Global Tax Adviser
January 17, 2012

IRS Offers Last Minute Reprieve for U.S. Cost Basis Reporting

Ian Bristol and Connie Lee
Toronto, U.S. Corporate Tax

The IRS has announced transitional relief (four days before the January 17 deadline) for a corporate issuer, including certain Canadian corporations, that must report a corporate action that affects the tax basis of all holders of a “specified security” (e.g., bond, share, note) by filing Form 8937, "Report of Organizational Actions Affecting Basis of Securities" by January 17, 2012.

The IRS has now said that it will not impose penalties for 2011 actions if a taxpayer makes a "good faith" attempt to comply with the measures, including filing Form 8937 and issuing a written statement about an action to its security holders or, alternatively, posting the required information on its primary website.

Background
The rules to report corporate actions affecting tax basis of stock (other than stock of a regulated investment company (RIC) or stock acquired in connection with a dividend reinvestment plan (DRIP)) became effective January 1, 2011.

The due date for providing calendar year 2011 corporate action returns (or website postings) is January 17, 2012.

Transitional relief
The IRS stated that it recognizes that Form 8937's release date of January 6, 2012 provided a limited timeframe before its due date. As a result, the IRS said it will not impose penalties for reporting incorrect information against issuers related to filing and providing Form 8937 for 2011 organizational actions, provided that issuers make good-faith efforts in:

  • Timely posting Form 8937 or the required information on the issuers’ primary public websites
  • Accurately filing Form 8937 and providing the corresponding issuer statements.

For more information, contact your KPMG adviser.

 


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