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IRS Issues Final Regulations on the Return and Information Statement Requirements for Stock Transfers
The Internal Revenue Service (IRS) has issued final regulations relating to the return and information statement requirements under section 6039 of the Internal Revenue Code (Code). These regulations reflect changes to section 6039 made by section 403 of the Tax Relief and Health Care Act of 2006. These regulations affect corporations that issue statutory stock options and provide guidance to assist corporations in complying with the return and information statement requirements under section 6039.
Section 403 of the Tax Relief and Health Care Act of 2006 (Act) amended the information reporting requirements of section 6039. Prior to its amendment, section 6039 required corporations to furnish a written statement to each employee, in a manner prescribed by the Secretary in the regulations, regarding: (i) the corporation’s transfer of stock pursuant to the employee’s exercise of an incentive stock option described in section 422(b); and (ii) the transfer of stock by the employee where the stock was acquired pursuant to the exercise of an option described in section 423(c). Corporations must furnish employees with the information statements required by section 6039 on or before January 31 of the year following the year for which the statement is required.
Prior to the amendment of section 6039 made by the Act, the regulations under section 6039 were last updated in 2004. As amended by the Act, section 6039 requires corporations to file an information return with the IRS, in addition to providing employees with an information statement, following a stock transfer. Section 6039, as amended by the Act, applies to stock transfers occurring on or after January 1, 2007. However, in Notice 2008-8, the IRS waived the obligation to file an information return for 2007 stock transfers governed by section 6039. On July 17, 2008, the Department of Treasury published a notice of proposed rulemaking in the Federal Register under section 6039. In addition to describing the return and information reporting requirements, the notice of proposed rulemaking waived the obligation to file an information return for 2008 stock transfers governed by section 6039. A public hearing on the proposed regulations was held on October 30, 2008. Comments responding to the notice of proposed rulemaking were received. After consideration of these comments, the Department of Treasury adopts the proposed regulations as final regulations, with modifications.
The rules are effective November 17, 2009 and apply January 1, 2007.
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