In the last edition of Tax Talk8 we discussed the new tax reporting obligations with respect to certain organizational actions (such as a stock split, a merger or an acquisition) affecting tax basis, effective as of January 1, 2011.9 Generally, these tax reporting obligations require an issuer of stock to file a return with the IRS describing any organizational action which affects the basis of a specified security.10 In 2011, a specified security is limited to stock in a corporation.11 The issuer is required to file the return within 45 days after the organizational action, as well as furnish a corresponding statement to each shareholder (or nominee of a shareholder) by January 15th of the year following the calendar year of the organizational action. In lieu of filing such return with the IRS, the issuer may post the return on its primary public website by the filing date.12 A penalty will be imposed on any issuer of stock that does not timely file a correct issuer return with the IRS.
Despite the effective date of January 1, 2011 for the reporting requirements, the IRS has yet to develop the form and manner of the issuer return. While the issuer return is a work in progress, the IRS released Notice 2011-18 (the “Notice”) which provides transitional relief from the information reporting requirements in 2011. Until the IRS provides the form of the issuer return, compliance can only be satisfied through the public reporting of information. Under the Notice no penalties will be imposed for failure to file an issuer return with the IRS within 45 days of an organizational action taken in 2011, provided that the issuer files the issuer return with the IRS (or posts the return to its website) by January 17, 2012.