under paragraph (d)(7)(i)(A) of this
section, G must apply the relevant rules for property
acquired by gift in determining whether any gain or
loss on the sale is long-term or short-term within the
meaning of section 1222 when reporting the sale of
the shares and, depending on the gross proceeds of
the sale, may determine holding period based on the
date M acquired the shares or the June 4, 2015 date
of the gift.
Example 2. O’s aunt dies on May 15, 2013. In
her will, she directs that O receive all of her shares
of stock in C, a corporation. H, O’s broker, receives
a transfer statement reporting that the transfer is an
inheritance or bequest of covered securities with an
original acquisition date of May 15, 2013. O then
sells the shares on July 15, 2013. Under paragraph
(d)(7)(i)(A) of this section, H must apply the rel-
evant rules for property acquired from a decedent
when reporting whether any gain or loss on the sale
is long-term or short-term within the meaning of sec-
tion 1222.
Example 3. On June 20, 2012, Y purchases
shares of stock in an account with P, a broker. On
December 20, 2012, the corporation distributes stock
to shareholders. Y receives 10 shares of stock in the
distribution. On January 10, 2013, the corporation
reports on an issuer statement (as described in
§1.6045B–1) that the distribution is a nondividend
(nontaxable) distribution that has resulted in an
adjustment to the basis of the shares owned prior
to the distribution. On July 1, 2014, Y sells the
distributed stock. Under section (d)(7)(i)(B) of this
section, P must apply the relevant holding period
rules when reporting whether any gain or loss on the
sale is long-term or short-term within the meaning of
section 1222.
(8)Conversion into United States dol-
lars of proceeds paid or received in foreign
currency—(i)Conversion rules.Whena
payment is made or received in a foreign
currency, the U.S. dollar amount shall be
determined by converting such foreign
currency into U.S. dollars on the date of
payment at the spot rate (as defined in
§1.988–1(d)(1)) or pursuant to a reason-
able spot rate convention. For example, a
broker may use a month-end spot rate or
a monthly average spot rate. A spot rate
convention must be used consistently with
respect to all non-dollar amounts reported
and from year to year. Such convention
cannot be changed without the consent of
the Commissioner or his or her delegate.
(ii)Effect of identification under
§1.988–5(a), (b), or (c) where the tax-
payer effects a sale and a hedge through
thesamebroker—(A)In general.Inlieu
of the amount reportable under paragraph
(d)(8)(i) of this section, the amount subject
to reporting shall be the integrated amount
computed under §1.988–5(a), (b) or (c)
if—
(1) A taxpayer effects through a bro-
ker a sale or exchange of nonfunctional
currency (as defined in §1.988–1(c)) and
hedges all or a part of such sale as pro-
vided in §1.988–5(a), (b) or (c) with the
same broker; and
(2) The taxpayer complies with the re-
quirements of §1.988–5(a), (b) or (c) and
so notifies the broker prior to the end of
the calendar year in which the sale occurs.
(B)Effective/applicability date.The
provisions of this paragraph (d)(8)(ii) ap-
ply to transactions entered into after De-
cember 31, 2000.
(9)Coordination with reporting rules
for widely held fixed investment trusts un-
der §1.671–5. The information required
to be reported under section 6045(a) must
be provided with respect to the sale of
an interest in a widely held fixed invest-
ment trust (as defined under §1.671–5).
To the extent that any additional infor-
mation reporting is required under section
6045(g), those requirements are deemed to
be met through compliance with the rules
in §1.671–5.
(e) * * *
(2)Exchanges required to be re-
ported—(i)In general. Except as provided
in paragraphs (e)(2)(ii) and (g) of this
section, a barter exchange shall make a
return of information with respect to ex-
changes of personal property or services
through the barter exchange during the cal-
endar year among its members or clients
or between such persons and the barter
exchange. For this purpose, property or
services are exchanged through a barter
exchange if payment for property or ser-
vices is made by means of a credit on the
books of the barter exchange or scrip is-
sued by the barter exchange or if the barter
exchange arranges a direct exchange of
property or servicesamong its members or
clients or exchanges property or services
with a member or client.
*****
2010–5 I.R.B.374February 1, 2010

(f)Information required—(1)In gen-
eral. A person that is a barter exchange
during a calendar year shall report on
Form 1099–B,“Proceeds From Broken
and Barter Exchange Transactions,”or
any successor form showing the informa-
tion required thereon for such year.
(2)Transactional reporting—(i)In gen-
eral. As to each exchange with respect
to which a barter exchange is required to
make a return of information under this
section, the barter exchange shall show
on Form 1099–B, “Proceeds From Bro-
ker and Barter Exchange Transactions,”
or any successor form the name, address,
and taxpayer identification number of each
member or client providing property or
services in the exchange, the property or
services provided, the amount received by
the member or client for such property or
services, the date on which the exchange
occurred, and such other information as
may be required by Form 1099, in the
form, manner, and number of copies re-
quired by Form 1099.
*****
(k)Requirement and time for furnishing
statement; cross-reference to penalty—(1)
General requirements. A broker or barter
exchange making a return of information
under this section with respect to a trans-
action shall furnish to the person whose
identifying number is (or is required to be)
shownonsuchreturnawrittenstatement
showingtheinformationrequiredbypara-
graph (c)(5), (d), or (f) of this section and
containing a legend stating that such in-
formation is being reported to the Internal
Revenue Service. If the return of informa-
tion is not made on magnetic media, this
requirement may be satisfiedbyfurnishing
to such person a copy of all Forms 1099
or any successor form with respect to such
person filed with the Internal Revenue Ser-
vice Center. A statement shall be consid-
ered to be furnished to a person to whom a
statement is required to be made under this
paragraph (k) if it is mailed to such person
at the last address of such person known to
the broker or barter exchange.
(2)Time for furnishing statements.A
broker or barter exchange may furnish the
statements required under this paragraph
(k) yearly, quarterly, monthly, or on any
other basis, without regard to the report-
ing period elected by the broker or barter
exchange, provided that all statements re-
quired to be furnished under this paragraph
(k) for a calendar year shall be furnished
on or before February 15 of the following
calendar year.
(3)Consolidated reporting.(i)The
termconsolidated reporting statement
means a grouping of statements furnished
by the same broker to the same customer
or same group of customers on the same
date that includes a statement required to
be furnished under this section. A con-
solidated reporting statement is limited to
those statements furnished to the customer
based on the same relationship of broker
to customer as the statement required to
be furnished under this section. For pur-
poses of this paragraph (k)(3)(i), a broker
may treat a shareholder of the broker as
a customer of the broker and may treat
a grouping of statements for a customer
as including a statement required to be
furnished under this section if the cus-
tomer has an account with the broker for
which a statement would be required to
be furnished under this section had a sale
occurred during the year.
(ii) A consolidated reporting state-
ment must be furnished on or before
February 15. Any statement that otherwise
must be furnished on or before January 31
may be furnished on or before February
15 if it is furnished in the consolidated
reporting statement.
(iii)Examples. The following examples
illustrate the rules of this paragraph (k)(3):
Example 1. D has a taxable account with B,
a broker, consisting solely of shares of stock in a
single corporation. D receives reportable dividends
from this stock in 2010, and sells the stock in 2010.
Under this section and §1.6042–4, B must furnish a
Form 1099-B,“Proceeds From Broker and Barter
Exchange Transactions,”and Form 1099-DIV,“Div-
idends and Distributions,”to D in 2011 with respect
to the sale and the dividends. Under paragraph (k)(2)
of this section, B is required to furnish the required
statement under this section to D by February 15,
2011. Under paragraph (k)(3)(ii) of this section, the
statement reporting the dividends, if furnished in a
consolidated reporting statement as defined in para-
graph (k)(3)(i) of this section, must also be furnished
by February 15, 2011. Otherwise, the statement
reporting the dividends must be furnished by the due
date set forth in §1.6042–4.
Example 2. Assume the same facts as inExample
1except that D does not sell the stock. B is not re-
quired to issue a statement required under this section.
However, under paragraph (k)(3)(i) of this section, B
may treat a grouping of statements for D as includ-
ing a required statement under this section because
D has an account for which a statement would be re-
quired under this section had a sale occurred during
the year. The statement reporting the dividends may
still be furnished by February 15, 2011, under para-
graph (k)(3)(ii) of this section.
Example 3. E has a non-taxable IRA account with
B, a broker. This account is the only account E holds
withB.Esellsstockin2010inthisaccount. Ealso
receives a cash distribution from the account in 2010.
The cash distribution from the IRA is reportable on
Form 1099-R,“Distributions From Pensions, Annu-
ities, Retirement or Profit-Sharing Plans, IRAs, In-
surance Contracts, etc.,”under §1.408–7. Because
the account is not taxable, sales in the account are not
subject to reporting under this section. Therefore, be-
cause no statement is or would be required under this
section, paragraph (k)(3) of this section does not per-
mit B to include any statements to E in a consolidated
reporting statement. Additionally, the February 15
due date for furnishing a statement does not apply to
the statement reporting the distribution or any other
customer statements.
Example 4. Assume the same facts as inExam-
ple 3except that E also has a taxable account with
B. Under paragraph (k)(3) of this section, all cus-
tomer statements that B must otherwise furnish to E
on or before January 31, 2011, including the state-
ment reporting the cash distribution from the IRA,
may be furnished by February 15, 2011, if furnished
on the same date in a consolidated reporting statement
with the required statements under this section for any
sales in E’s taxable account.
Example 5.AssumethesamefactsasinExample
3except that E and F have a joint taxable account with
B. Because sales in the joint taxable account are sub-
ject to reporting under this section, all customer state-
ments that B must otherwise furnish jointly to E and
F on or before January 31, 2011, may be furnished by
February 15, 2011, under paragraph (k)(3) of this sec-
tion if furnished on the same date in a consolidated re-
porting statement with the required statements under
this section for any sales in the joint taxable account.
However, B may not include any statement with re-
spect to E’s IRA account in the consolidated report-
ing statement furnished jointly to E and F because the
statements are not furnished to the same customer or
group of customers.
*****
Par. 8. Section 1.6045–2 is amended by
revising paragraph (d) to read as follows:
§1.6045–2 Furnishing statement required
with respect to certain substitute
payments.
*****
(d)Time for furnishing statements—(1)
General requirements.Abrokermustfur-
nish the statements required by paragraph
(a) of this section for each calendar year.
Such statements shall be furnished after
April 30th of such calendar year but in no
case before the final substitute payment for
the calendar year is made, and on or before
February 15 of the following calendar year.
(2)Consolidated reporting.(i)The
termconsolidated reporting statement
February 1, 20103752010–5 I.R.B.

means a grouping of statements furnished
by the same broker to the same customer
or same group of customers on the same
date that includes a statement required to
be furnished under this section. A con-
solidated reporting statement is limited to
those statements furnished to the customer
based on the same relationship of broker
to customer as the statement required to
be furnished under this section.
(ii) A consolidated reporting state-
ment must be furnished on or before
February 15. Any statement that otherwise
must be furnished on or before January 31
may be furnished on or before February
15 if it is furnished in the consolidated
reporting statement.
*****
Par. 9. Section 1.6045–3 is amended by
revising paragraph (e) to read as follows:
§1.6045–3 Information reporting for an
acquisition of control or a substantial
change in capital structure.
*****
(e)Furnishing of forms to cus-
tomers—(1)General requirements.The
Form 1099-B prepared for each customer
must be furnished to the customer on or
before February 15 of the year following
the calendar year in which the customer
receives stock, cash or other property.
(2)Consolidated reporting.(i)The
termconsolidated reporting statement
means a grouping of statements furnished
by the same broker to the same customer
or same group of customers on the same
date that includes a statement required to
be furnished under this section. A con-
solidated reporting statement is limited to
those statements furnished to the customer
based on the same relationship of broker
to customer as the statement required to
be furnished under this section.
(ii) A consolidated reporting state-
ment must be furnished on or before
February 15. Any statement that otherwise
must be furnished on or before January 31
may be furnished on or before February
15 if it is furnished in the consolidated
reporting statement.
*****
Par. 10. Section 1.6045–4 is amended
by revising paragraph (m)(2) and adding
paragraph (m)(3) to read as follows:
§1.6045–4 Information reporting on real
estate transactions with dates of closing
on or after January 1, 1991.
*****
(m) * * *
(2)Time for furnishing statement.The
statement required under this paragraph
(m) must be furnished to the transferor on
or after the date of closing and on or be-
fore February 15 of the following calendar
year.
(3)Consolidated reporting.(i)The
termconsolidated reporting statement
means a grouping of statements furnished
by the same reporting person to the same
transferor or same group of transferors on
the same date that includes a statement
required to be furnished under this section.
A consolidated reporting statement is lim-
ited to those statements furnished to the
transferor based on the same relationship
of reporting person to transferor as the
statement required to be furnished under
this section.
(ii) A consolidated reporting state-
ment must be furnished on or before
February 15. Any statement that otherwise
must be furnished on or before January 31
may be furnished on or before February
15 if it is furnished in the consolidated
reporting statement.
*****
Par. 11. Section 1.6045–5 is amended
by revising paragraph (a)(3) to read as fol-
lows:
§1.6045–5 Information reporting on
payments to attorneys.
(a) * * *
(3)Requirement to furnish state-
ment—(i)General requirements.Aperson
required to file an information return un-
der paragraph (a)(1) of this section must
furnish to the attorney a written statement
of the information required to be shown on
the return. This requirement may be met
by furnishing a copy of the return to the
attorney. The written statement must be
furnished to the attorney on or before Feb-
ruary 15 of the year following the calendar
year in which the payment was made.
(ii)Consolidated reporting.(A)The
termconsolidated reporting statement
means a grouping of statements furnished
by the same payor to the same payee or
same group of payees on the same date,
provided that the grouping of statements
includes a statement required to be fur-
nished under this section. A consolidated
reporting statement is limited to those
statements furnished to the payee based
on the same relationship of payor to payee
as the statement required to be furnished
under this section.
(B) A consolidated reporting state-
ment must be furnished on or before
February 15. Any statement that otherwise
must be furnished on or before January 31
may be furnished on or before February 15
if it is furnished in the consolidated
reporting statement.
*****
Par. 12. Section 1.6045A–1 is added to
read as follows:
§1.6045A–1 Statements of information
required in connection with transfers of
securities.
(a)Duty to furnish transfer state-
ment—(1)In general. Every applicable
person (as described in paragraph (a)(3) of
this section) that transfers to a broker (as
described in paragraph (a)(4) of this sec-
tion) the custody of a specified security in
a transaction that is not a sale must furnish
to the broker a transfer statement setting
forth the information described in para-
graph (b) of this section with respect to the
transferred securities. Except as provided
in paragraph (b)(1)(vii) of this section for
certain securities for which basis is deter-
mined under an average basis method, a
separate statement must be furnished for
each security and, if transferring the same
security acquired on different dates or at
different prices, foreach acquisition. For
purposes of this section, the terms sale and
specified security have the same meaning
as in §1.6045–1(a)(9) and (a)(14).
(2)Format of transfer statement.The
transfer statement must be furnished in
writing unless both the furnishing party
and the receiving party agree to a different
format or method prior to the transfer.
If a transfer occurs between accounts at
the same or affiliated entities, the trans-
fer statement is deemed to have been
furnished and received if the required
information, including any adjustments
required under this section to the basis,
acquisition date, or date for computing
2010–5 I.R.B.376February 1, 2010

whether any gain or loss with respect to
the security is long-term or short-term
(within the meaning of section 1222) of
the transferred securities, is incorporated
into the records for the recipient account.
(3)Applicable person effecting trans-
fer. A person effecting a transfer of cus-
tody of securities must furnish a transfer
statement if the person is an applicable per-
son.Applicable personmeans a broker
as described in §1.6045–1(a)(1), any per-
son that acts as a custodian of securities
in the ordinary course of a trade or busi-
ness, any issuer of securities, and any agent
of these persons. Applicable person does
not include the beneficial owner of the se-
curities, any governmental unit or agency
or instrumentality of a governmental unit
with respect to escheated securities, or any
person that acts solely as a clearing organ-
ization with respect to the transfer.
(4)Broker receiving custody.Anap-
plicable person must furnish the statement
required under this section when trans-
ferring securities to the custody of any
broker. Solely for purposes of this sec-
tion,brokermeans any person described
in §1.6045–1(a)(1), any person that acts
as a custodian of securities in the ordinary
course of a trade or business, any issuer
of securities, and any agent of these per-
sons. Broker does not include the ben-
eficial owner of the securities, any gov-
ernmental unit or agency or instrumental-
ity of a governmental unit with respect to
escheated securities, or any person acting
solely as a clearing organization with re-
spect to the transfer.
(5)Time for furnishing statement. Each
transfer statement with respect to a trans-
fer must be furnished not later than fifteen
days after the date of settlement for the
transfer.
(6)Examples. The following examples
illustrate the rules of this paragraph (a):
Example 1. Q owns securities in an account with
J, a broker. J partners with K, a broker, so that K holds
custody of the securities of J’s customers including Q.
Q instructs J to transfer his securities to an account
with L, another broker. J informs K of the instruc-
tion. K transfers the securities to L. Because K is a
broker, K is an applicable person within the meaning
of paragraph (a)(3) of this section. Because K effects
the transfer of custody, under paragraph (a)(3) of this
section, K is the applicable person that must furnish
the transfer statement. Because L is the broker receiv-
ing custody under paragraph (a)(4) of this section, K
must furnish the transfer statement to L.
Example 2. R owns securities in an account with
L, a broker. R instructs L to transfer the securities to
an account with M, a bank that acts as a custodian of
securities in the ordinary course of a trade or business
but does not stand ready to effect sales of securities.
L transfers the securities to M. Because L effects the
transfer of custody, under paragraph (a)(3) of this sec-
tion, L is the applicable person that must furnish the
transfer statement. Because M receives custody of
the stock and acts as a custodian of securities in the
ordinary course of a trade or business, M is the broker
receiving custody under paragraph (a)(4) of this sec-
tion. Therefore, L must furnish the transfer statement
to M.
Example 3. (i) S owns shares of stock in C, a cor-
poration, in an account with N, a broker. S instructs
N to transfer the C shares to C so that ownership is
held on the books of the issuer. C uses the services
of T, a transfer agent, to keep records of ownership
of the company’s stock, how that stock is held, and
how many shares each investor owns. N transfers the
securities to T.
(ii) Because N effects the transfer of custody,
under paragraph (a)(3) of this section, N is the appli-
cable person that must furnish the transfer statement.
Because T records ownership of S’s stock on the
books of C and is the agent of C, T is the broker
receiving custody under paragraph (a)(4) of this sec-
tion. Therefore, N must furnish the transfer statement
to T.
Example 4. Assume the same facts as inExample
3except that S later instructs T to transfer the shares
back to an account held by S with O, another broker.
Because T is an agent of C, the issuer of the securities,
T is an applicable person within the meaning of para-
graph (a)(3) of this section. Under paragraphs (a)(3)
and (a)(4) of this section, T must furnish a transfer
statement to O.
(b)Information required—(1)In gen-
eral. Each transfer statement must include
the information described in this paragraph
(b)(1). The applicable person furnishing
the transfer statement and the broker re-
ceiving the transfer statement may agree
to combine the information in any format.
For example, a single code representing
the broker receiving custody of the secu-
rity may substitute for a separate listing of
the person’s name, address, and telephone
number.
(i)Statement dates. The date the state-
ment is furnished and the date of any pre-
vious statement with respect to the same
transfer.
(ii)Applicable person effecting trans-
fer. The name, address, and telephone
number of the applicable person furnish-
ing the statement.
(iii)Broker receiving custody.The
name, address, and telephone number of
the broker receiving custody of the secu-
rity.
(iv)Beneficial owners. The name, ad-
dress, telephone number, taxpayer identifi-
cation number, and account number of the
beneficial owner or owners of the security
prior to the transfer and, if different, the
beneficial owner or owners after the trans-
fer.
(v)Security identifiers. The Committee
on Uniform Security Identification Pro-
cedures (CUSIP) number of the security
transferred (if applicable) or other security
identifier number that the Secretary may
designate by publication in theFederal
Registeror in the Internal Revenue Bul-
letin (see §601.601(d)(2) of this chapter),
quantity of shares or units, security symbol
(if applicable), lot numbers (if applicable),
and classification of the security (such as
stock).
(vi)Transfer dates. The date the trans-
fer was initiated and the settlement date of
the transfer (if known when furnishing the
statement).
(vii)Adjusted basis and acquisition
date. The total adjusted basis of the se-
curity, the original acquisition date of
the security, and the date for computing
whether any gain or loss with respect to
the security is long-term or short-term
(within the meaning of section 1222) upon
the subsequent sale. This information
must be determined as provided under
§1.6045–1(d), except that any informa-
tion reported on any issuer statement (as
described in §1.6045B–1) regarding the
effect on the security of any organizational
actions does not need to be taken into ac-
count. If organizational actions reportable
on an issuer statement are taken into ac-
count, the transfer statement must include
the identifying number of the last issuer
statement taken into account to indicate
that the organizational action identified
and all relevant prior organizational ac-
tions reported by the issuer are reflected
on the transfer statement. The transfer
statement must also identify and describe
any other organizational actions reflected
on the statement that the applicable person
did not derive from anissuer statement.
If the basis of the transferred security is
determined using an average basis method
(as described in §1.1012–1(e)), any secu-
rities acquired more than five years prior
to the transfer may be reported on a single
statement on which the original acquisi-
tion date is reported as “VARIOUS,” but
only if the other information reported on
the statement applies to all of the securi-
ties.
February 1, 20103772010–5 I.R.B.

(viii)Examples. The following exam-
ples illustrate the rules of this paragraph
(b)(1):
Example 1. (i) In a single account with P, a broker,
T purchases three lots of 100 shares of stock each in
C, a corporation, at different prices on April 2, 2012,
July 2, 2012, and October 1, 2012. T instructs P to
enroll the shares of the C stock in P’s dividend rein-
vestment plan and to average the basis of the shares
of the C stock. All of the C stock purchased by P has
the same CUSIP number. On September 13, 2013,
less than five years after the acquisition dates for all
three lots, T transfers all 300 shares of the C stock to
an account with another broker.
(ii) Under paragraphs (a)(1) and (b)(1) of this sec-
tion, P must furnish three transfer statements in con-
nection with the transfer: One reporting the trans-
fer of 100 shares with an original acquisition date
of April 2, 2012; One reporting the transfer of 100
shares with an original acquisition date of July 2,
2012; and one reporting the transfer of 100 shares
with an original acquisition date of October 1, 2012.
Example 2. Assume the same facts as inExample
1except that T transfers the shares to the account
with the other broker on September 13, 2017. For the
100 shares purchased on April 2, 2012, and the 100
shares purchased on July 2, 2012, under paragraph
(b)(1)(vii) of this section, P may furnish a single
transfer statement reporting the transfer of 200 shares
with the original acquisition date as “VARIOUS” in-
stead of furnishing two separate transfer statements.
Example 3. (i) Assume the same facts as inEx-
ample 1except that, on June 15, 2012, T sells the 100
shares purchased on April 2, 2012 at a loss.
(ii) When reporting the transfer, under para-
graph (b)(1)(vii) of this section (incorporating
§1.6045–1(d)(6)(iii) and (d)(7)(ii)), P must determine
adjusted basis and the date for computing whether
any gain or loss with respect to the stock is long-term
or short-term (within the meaning of section 1222)
by taking the rules for broker reporting of wash sales
into account. On the transfer statement reporting the
transfer of the 100 shares purchased on July 2, 2012,
P must adjust the basis of this stock for the amount
of the loss disallowed under section 1091 on the sale
of the 100 shares purchased on April 2, 2012, and
must also adjust the date for computing whether any
gain or loss with respect to the stock is long-term or
short-term (within the meaning of section 1222) in
accordance with section 1091.
(2)Transfers of noncovered or excepted
securities. (i) In the case of a transfer of a
specified security that is a noncovered se-
curity (as describedin §1.6045–1(a)(16)),
reporting of the information described in
paragraphs (b)(1)(vii), (b)(3), and (b)(4) of
this section is not required provided that
the transfer statement indicates that the
transfer is a transfer of a noncovered se-
curity. An applicable person that chooses
to report the information described in para-
graphs (b)(1)(vii), (b)(3), and (b)(4) of this
section with respect to a noncovered spec-
ified security is not subject to penalties
under section 6722 for any failure to re-
port such information correctly, provided
that the transfer statement indicates that
the transfer is a transfer of a noncovered
security. For purposes of this paragraph
(b)(2)(i), a security that was excepted from
all reporting under §1.6045–1 as described
in §1.6045–1(c)(3) at the time of its acqui-
sition is treated in the same manner as a
noncovered security.
(ii)Example. The following example il-
lustratestherulesofthisparagraph(b)(2):
Example. XinstructsS,abroker,togivetoZ
shares of stock that X holds in an account with S. The
stock consists of noncovered securities. On X’s in-
struction, S transfers custody of the shares to T, Z’s
broker. The transfer settles on August 15, 2013. Un-
der paragraph (b)(2)(i) of this section, S is not re-
quired to state adjusted basis or acquisition date for
the shares, the date of the gift, the fair market value
of the shares on that date, or that the shares are gifted
securities on the transfer statement, provided that S
indicates that the transfer is a transfer of a noncovered
security. If the transfer statement fails to indicate that
the transfer is a transfer of a noncovered security, the
transfer is deemed to be a transfer of covered secu-
rities and S is subject to penalties for any failure to
report the required information.
(3)Transfers pursuant to an inheri-
tance—(i)In general. In the case of a
transfer of a security described in para-
graph (a) of this section from a decedent
or decedent’s estate, in addition to the
information describedin paragraph (b)(1)
of this section, the transfer statement must
indicate that the transfer consists of an
inherited security. The transfer statement
must also report the date of death as the
original acquisition date and must report
adjusted basis according to the instructions
or valuations provided by an authorized
representative of the estate, taking into
account any additional adjustments to ba-
sis required under this Title for property
acquired from a decedent.
(ii)Transfers without instructions from
the estate. If the authorized estate rep-
resentative does not provide complete in-
structions or valuations to the applicable
person effecting the transfer regarding the
basis of the transferred security at the time
the representative requests the transfer of
the security, the applicable person effect-
ing the transfer must ask the representa-
tive for instructions or valuations regard-
ing such basis before preparing the transfer
statement. The applicable person is not re-
quired to make this request more than once
for each transferred security. Subsequent
to this request, if complete instructions are
not received before the transfer statement
is prepared, the transfer statement must in-
dicate that the transfer consists of an inher-
ited security but may otherwise report the
security as if it were a noncovered secu-
rity. If the applicable person receives com-
plete instructions or valuations from an au-
thorized estate representative after furnish-
ing a transfer statement for a security that
was a covered security in the hands of the
decedent, the applicable person must fur-
nish, within fifteen days of receiving the
complete instructions or valuations, a cor-
rected statement that no longer reports the
security as a noncovered security and in-
cludes the information required in para-
graph (b)(3)(i) of this section.
(iii)Transfers of shares to satisfy a cash
legacy. If the security is transferred from
a decedent or a decedent’s estate in order
to satisfy a cash legacy, then the rules of
paragraph (b)(1) of this section apply, and
paragraphs (b)(3)(i) and (b)(3)(ii) of this
section do not apply.
(iv)Examples. The following examples
illustrate the rules of this paragraph (b)(3):
Example 1. V owns shares of stock in C, a pub-
licly traded company, in an account with Q, a broker.
The shares of stock are covered securities. V dies on
May 15, 2013. In her will, V directs that W receive all
of her shares of stock in C. Following the terms of V’s
will and upon the instruction of an authorized repre-
sentative of the estate that the basis of the transferred
securities should be adjusted to the fair market value
as of the date of V’s death, Q transfers custody of the
stock to R, W’s broker. Under paragraph (b)(3)(i) of
this section, the transfer statement must report that
the shares are inherited or bequeathed securities with
an original acquisition date of May 15, 2013, and an
adjusted basis that reflects the instructions of the au-
thorized representative of the estate.
Example 2.AssumethesamefactsasinExample
1except that the instruction from the authorized rep-
resentative of the estate to transfer the securities to W
does not include an instruction regarding the basis of
the shares of stock in C. Under paragraph (b)(3)(ii) of
this section, Q must contact the authorized represen-
tative and ask for an instruction or valuation regard-
ing the basis of the shares of stock in C before prepar-
ing the transfer statement.Under paragraph (b)(3)(ii)
of this section, if Q still does not receive an instruc-
tion regarding the basis of the shares of stock in C, Q
may treat the shares of stock in C as noncovered secu-
rities when transferring the stock. If Q receives com-
plete instructions or valuations from the authorized
representative after furnishing the transfer statement,
under paragraph (b)(3)(ii) of this section, Q must fur-
nish a corrected statement within fifteen days of re-
ceiving the instruction or valuation from the autho-
rized representative that no longer reports the shares
of stock in C as a noncovered security and reflects the
instruction or valuation from the authorized represen-
tative.
Example 3. Assume the same facts as inExam-
ple 1except that V directs in her will that W receive
2010–5 I.R.B.378February 1, 2010

$3,000. To satisfy this legacy, Q transfers custody of
the shares of stock in C to R on a date when the stock
has a fair market value of$3,000. Because the shares
are transferred from V’s estate to satisfy a cash legacy,
under paragraph (b)(3)(iii) of this section, paragraph
(b)(1) of this section applies and paragraphs (b)(3)(i)
and (b)(3)(ii) of this section do not apply. Under
paragraph (b)(1) of this section, the transfer statement
must report that the adjusted basis is $3,000 and that
the original acquisition date is the date of settlement
for the transfer. Additionally, the transfer statement
must not indicate that the securities are inherited or
bequeathed securities.
(4)Gift or deemed gift transfers—(i)In
general. In the case of a transfer of se-
curities described in paragraph (a) of this
section that effects a change of ownership
of a security (other than transfers from a
decedent or decedent’s estate), in addition
to the information described in paragraph
(b)(1) of this section, the transfer statement
must indicate that the security is a gift and
must report the date of the gift (if known
when furnishing the statement) and the fair
market value of the gift on that date (if
known or readily ascertainable at the time
the transfer statement is prepared). Addi-
tionally, for purposes of paragraph (b)(1)
of this section, the adjusted basis and orig-
inal acquisition date are equal to the ad-
justed basis and original acquisition date
of the security in the hands of the donor.
The requirement to identify the security as
a gift does not apply to a transfer between
persons for whom gift-related basis adjust-
ments are inapplicable or to a transfer be-
tween accounts that share at least one com-
mon owner.
(ii)Subsequent transfers of gifts with
no change in ownership. If a security de-
scribed in paragraph (b)(4)(i) of this sec-
tion is subsequently transferred to a differ-
ent account of the same owner, the applica-
ble person effecting the subsequent trans-
fer must include the information described
in paragraphs (b)(1) and (b)(4)(i) of this
section on the transfer statement. The date
of the gift and the fair market value of
thegiftonthatdatemustbeincludedon
the transfer statement unless they are not
known or readily ascertainable at the time
the transfer statement is prepared and if the
applicable person effecting the subsequent
transfer has not received a transfer state-
ment that included them.
(iii)Examples. The following examples
illustrate the rules of this paragraph (b)(4):
Example 1. XinstructsS,abroker,togivetoY
shares of stock in a publicly traded company that X
holds in an account with S. The shares of stock are
covered securities. On X’s instruction, S transfers
custodyofthestocktoT,Y’sbroker. Thetransfer
settles on August 15, 2013. Under paragraph (b)(4)(i)
of this section, S must indicate on the transfer state-
ment that the transfer is a transfer of gifted securities
and report X’s adjusted basis and original acquisition
date. S must also indicate that the date of the gift was
August 15, 2013, if the settlement date was known
when S furnished the statement, and the fair market
value of the shares on that date.
Example 2. Assume the same facts as inExample
1except that, one year later, Y transfers the shares to
an account in his name with U, another broker. Under
paragraph (b)(4)(ii) of this section, T must indicate
on the transfer statement that the transfer is a transfer
of gifted securities and report the adjusted basis and
original acquisition date of the shares. Under para-
graph (b)(4)(ii) of this section, if the date of the gift
and its fair market value were not reported on the ini-
tial transfer statement, T must indicate on the trans-
fer statement that the date of the gift was August 15,
2013, and include the fair market value of the shares
on that date, if known or readily ascertainable.
(5)Transfers of borrowed securities.If
the transferred security is borrowed from
or through the applicable person effect-
ing the transfer (for example, as part of a
transaction to close a short position with
the broker receiving custody of the secu-
rity), the transfer statement must indicate
that the transferred security is borrowed
and that the adjusted basis of the secu-
rity is zero. The transfer statement must
also instruct the broker receiving custody
to provide the applicable person effecting
the transfer with information about any
short position potentially being closed by
the transfer or other disposition of the se-
curities.See§1.6045–1(c)(3)(xi)(C).
(6)Transfers of less than the entire po-
sition of a security in an account.Inthe
case of a transfer of less than the entire po-
sition of a security described in paragraph
(a) of this section acquired in an account
on different dates or at different prices, the
transfer statement must report the trans-
fer on a first-in, first-out basis within the
account unless the customer notifies the
applicable person furnishing the transfer
statement by means of making an adequate
and timely identification in the same man-
ner as for a sales transaction under the rules
in §1.1012–1(c).
(7)Information from other parties and
other accounts—(i)Prior transfer state-
ments. When reporting the transfer of a
covered security, an applicable person fur-
nishing the transferstatement must take
into account all information reported on
any transfer statement (as described in
this section) received in connection with
a previous transfer of the security to the
custody of the applicable person and all
instructions and valuations provided by
an authorized representative of the estate
of a decedent unless the applicable person
knows that the information presented on
the previous transfer statement or by the
personal representative is incorrect. With
respect to penalties under section 6722,
any failure to reportcorrect information
that arises solely from this reliance is
deemed to be due to reasonable cause.See
§301.6724–1(a)(1) of this chapter.
(ii)Other information. An applicable
person furnishing a transfer statement is
permitted, but not required, to take into
account any other information that is not
reflected on a prior transfer statement
within the meaning of paragraph (b)(7)(i)
of this section, including any information
the applicable person has about securities
held by the same customer in the custody
of the applicable person furnishing the
transfer statement. With respect to penal-
ties under section 6722, an applicable
person that takes into account information
received from a customer or third party
other than information reflected on a prior
transfer statement or information received
from an authorized representative of the
estate of a decedent is deemed to have
relied upon the information in good faith
if the applicable person neither knows nor
has reason to know that the information is
incorrect.See§301.6724–1(c)(6) of this
chapter.
(8)Failure to receive a complete trans-
fer statement. A broker that receives cus-
tody of a security but does not receive a
complete transfer statement by the trans-
fer statement due date as described in para-
graph (a)(5) of this section must notify the
applicable person effecting the transfer and
request a complete statement. The bro-
ker receiving custody of the security is not
required to make this request more than
once. If the broker receiving custody of the
security does not receive a complete trans-
fer statement after making this request, the
broker receiving custody of the security
may designate the security as noncovered
on any subsequent transfer statement. A
transfer statement is incomplete if it fails to
include the information described in para-
graph (b) of this section. A failure to in-
clude the information listed in paragraph
(b)(1)(vii) of this section does not make a
transfer statement incomplete if the trans-
February 1, 20103792010–5 I.R.B.

fer statement reports that the transferred
securities are noncovered securities.
(c)Corrected transfer statements.If
a person that furnishes a transfer state-
ment receives a statement for an earlier
transfer of the securities that reports that
the transferred securities are covered se-
curities and includes information incon-
sistent with the subsequent transfer state-
ment, the person that furnished the sub-
sequent transfer statement must furnish a
corrected transfer statement within fifteen
days of receipt of the prior transfer state-
ment.
(d)Effective/applicability dates.This
section applies to transfers of specified se-
curities other than shares of stock in a reg-
ulated investment company (as described
in §1.1012–1(e)(5)) that occur on or after
January 1, 2011, and to transfers of shares
of stock in a regulated investment com-
pany that occur on or after January 1, 2012.
Par. 13. Section 1.6045B–1 is added to
read as follows:
§1.6045B–1 Returns relating to actions
affecting basis of specified securities.
(a)General rule—(1)In general.Any
issuer of a specified security (within the
meaning of §1.6045–1(a)(14)) that takes
an organizational action that affects the ba-
sis of the security must file an issuer return
setting forth the following information and
any other information specified in the re-
turn form and instructions:
(i)Reporting issuer. The name and tax-
payer identification number of the report-
ing issuer.
(ii)Security identifiers. The identifiers
of each security involved in the organi-
zational action including, as applicable,
the Committee on Uniform Security Iden-
tification Procedures (CUSIP) number or
other security identifier number that the
Secretary may designate by publication in
theFederal Registeror in the Internal
Revenue Bulletin (see§601.601(d)(2) of
this chapter), classification of the secu-
rity (such as stock), account number, serial
number, and ticker symbol, as well as any
descriptions about the class of security af-
fected.
(iii)Contact at reporting issuer.The
name, address, e-mail address, and tele-
phone number of a contact person at the
issuer.
(iv)Information about action.Thetype
or nature of the organizational action in-
cluding, as applicable, the date of the ac-
tion or the date against which sharehold-
ers’ ownership is measured for the action.
(v)Effect of the action. The quantitative
effect of the organizational action on the
basis of the security in the hands of a U.S.
taxpayer as an adjustment per share or as
a percentage of old basis, including a de-
scription of the calculation, the applicable
Internal Revenue Code section and subsec-
tion upon which the tax treatment is based,
the data supporting the calculation such as
the market values of securities and valua-
tion dates, any other information necessary
to implement the adjustment including the
reportable taxable year, and whether any
resulting loss may be recognized.
(vi)Reporting date and sequence num-
ber. A sequential identification number
determined separately by security and as-
signed to each announced organizational
action or corrected action for each security
prefixed by the year the return is filed (for
example, 2013003 for the third issuer re-
turn regarding the quantitative effect of a
corporate action on the basis of a security
with a specific CUSIP number that is re-
ported in 2013).
(2)Time for filing the return—(i)In
general. The issuer return must be filed
with the Internal Revenue Service (IRS)
pursuant to the prescribed form and in-
structions on or before the 45th day fol-
lowing the organizational action, or, if ear-
lier, January 15 of the year following the
calendar year in which the organizational
action occurs. The issuer may file the re-
turn prior to the date of the organizational
action if the quantitative effect on basis is
determinable beforehand.
(ii)Reasonable assumptions.Inorder
to report the quantitative effect on basis by
the due date in paragraph (a)(2)(i) of this
section, an issuer may make reasonable as-
sumptions about facts that cannot be deter-
mined prior to this due date and must file
a corrected return within forty-five days
of determining the facts necessary to re-
port the correct quantitative effect on ba-
sis. Under this paragraph (a)(2)(ii), it is
expected that an issuer will treat a payment
that may be a dividend consistently with
its treatment of the payment under section
6042(b)(3) and §1.6042–3(c).
(3)Exception for public reporting.An
issuer is not required to file a return with
the IRS under this paragraph (a) if, by the
due date described in paragraph (a)(2)(i) of
this section, the issuer posts the return with
the required information in a readily acces-
sibleformatinanareaofitsprimarypub-
lic Web site dedicated to this purpose and
keeps the return accessible to the public.
(4)Exception when holders are exempt
recipients. No reporting is required under
this paragraph (a) if the issuer reasonably
determines that all of the holders of the
security are exempt recipients under para-
graph (b)(5) of this section.
(b)Statements to nominees and certifi-
cate holders—(1)In general. An issuer re-
quired to file an information return under
this section must furnish a written state-
ment with the same information to each
holder of record of the security or to the
holder’s nominee, if any. This issuer state-
ment must indicate that the information is
being reported to the IRS. An issuer may
satisfy this requirement by furnishing a
copy of the information return.
(2)Time for furnishing statements.The
issuer statement must be furnished on or
before January 15th of the year following
the year of the organizational action. The
issuer may furnish the statement prior to
the date of the organizational action if the
quantitative effect on basis is determinable
beforehand.
(3)Recipients of statements. An issuer
must furnish a separate statement to each
holder of record of the security as of the
date of the organizational action and all
subsequent holders of record up to the date
the issuer furnishes the statement required
under this section. If the issuer holds the
security on its books in the name of a nom-
inee, the issuer must furnish the statement
to the nominee recorded on its books un-
less the nominee is the issuer, an agent of
the issuer, or a plan operated by the issuer.
(4)Exception for public reporting.An
issuer is not required to furnish an issuer
statement under this paragraph (b) if the is-
suer satisfies the public reporting require-
ments of paragraph (a)(3) of this section.
(5)Exempt recipients
.Anissueris
not required to furnish an issuer statement
under this paragraph (b) to the following
holders or to persons serving as nominees
solely for the following holders:
(i) Any holder that is an exempt re-
cipient under §1.6045–1(c)(3)(i)(B) if
the issuer has actual knowledge that the
holder is described in that section or has a
2010–5 I.R.B.380February 1, 2010

properly completed exemption certificate
from the holder asserting that the holder
is an exempt recipient (as provided in
§31.3406(h)–3 of this chapter). The is-
suer may treat a shareholder as an exempt
recipient based on the applicable indica-
tors described in §1.6049–4(c)(1)(ii)(B)
through (M).
(ii) Any holder that the issuer, prior
to the transaction, associates with docu-
mentation upon which the issuer may rely
in order to treat payments to the holder
as made to a foreign beneficial owner in
accordance with §1.1441–1(e)(1)(ii) or as
made to a foreign payee in accordance with
§1.6049–5(d)(1) or presumed to be made
to a foreign payee under §1.6049–5(d)(2)
or (3). For purposes of this paragraph
(b)(5)(ii), the provisions in §1.6049–5(c)
(regarding rules applicable to documenta-
tion of foreign status and definition of U.S.
payor and non-U.S. payor) apply. Rules
similar to the rules of §1.1441–1 apply
by using the terms “issuer” and “holder”
in place of the terms “withholding agent”
and “payee” and without regard to the
limitation to amounts subject to with-
holding under chapter 3 of the Internal
Revenue Code. Rules similar to the rules
of §1.6049–5(d) apply by using the terms
“issuer” and “holder” in place of the terms
“payor” and “payee.”
(c)Special rule for S corporations.Any
corporation for whichanelectionunder
section 1362(a) is in effect is deemed to
have satisfied the requirements of para-
graphs (a) and (b) of this section for any
organizational action affecting the basis
of its stock if the corporation reports the
effect of the organizational action on a
timely filed Schedule K–1 (Form 1120S),
“Shareholder’s Share of Income, Deduc-
tions, Credits, etc.,”for each shareholder
and timely furnishes copies of these sched-
ules to all proper parties.
(d)Successor entities. A successor en-
tity of an issuer that fails to satisfy the re-
porting obligations of paragraphs (a) or (b)
of this section must satisfy these report-
ing obligations. If neither the issuer nor
the successor entity satisfies these report-
ing obligations, both parties are jointly and
severally liable for any applicable penal-
ties.
(e)Penalties. For penalties for failure
to comply with the requirements of this
section, see sections 6721 through 6724.
(f)Examples. The following examples
illustrate the rules of this section:
Example 1. (i) C, a corporation, distributes stock
to shareholders on March 31, 2013.
(ii) Under paragraph (a)(2)(i) of this section, C
must file an issuer return with the IRS on or before
May 15, 2013, reporting the quantitative effect of this
distribution on the basis of C’s stock. This date is 45
days after the date of the distribution. Under para-
graph (b)(2) of this section, C must furnish issuer
statements to its nominees and certificate holders on
or before January 15, 2014.
(iii) Alternatively, under paragraphs (a)(3) and
(b)(4) of this section, C may post by May 15, 2013,
the return with the required information in a readily
accessible format in an area of its primary public Web
site dedicated to this purpose and keep the return ac-
cessible to the public.
Example 2. (i) D, a corporation, makes a cash
distribution to shareholders on December 31, 2013.
(ii) Under paragraphs (a)(2)(i) and (b)(2) of this
section, D is required to file an issuer return with the
IRS and furnish issuer statements to its nominees and
certificate holders on or before January 15, 2014.
(iii) On January 15, 2014, D is unsure whether
the distribution will exceed its earnings and profits
for the fiscal year. For purposes of section 6042(b)(3)
and §1.6042–3(c), the distribution must be treated as
a dividend. Therefore, under paragraph (a)(2)(ii) of
this section, it is expected that D will treat the distri-
bution as a dividend, and D is therefore not required
to file an issuer return. If D later determines that this
treatment was incorrect, D must determine and report
the correct quantitative effect on basis.
Example 3. E, a corporation, undertakes a stock
split as of April 1, 2014. E furnishes issuer statements
under paragraph (b) of this section on April 1, 2014,
at which time the books and records of E show that
90 percent of its outstanding stock is owned by share-
holders through a clearing organization as their nom-
inee, 7 percent is owned by 5,000 individuals, and
the remaining 3 percent is owned by a dividend rein-
vestment plan operated by E that has 1,000 members.
Under paragraph (b)(3) of this section, E must fur-
nish statements to the clearing organization, the 5,000
individuals, and the 1,000 members of the dividend
reinvestment plan.
(g)Effective/applicability dates.This
section applies to organizational actions
affecting the basis of specified securities
(as described in §1.6045–1(a)(14)) other
thanstockinaregulatedinvestmentcom-
pany (as described in §1.1012–1(e)(5))
that occur on or after January 1, 2011, and
to organizational actions affecting stock
in a regulated investment company that
occur on or after January 1, 2012.
Par. 14. Section 1.6049–6 is amended
by adding two new sentences to the end
of paragraphs (c) and (e)(2) to read as fol-
lows:
§1.6049–6 Statements to recipients
of interest payments and holders of
obligations for attributed original issue
discount.
*****
(c)***However,ifthestate-
ment is furnished in a consolidated re-
porting statement under section 6045,
the February 15 due date set forth in
section 6045 applies to the statement.
See§§1.6045–1(k)(3), 1.6045–2(d)(2),
1.6045–3(e)(2), 1.6045–4(m)(3), and
1.6045–5(a)(3)(ii).
*****
(e) * * *
(2)***However,ifthestate-
ment is furnished in a consolidated re-
porting statement under section 6045,
the February 15 due date set forth in
section 6045 applies to the statement.
See§§1.6045–1(k)(3), 1.6045–2(d)(2),
1.6045–3(e)(2), 1.6045–4(m)(3), and
1.6045–5(a)(3)(ii).
*****
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT THE SOURCE
Par. 15. The authority citation for part
31 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 16. Section 31.3406(b)(3)–2 is
amended by revising paragraph (b)(4) to
read as follows:
§31.3406(b)(3)–2 Reportable barter
exchanges and gross proceeds of sales of
securities or commodities by brokers.
*****
(b) * * *
(4)Security short sales—(i)Short
sales closed before January 1, 2011—(A)
Amount subject to backup withholding.
The amount subject to withholding un-
der section 3406 with respect to a short
sale of securities closed before January
1, 2011, is the gross proceeds (as defined
in §1.6045–1(d)(5) of this chapter) of the
short sale. At the option of the broker,
however, the amount subject to withhold-
ing may be the gain upon the closing of
the short sale (if any); consequently, the
obligation to withhold under section 3406
is deferred until the closing transaction. A
broker may use this alternative method of
determining the amount subject to with-
holding under section 3406 for a short sale
February 1, 20103812010–5 I.R.B.

only if at the time the short sale is initiated,
the broker expects that the amount of gain
realized upon the closing of the short sale
will be determinable from the broker’s
records. If, due to events unforeseen at
the time the short sale was initiated, the
broker is unable to determine the basis of
thepropertyusedtoclosetheshortsale,
the property is assumed for this purpose to
have a basis of zero.
(B)Time of backup withholding.For
short sales closed before January 1, 2011,
the determination of whether a short seller
is subject to withholding under section
3406 must be made on the date of the ini-
tiation or closing, as the case may be, or
on the date that the initiation or closing, as
the case may be, is entered on the broker’s
books and records.
(ii)Short sales closed on or after Jan-
uary 1, 2011. For short sales closed on
or after January 1, 2011, the obligation to
withhold under section 3406 is deferred
until the short sale is considered closed
under section 1233. The determination
of whether a short seller is subject to
withholding under section 3406 may be
made as of either this date or the date
that the closing transaction is entered
on the broker’s books and records. The
amount subject to withholding under sec-
tion 3406 is the gross proceeds (as defined
in §1.6045–1(d)(5) of this chapter) of the
short sale. At the option of the broker,
however, the amount subject to withhold-
ing may be the gain upon the closing of
the short sale (if any) if the broker reports
both the gross proceeds and basis of the
securities on the return of information re-
quired by section 6045.
*****
Par. 17. Section 31.6051–4 is amended
by adding two new sentences at the end of
paragraph (d) to read as follows:
§31.6051–4 Statement required in case of
backup withholding.
*****
(d)***However,ifthestate-
ment is furnished in a consolidated re-
porting statement under section 6045,
the February 15 due date set forth in
section 6045 applies to the statement.
See§§1.6045–1(k)(3), 1.6045–2(d)(2),
1.6045–3(e)(2), 1.6045–4(m)(3), and
1.6045–5(a)(3)(ii) of this chapter.
*****
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 18. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 19. Section 301.6721–1 is
amended by revising paragraphs (g)(2)
and (g)(3) to read as follows:
§301.6721–1 Failure to file correct
information returns.
*****
(g) * * *
(2)Statements. The statements subject
to this section are the statements required
by—
(i)Section6041(a)or(b)(relatingto
certain information at source, generally
reported on Form 1099-MISC,“Miscel-
laneous Income”; Form W–2,“Wage
and Tax Statement”; Form W–2G,“Cer-
tain Gambling Winnings”;and Form
1099-INT,“Interest Income”);
(ii) Section 6042(a)(1) (relating to pay-
ments of dividends, generally reported on
Form 1099-DIV,“Dividends and Distribu-
tions”);
(iii) Section 6044(a)(1) (relating to pay-
ments of patronage dividends, generally
reported on Form 1099-PATR,“Taxable
Distributions Received From Coopera-
tives”);
(iv)Section6049(a)(relatingtopay-
ments of interest, generally reported on
Form 1099-INT or Form 1099-OID,
“Original Issue Discount”);
(v) Section 6050A(a) (relating to re-
porting requirements of certain fishing
boat operators, generally reported on Form
1099-MISC);
(vi) Section 6050N(a)(relating to pay-
ments of royalties, generally reported on
Form 1099-INT);
(vii) Section 6051(d) (relating to in-
formation returns with respect to income
tax withheld, generally reported on Form
W–2);
(viii) Section 6050R(relating to returns
relating to certain purchases of fish, gener-
ally reported on Form 1099-MISC);
(ix) Section 110(d) (relating to qualified
lessee construction allowances for short-
term leases, generally reported by attach-
ing a statement to an income tax return);
(x)Section408(i)(relatingtoreports
with respect to individual retirement ac-
counts or annuities on Form 1099-R,“Dis-
tributions From Pensions, Annuities, Re-
tirement or Profit-Sharing Plans, IRAs, In-
surance Contracts, etc.”); or
(xi) Section 6047(d) (relating to reports
by employers, plan administrators, etc., on
Form 1099-R).
(3)Returns. The returns subject to this
section are the returns required by—
(i)Section6041A(a)or(b)(relatingto
returns of direct sellers, generally reported
on Form 1099-MISC);
(ii) Section 6043A(a) (relating to re-
turns relating to taxable mergers and acqui-
sitions);
(iii) Section 6045(a) or (d) (relating to
returns of brokers, generally reported on
Form 1099-B,“Proceeds From Broker and
Barter Exchange Transactions,”for bro-
ker transactions; Form 1099-S,“Proceeds
From Real Estate Transactions,”for gross
proceeds from the sale or exchange of real
estate; and Form 1099-MISC for certain
substitute payments and payments to attor-
neys);
(iv) Section 6045B(a) (relating to re-
turns relating to actions affecting basis of
specified securities);
(v) Section 6050H(a) or (h)(1) (relat-
ing to mortgage interest received in trade
or business from individuals, generally re-
ported on Form 1098,“Mortgage Interest
Statement”);
(vi) Section 6050I(a) or (g)(1) (relating
to cash received in trade or business, etc.,
generally reported on Form 8300,“Report
of Cash Payments Over $10,000 Received
In a Trade or Business”);
(vii) Section 6050J(a) (relating to fore-
closures and abandonments of security,
generally reported on Form 1099-A,“Ac-
quisition or Abandonment of Secured
Property”);
(viii) Section 6050K(a) (relating to ex-
changes of certain partnership interests,
generally reported on Form 8308,“Report
of a Sale or Exchange of Certain Partner-
ship Interests”);
(ix) Section 6050L(a) (relating to re-
turns relating to certain dispositions of do-
nated property, generally reported on Form
8282,“Donee Information Return”);
(x) Section 6050P (relating to returns
relating to the cancellation of indebtedness
by certain financial entities, generally re-
2010–5 I.R.B.382February 1, 2010

ported on Form 1099-C,“Cancellation of
Debt”);
(xi) Section 6050Q (relating to certain
long-term care benefits, generally reported
on Form 1099-LTC,“Long-Term Care and
Accelerated Death Benefits”);
(xii) Section 6050S (relating to returns
relating to payments for qualified tuition
and related expenses, generally reported
on Form 1098-E,“Student Loan Inter-
est Statement,”or Form 1098-T,“Tuition
Statement”);
(xiii) Section 6050T(relating to returns
relating to credit for health insurance costs
of eligible individuals, generally reported
on Form 1099-H,“Health Coverage Tax
Credit (HCTC) Advance Payments”);
(xiv) Section 6052(a) (relating to re-
porting payment of wages in the form of
group-life insurance, generally reported on
Form W–2);
(xv) Section 6050V (relating to returns
relating to applicable insurance contracts
in which certain exempt organizations hold
interests, generally reported on Form 8921,
“Applicable Insurance Contract Informa-
tion Return”);
(xvi) Section 6053(c)(1) (relating to re-
porting with respect to certain tips, gener-
ally reported on Form 8027,“Employer’s
Annual Information Return of Tip Income
and Allocated Tips”);
(xvii) Section 1060(b) (relating to re-
porting requirements of transferors and
transferees in certainasset acquisitions,
generally reported on Form 8594,“As-
set Acquisition Statement”), or section
1060(e) (relating to information required
in the case of certain transfers of interests
in entities (effective for acquisitions after
October 9, 1990, except any acquisition
pursuant to a written binding contract in
effect on October 9, 1990, and at all times
thereafter before such acquisition));
(xviii) Section 4101(d) (relating to in-
formation reporting with respect to fuel
oils (effective for information returns re-
quired to be filed after November 30,
1990));
(xix) Section 338(h)(10)(C) (relating to
informationrequiredtobefurnishedtothe
Secretary in case of elective recognition of
gain or loss (effective for acquisitions after
October 9, 1990, except any acquisition
pursuant to a written binding contract in
effect on October 9, 1990, and at all times
thereafter before such acquisition));
(xx) Section 264(f)(5)(A)(iv) (relating
to reporting with respect to certain life in-
surance and annuity contracts);
(xxi) Section 6050U (relating to
charges or payments for qualified
long-term care insurance contracts un-
der combined arrangements, generally
reported on Form 1099-R);
(xxii) Section 6039(a) (relating to re-
turns required with respect to certain op-
tions); or
(xxiii) Section 6050W (relating to in-
formation returns with respect to payments
made in settlement of payment card and
third party network transactions).
*****
Par. 20. Section 301.6722–1 is
amended by revising paragraph (d)(2) to
read as follows:
§301.6722–1 Failure to furnish correct
payee statements.
*****
(d) * * *
(2)Payee statement.Thetermpayee
statementmeans any statement required to
be furnished under—
(i) Section 6031(b) or (c), 6034A, or
6037(b) (relating to statements furnished
by certain pass-thru entities, generally a
Schedule K–1 (Form 1065),“Partner’s
Share of Income, Deductions, Credits,
etc.,”for section 6031(b) or (c), a copy
of the Schedule K–1 (Form 1041),“Ben-
eficiary’s Share of Income, Deductions,
Credits, etc.,”for section 6034A, and a
copy of Schedule K–1 (Form 1120S),
“Shareholder’s Share of Income, Deduc-
tions, Credits, etc.,”for section 6037(b));
(ii) Section 6039(b) (relating to infor-
mation required in connection with certain
options);
(iii) Section 6041(d) (relating to infor-
mation at source, generally the recipient
copy of Form 1099-MISC,“Miscella-
neous Income”; Form W–2,“Wage and
Tax Statement”; Form 1099-INT,“Interest
Income”; and the winner’s copies of Form
W–2G,“Certain Gambling Winnings”);
(iv) Section 6041A(e) (relating to re-
turns regarding payments of remuneration
for services and direct sales, generally the
recipient copy of Form 1099-MISC);
(v) Section 6042(c) (relating to returns
regarding payments of dividends and cor-
porate earnings and profits, generally the
recipient copy of Form 1099-DIV,“Divi-
dends and Distributions”);
(vi) Section 6043A(b) or (d) (relating
to returns relating to taxable mergers and
acquisitions);
(vii) Section 6044(e) (relating to re-
turns regarding payments of patronage
dividends, generally the recipient copy of
Form 1099-PATR,“Taxable Distributions
Received From Cooperatives”);
(viii) Section 6045(b) or (d) (relat-
ing to returns of brokers, generally the
recipient copy of Form 1099-B,“Pro-
ceeds From Broker and Barter Exchange
Transactions,”for broker transactions; the
transferor copy of Form 1099-S,“Pro-
ceeds From Real Estate Transactions,”
for reporting proceeds from real estate
transactions; and the recipient copy of
Form 1099-MISC for certain substitute
payments and payments to attorneys);
(ix) Section 6045A (relating to informa-
tion required in connection with transfers
of covered securities to brokers);
(x) Section 6045B(c) or (e) (relating to
returns relating to actions affecting basis of
specified securities);
(xi) Section 6049(c) (relating to returns
regarding payments of interest, generally
the recipient copy of Form 1099-INT or
Form 1099-OID,“Original Issue Dis-
count”);
(xii) Section 6050A(b) (relating to re-
porting requirements of certain fishing
boat operators, generally the recipient
copy of Form 1099-MISC);
(xiii) Section 6050H(d) or (h)(2) (relat-
ing to returns relating to mortgage inter-
est received in trade or business from indi-
viduals, generally the payor copy of Form
1098,“Mortgage Interest Statement”);
(xiv) Section 6050I(e), (g)(4), or (g)(5)
(relating to returns relating to cash re-
ceived in trade or business, etc., generally
a copy of Form 8300,“ReportofCash
Payments Over $10,000 Received In a
Trade or Business”);
(xv) Section 6050J(e) (relating to re-
turns relating to foreclosures and aban-
donments of security, generally the bor-
rower copy of Form 1099-A,“Acquisition
or Abandonment of Secured Property”);
(xvi) Section 6050K(b) (relating to re-
turns relating to exchanges of certain part-
nership interests, generally a copy of Form
8308,“Report of a Sale or Exchange of
Certain Partnership Interests”);
February 1, 20103832010–5 I.R.B.

(xvii) Section 6050L(c) (relating to re-
turns relating to certain dispositions of do-
nated property, generally a copy of Form
8282,“Donee Information Return”);
(xviii) Section 6050N(b) (relating to re-
turns regarding payments of royalties, gen-
erally the recipient copy of Form 1099-
MISC);
(xix) Section 6050P(d) (relating to re-
turns relating to the cancellation of indebt-
edness by certain financial entities, gen-
erally the recipient copy of Form 1099-C,
“Cancellation of Debt”);
(xx) Section 6050Q(b) (relating to cer-
tain long-term care benefits, generally the
policyholder and insured copies of Form
1099-LTC,“Long-Term Care and Acceler-
ated Death Benefits”);
(xxi) Section 6050R(c) (relating to re-
turns relating to certain purchases of fish,
generally the recipient copy of Form 1099-
MISC);
(xxii) Section 6051 (relating to receipts
for employees, generally the employee
copy of Form W–2);
(xxiii) Section 6052(b) (relating to re-
turns regarding payment of wages in the
form of group-term life insurance, gener-
ally the employee copy of Form W–2);
(xxiv) Section 6053(b) or (c) (relating
to reports of tips, generally the employee
copy of Form W–2);
(xxv) Section 6048(b)(1)(B) (relating to
foreign trust reporting requirements, gen-
erally copies of the owner and beneficiary
statements of Form 3520-A,“Annual In-
formation Return of Foreign Trust With a
U.S. Owner”);
(xxvi) Section 408(i) (relating to reports
with respect to individual retirement plans
on the recipient copies of Form 1099-R,
“Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc.”);
(xxvii) Section 6047(d) (relating to re-
ports by plan administrators on the recipi-
ent copies of Form 1099-R);
(xxviii) Section 6050S(d) (relating to
returns relating to qualified tuition and
related expenses, generally the borrower
copy of Form 1098-E,“Student Loan In-
terest Statement,”or the student copy of
Form 1098-T,“Tuition Statement”);
(xxix) Section 264(f)(5)(A)(iv) (relat-
ing to reporting with respect to certain life
insurance and annuity contracts);
(xxx) Section 6050T (relating to returns
relating to credit for health insurance costs
of eligible individuals, generally the recip-
ient copy of Form 1099-H,“Health Cov-
erage Tax Credit (HCTC) Advance Pay-
ments”);
(xxxi) Section 6050U (relating to
charges or payments for qualified
long-term care insurance contracts under
combined arrangements, generally the re-
cipient copy of Form 1099-R); or
(xxxii) Section 6050W (relating to in-
formation returns with respect to payments
made in settlement of payment card and
third party network transactions).
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on December 16,
2009, 8:45 a.m., and published in the issue of the Federal
Register for December 17, 2009, 74 F.R. 67010)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2010–4
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin onFebruary 1, 2010
and would end on the date the court first
determines that the organization is not de-
scribed in section 170(c)(2) as more partic-
ularly set forth in section 7428(c)(1). For
individual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were the
basis for revocation.
Coinmach Disaster Relief Fund Trust
Plainview, NW
Newton County Community Center, Inc
Covington, GA
Five Rivers Community Development
Corporation
Georgetown, SC
Interfaith Adopt-A-Building
New York, NY
Jeffrey and Sara Brunken Family FDN
Salt Lake City, UT
The Hemp & Cannabis Foundation
Portland, OR
Nuestra Sra De La Ribida-USA Auxiliary
Service, Inc.
Tamarac, FL
2010–5 I.R.B.384February 1, 2010

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
February 1, 2010i2010–5 I.R.B.

Numerical Finding List
1
Bulletins 2010–1 through 2010–5
Announcements:
2010-1, 2010-4 I.R.B.333
2010-2, 2010-2 I.R.B.271
2010-3, 2010-4 I.R.B.333
2010-4, 2010-5 I.R.B.384
Notices:
2010-1, 2010-2 I.R.B.251
2010-2, 2010-2 I.R.B.251
2010-3, 2010-2 I.R.B.253
2010-4, 2010-2 I.R.B.253
2010-5, 2010-2 I.R.B.256
2010-6, 2010-3 I.R.B.275
2010-7, 2010-3 I.R.B.296
2010-8, 2010-3 I.R.B.297
2010-9, 2010-3 I.R.B.298
2010-10, 2010-3 I.R.B.299
2010-11, 2010-4 I.R.B.326
2010-12, 2010-4 I.R.B.326
2010-13, 2010-4 I.R.B.327
2010-14, 2010-5 I.R.B.344
Proposed Regulations:
REG-101896-09, 2010-5 I.R.B.347
REG-131028-09, 2010-4 I.R.B.332
Revenue Procedures:
2010-1, 2010-1 I.R.B.1
2010-2, 2010-1 I.R.B.90
2010-3, 2010-1 I.R.B.110
2010-4, 2010-1 I.R.B.122
2010-5, 2010-1 I.R.B.165
2010-6, 2010-1 I.R.B.193
2010-7, 2010-1 I.R.B.231
2010-8, 2010-1 I.R.B.234
2010-9, 2010-2 I.R.B.258
2010-10, 2010-3 I.R.B.300
2010-11, 2010-2 I.R.B.269
2010-12, 2010-3 I.R.B.302
2010-13, 2010-4 I.R.B.329
Revenue Rulings:
2010-1, 2010-2 I.R.B.248
2010-2, 2010-3 I.R.B.272
2010-3, 2010-3 I.R.B.272
2010-4, 2010-4 I.R.B.309
2010-5, 2010-4 I.R.B.312
Treasury Decisions:
9474, 2010-4 I.R.B.322
9475, 2010-4 I.R.B.304
9476, 2010-5 I.R.B.336
Treasury Decisions— Continued:
9478, 2010-4 I.R.B.315
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin
2009–52, dated December 28, 2009.
2010–5 I.R.B.iiFebruary 1, 2010

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–1 through 2010–5
Notices:
2005-88
Superseded by
Notice 2010-13, 2010-4 I.R.B.327
2008-41
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-55
Modified by
Notice 2010-3, 2010-2 I.R.B.253
2008-88
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-113
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2008-115
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2009-11
Amplified by
Notice 2010-9, 2010-3 I.R.B.298
2009-13
Obsoleted by
T.D. 9478, 2010-4 I.R.B.315
REG-131028-09, 2010-4 I.R.B.332
2009-38
Amplified and superseded by
Notice 2010-2, 2010-2 I.R.B.251
Revenue Procedures:
80-59
Modified and superseded by
Rev. Proc. 2010-11, 2010-2 I.R.B.269
87-35
Obsoleted by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-1
Superseded by
Rev. Proc. 2010-1, 2010-1 I.R.B.1
2009-2
Superseded by
Rev. Proc. 2010-2, 2010-1 I.R.B.90
2009-3
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
Revenue Procedures— Continued:
2009-4
Superseded by
Rev. Proc. 2010-4, 2010-1 I.R.B.122
2009-5
Superseded by
Rev. Proc. 2010-5, 2010-1 I.R.B.165
2009-6
Superseded by
Rev. Proc. 2010-6, 2010-1 I.R.B.193
2009-7
Superseded by
Rev. Proc. 2010-7, 2010-1 I.R.B.231
2009-8
Superseded by
Rev. Proc. 2010-8, 2010-1 I.R.B.234
2009-9
Superseded by
Rev. Proc. 2010-9, 2010-2 I.R.B.258
2009-15
Amplified and superseded by
Rev. Proc. 2010-12, 2010-3 I.R.B.302
2009-25
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
Revenue Rulings:
67-436
Obsoleted by
REG-101896-09, 2010-5 I.R.B.347
2008-52
Supplemented and superseded by
Rev. Rul. 2010-2, 2010-3 I.R.B.272
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,
2009.
February 1, 2010iii2010–5 I.R.B.

2010–5 I.R.B.February 1, 2010

February 1, 20102010–5 I.R.B.

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