Reporting Organizational Changes to the IRS: Form 8937 Reminder

Written on February 18, 2013

Who must file this form?
A corporation that undergoes an organizational action that will affect its shareholders’ basis in their shares. Penalties in the amount of $100 per form and issuer statement may be imposed. Examples of an “organizational action” that can trigger the filing are:

  • A tax-free stock split
  • A stock merger
  • Stock dividend to shareholders
  • Tax-free spinoff
  • Tax-free acquisition
  • Redemption of stock by the corporation

When to file?
The corporation must submit Form 8937 to the IRS on or before the 45th day following the organizational action or, if earlier, January 15 of the year following the calendar year of the organizational action. The same form filed with the IRS must be furnished to the shareholders or nominees on or before January 15 of the year following the calendar year of the organizational action.

Exceptions:
There are specific exceptions to this filing requirement. The service is focusing on adequate notice to non-corporate shareholders; therefore, there are alternatives in fulfilling the notice requirement.

If any of the following are true, Form 8937 does NOT need to be filed:

  • The corporation reports the required information on its website according to the due dates noted for filing the form with the IRS. This information must be maintained on a company’s primary public website for a 10 year period.
  • All holders of the security are exempt recipients.
  • Any S Corporation that reports the required basis information on each shareholder’s timely filed Schedule K-1.
  • Not all shareholders are affected by the organizational action.
  • It is uncertain as to what amount, if any, of a distribution will be treated as a dividend. The corporation is to assume that it will all be a dividend (not reportable), but must file the Form 8937 within 45 days of determining what amount is NOT a dividend.
  • Distribution is properly reported as a dividend on Form 1099-DIV.

Does this affect you?
If your corporation has or is planning to undergo a transaction that will affect your owners’ equity, it is critical that you properly report the transaction to the IRS. If you have questions on the reporting requirements for corporate organizational changes, please contact your Warren Averett advisor.

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