Basis Reporting by Securities Brokers and Basis Determination for Debt Instruments and Options, 72652-72661 [2011-30383]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 76, Number 227 (Friday, November 25, 2011)]
[Proposed Rules]
[Pages 72652-72661]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30383]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-102988-11]
RIN 1545-BK05


Basis Reporting by Securities Brokers and Basis Determination for 
Debt Instruments and Options

AGENCY: Internal Revenue Service (IRS), Treasury.

[[Page 72653]]


ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to 
reporting by brokers for transactions related to debt instruments and 
options. The proposed regulations reflect changes in the law made by 
the Energy Improvement and Extension Act of 2008 (the Act) that require 
brokers when reporting the sale of securities to the IRS to include the 
customer's adjusted basis in the sold securities and to classify any 
gain or loss as long-term or short-term. The proposed regulations also 
implement the Act's requirement that a broker report gross proceeds 
from a sale or closing transaction with respect to certain options. In 
addition, this document contains proposed regulations that implement 
reporting requirements for a transfer of a debt instrument or an option 
to another broker and for an organizational action that affects the 
basis of a debt instrument or option. This document also provides for a 
notice of a public hearing on these proposed regulations.

DATES: Written or electronic comments must be received by February 23, 
2012. Outlines of topics to be discussed at the public hearing 
scheduled for Friday, March 16, 2012, must be received by Friday, 
February 24, 2012.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-102988-11), room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
102988-11), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at https://www.regulations.gov (IRS REG-102988-11). 
The public hearing will be held in the Auditorium, beginning at 10 a.m. 
at the Internal Revenue Building, 1111 Constitution Avenue NW., 
Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Pamela Lew of the Office of Associate Chief Counsel (Financial 
Institutions and Products) at (202) 622-3950; concerning submissions of 
comments, the public hearing, and/or to be placed on the building 
access list to attend the public hearing, Richard Hurst at (202) 622-
7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking relating to the furnishing of information in connection with 
the transfer of securities was previously reviewed and approved by the 
Office of Management and Budget in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-
2186. Comments on the collection of information should be sent to the 
Office of Management and Budget, Attn: Desk Officer for the Department 
of the Treasury, Office of Information and Regulatory Affairs, 
Washington, DC 20503, with copies to the Internal Revenue Service, 
Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 
20224. Comments on the collection of information should be received by 
February 23, 2012. Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    The collection of information is in Sec. Sec.  1.6045-
1(c)(3)(xi)(C) and 1.6045A-1 of these proposed regulations and is an 
increase in the total annual burden from the burden in the current 
regulations to reflect the addition of debt instruments and options to 
the definition of covered securities. The collection of information is 
necessary to allow brokers that effect sales of transferred covered 
securities to determine and report the adjusted basis of the securities 
and whether any gain or loss with respect to the securities is long-
term or short-term in compliance with section 6045(g) of the Internal 
Revenue Code. The collection of information is required to comply with 
the provisions of section 403 of the Energy Improvement and Extension 
Act of 2008, Division B of Public Law 110-343 (122 Stat. 3765, 3854 
(2008)). The likely respondents are brokers of securities and issuers, 
transfer agents, and professional custodians of securities that do not 
effect sales.
    Estimated total annual reporting burden is 450,000 hours.
    Estimated average annual burden per respondent is 15 hours.
    Estimated average burden per response is 4 minutes.
    Estimated number of respondents is 30,000.
    Estimated total frequency of responses is 7 million.
    The burden for the collection of information contained in the 
proposed amendments to Sec.  1.6045-1 will be reflected in the burden 
on Form 1099-B, ``Proceeds from Broker and Barter Exchange 
Transactions,'' when revised to request the additional information in 
the regulation. The burden for the collection of information contained 
in the proposed amendments to Sec.  1.6045B-1 will be reflected in the 
burden on Form 8937, ``Report of Organizational Actions Affecting Basis 
of Securities,'' when revised to request the additional information in 
the 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 Office of Management and Budget.

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1) relating to information reporting by 
brokers and others as required by section 6045 of the Internal Revenue 
Code (Code). This section was amended 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) to require the reporting of 
adjusted basis for a covered security and whether any gain or loss upon 
the sale of the security is long-term or short-term. The Act also 
requires the reporting of gross proceeds for an option that is a 
covered security. In addition, the Act added section 6045A to the Code, 
which requires certain information to be reported in connection with a 
transfer of a covered security to another broker, and section 6045B, 
which requires an issuer of a specified security to file a return 
relating to certain actions that affect the basis of the security. 
Final regulations under these provisions relating to stock were 
published in the Federal Register on October 18, 2010, in TD 9504. The 
proposed regulations in this document address reporting by brokers 
under Sec.  1.6045-1 for debt instruments and options. This document 
also contains proposed amendments to the Income Tax Regulations under 
sections 6045A and 6045B for debt instruments and options.
    Section 6045(g)(1) requires every broker that is required to file a 
return

[[Page 72654]]

with the IRS under section 6045(a) showing the gross proceeds from the 
sale of a covered security to 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. Under section 
6045(g)(3), a note, bond, debenture, or other evidence of indebtedness 
acquired on or after January 1, 2013, is a security subject to the 
information reporting rules in section 6045(g)(1). Section 6045(h) 
provides rules for reporting certain information, including gross 
proceeds, with respect to the sale, exercise, lapse, or other closing 
transaction with respect to an option on a specified security granted 
or acquired on or after January 1, 2013.

Explanation of the Provisions

    In general, these regulations would amend Sec. Sec.  1.6045-1, 
1.6045A-1, and 1.6045B-1 to require additional information reporting by 
a broker for a debt instrument acquired on or after January 1, 2013. 
The proposed regulations also require information reporting for an 
option granted or acquired on or after January 1, 2013. Many of the 
changes are technical provisions needed to incorporate debt instruments 
and options into the rules established for stock in the final 
regulations published in TD 9504. As a result of these changes, the 
general rules of Sec.  1.6045-1 that currently apply to stock also will 
apply to a debt instrument or an option that is a covered security, 
including the wash sale and short sale provisions. In addition, the 
general rules of Sec.  1.6045A-1 relating to transfer statement 
requirements and Sec.  1.6045B-1 relating to issuer statement 
requirements will apply to a debt instrument or an option. Certain 
substantive changes were also needed to accommodate debt instruments 
and options. Certain other changes were made that will affect all 
specified securities, including stock. The significant substantive 
changes to the regulations are described in this preamble.

A. Section 1.6045-1

1. Options
    Under section 6045(h), for any sale or other closing transaction 
with respect to an option that is a covered security, a broker is 
required to report gross proceeds, adjusted basis, and whether any gain 
or loss is short-term or long-term.
    For purposes of Sec.  1.6045-1, certain options have been added to 
the definition of a security, specified security, and covered security. 
In general, an option on one or more specified securities, including an 
index of such securities or financial attributes of such securities, 
that is granted or acquired on or after January 1, 2013, will be a 
covered security. For example, as indicated by the Joint Committee on 
Taxation, the proposed regulations would apply to an option on the S&P 
500 Index. See General Explanation of Tax Legislation Enacted in the 
110th Congress, JCS-1-09 at 366.
    An exception to the general rules described in proposed Sec.  
1.6045-1(m) for reporting basis for an option is provided for a 
compensation-related option. The proposed rules retain the existing 
rules for a compensation-related option, but make those rules 
applicable to all compensation-related options, and not just those 
granted or acquired before January 1, 2013. Under the regulations, if a 
customer exercises a compensation-related option, a broker is 
permitted, but not required, to adjust basis of the acquired stock for 
any amounts included as compensation income. Instructions to the Form 
1040 (Schedule D) and other IRS forms and publications will be amended 
to remind a taxpayer that a reconciliation of basis may be required if 
the sale reported on a Form 1099-B is a sale of stock acquired through 
a stock grant or the exercise of a compensatory option. The IRS is 
exploring the possibility of adding an indicator on the Form 1099-B to 
denote a sale of compensation-related stock.
    The definitions for the terms closing transaction and sale have 
been updated to be consistent with sections 1234 and 1234A and to 
accommodate the reporting of options granted or acquired on or after 
January 1, 2013. In particular, the cancellation, lapse, expiration, or 
other termination of an option will be a closing transaction, as will a 
cash settlement.
    For an option that is a covered security, reporting requirements 
will depend on whether or not the option was physically settled. If an 
option is physically settled, the premium paid or received, as the case 
may be, will be used by the broker for the asset purchaser to adjust 
the basis of the purchased asset and by the broker for the asset seller 
to adjust reported proceeds. Publication 550, Investment Income and 
Expenses, contains a detailed explanation of the appropriate tax 
treatment of the exercise or lapse of an option. If an option that is a 
covered security is sold or is part of a closing transaction that does 
not entail physical settlement, a broker is required to report gross 
proceeds and whether the gain or loss is long-term or short-term. It 
should be noted that if a customer sells any option prior to 
expiration, including an option acquired prior to January 1, 2013, the 
regulations currently in effect already require a broker to report the 
gross proceeds from that sale except in cases in which an option is 
closed by offset.
    If a customer receives a warrant or stock right in a section 305(a) 
distribution, a broker must determine the basis of the warrant or stock 
right by applying the rules described in sections 305 and 307.
2. Debt Instruments
    Under section 6045(g), upon the sale of a debt instrument that is a 
covered security, a broker is required to report the adjusted basis of 
the debt instrument and whether any gain or loss is short-term or long-
term. Pursuant to section 6045(g), the proposed regulations amend Sec.  
1.6045-1 to include a debt instrument in the definition of a specified 
security and a debt instrument acquired for cash in an account on or 
after January 1, 2013, in the definition of a covered security.
    For purposes of Sec.  1.6045-1, the proposed regulations define a 
debt instrument to include any instrument described in Sec.  1.1275-
1(d) and any instrument or position that is treated as a debt 
instrument under a specific provision of the Internal Revenue Code. 
This definition of a debt instrument applies whenever the term debt 
instrument, bond, debt obligation, or obligation is used anywhere in 
Sec.  1.6045-1. Under the proposed regulations, solely for purposes of 
Sec.  1.6045-1, a security classified as debt by the issuer is treated 
as a debt instrument. If the issuer has not classified the security, 
however, the security is not treated as a debt instrument unless the 
broker knows that the security is reasonably classified as debt under 
general Federal tax principles or that the instrument or position is 
treated as a debt instrument under a specific provision of the Internal 
Revenue Code.
    Due to the difficulties in implementing a broker's reporting 
obligations under section 6045(g) that would arise with respect to debt 
instruments described in section 1272(a)(6) (debt instruments with 
principal subject to acceleration) that are acquired on or after 
January 1, 2013, the proposed regulations provide that a debt 
instrument described in section 1272(a)(6) is not a covered security.
    If a debt instrument is acquired on or after January 1, 2013, a 
broker will be required to determine and account for original issue 
discount (``OID''), bond premium, acquisition premium, market

[[Page 72655]]

discount, and principal payments to determine the adjusted basis of the 
debt instrument and whether any gain or loss upon the sale of the debt 
instrument is short-term or long-term. Further, a broker will be 
required to report the amount of any market discount that has accrued 
as of the date of a sale or transfer of a debt instrument.
    Under Sec.  1.6045-1(d)(6)(i) of the existing final regulations, a 
broker is not required to consider elections occurring outside the 
account. Consistent with this rule, a broker generally is required to 
calculate amounts relating to OID, bond premium, acquisition premium, 
and market discount by assuming that the customer has not made any 
elections with respect to the debt instrument. The proposed 
regulations, however, provide two exceptions to this general rule: (1) 
A broker must assume that a customer has elected to use the constant 
interest rate method under section 1276(b)(2) to determine the amount 
of accrued market discount; and (2) a broker must assume that the 
customer has elected under section 171 to amortize bond premium on a 
taxable debt instrument.
    Both of these elections have the effect of minimizing the 
customer's ordinary income inclusion when compared with the 
alternatives available under the existing rules. It is also expected 
that prescribing which elections are to be ignored and which elections 
are assumed to be made will standardize, and therefore simplify, the 
information reporting required with respect to OID, bond premium, 
acquisition premium, and market discount.
    The Treasury Department and the IRS recognize that the section 171 
election assumption is inconsistent with the rule under section 6049 
providing that a payor is not permitted to take premium into account 
for purposes of reporting a holder's interest or OID income on Form 
1099-INT or 1099-OID each year. However, because the Treasury 
Department and the IRS believe that most holders will make a section 
171 election to treat the premium as an offset to ordinary income 
rather than as a capital loss, the Treasury Department and the IRS 
believe that the section 171 election assumption will result in fewer 
instances in which a customer will need to reconcile the reported 
adjusted basis number to the proper number.
    In general, the proposed regulations will result in the following 
outcomes for a debt instrument:
    a. If a debt instrument is sold prior to maturity, a broker will 
report any accrued market discount as of the sale date based on a 
constant interest rate.
    b. Except as provided in c below, a broker must determine a 
customer's basis in a debt instrument by computing any OID, bond 
premium, or acquisition premium using the default method described in 
the relevant provisions of the Code or regulations. A broker also must 
adjust the basis for any principal payments received.
    c. If a taxable debt instrument has bond premium, a broker must 
assume a customer has elected current amortization when computing the 
amount of the customer's basis.
    A broker generally must use a consistent accrual period to 
determine the accruals of discount or premium on a debt instrument. If 
a debt instrument has both OID and market discount, the accrual period 
used for the OID computation must be used for the market discount 
computation. In all other situations, a broker must use the shorter of 
an annual accrual period or a period that matches the frequency of 
regular coupon or principal payments.
    The rules in Sec.  1.6045-1(n) only apply for purposes of a 
broker's reporting obligation under section 6045. A customer can use 
any method or make any election permitted under the relevant provisions 
of the Code and regulations and is not bound by the assumptions that 
the broker uses to satisfy the broker's reporting obligations under 
section 6045. For example, even though a broker will compute and report 
any accrued market discount on a debt instrument by assuming that a 
customer made the constant yield election under section 1276(b)(2), the 
customer can determine the amount of accrued market discount using 
ratable accrual as described in section 1276(b)(1).
    Notwithstanding the information reported by a broker, a customer is 
still required to comply with all relevant provisions of the Code and 
regulations. For example, if a customer sells a debt instrument at a 
loss in one account with Broker A and reacquires a substantially 
identical debt instrument in a different account with Broker B within 
30 days of the loss transaction, Broker A is not required to apply the 
wash sale rules under section 1091 when reporting the sale. However, 
the customer is required to properly apply the rules of section 1091 to 
defer some or all of the loss and must make appropriate basis 
adjustments.
    If a customer uses an assumption or method different from the 
assumption or method used by the broker to determine a debt 
instrument's adjusted basis or other information for purposes of the 
Form 1099-B sent to the customer, the customer must reconcile the 
amount reported on the Form 1099-B to the amount reported on the 
customer's tax return.
3. Changes Affecting All Specified Securities (Including Stock)
    Under Sec.  1.6045-1(d)(5) of the final regulations relating to 
stock, a broker may choose to report gross proceeds from the sale of a 
security as the entire proceeds from the sale or as the proceeds 
reduced by the commissions and transfer taxes related to the sale. 
Commenters requested that the regulations remove this choice in order 
to standardize broker reporting on Form 1099-B and taxpayer reporting 
on Form 1040. The proposed regulations adopt this request and require 
brokers to reduce reported gross proceeds by commissions and transfer 
taxes related to a sale.
    Under Sec.  1.6045-1(d)(6) of the final regulations relating to 
stock, a broker currently must adjust basis reported for an 
organizational action taken by an issuer of a security during the 
period the broker has custody of the security. For a transferred 
security, the regulations exclude adjustments for organizational 
actions taken on the transfer settlement date. The proposed regulations 
amend this exclusion to clarify that the exclusion applies only to the 
broker receiving custody of a transferred security. The proposed 
regulations require that a broker transferring a security reflect all 
necessary adjustments for organizational actions taken through and on 
the transfer settlement date when completing a transfer statement.

B. Section 1.6045A-1

    If a specified security is transferred between brokers, the 
transferring broker must provide the receiving broker with certain 
information related to the transferred security that will enable the 
receiving broker to properly report under section 6045. The existing 
regulations under Sec.  1.6045A-1(b)(1) list information that must be 
reported for a transfer of any specified security. The proposed 
regulations under Sec.  1.6045A-1 modify this existing list by adding 
information about whether the security was acquired through an equity-
based compensation arrangement.
    Because debt instruments and options are being added to the 
definition of specified security under proposed changes to Sec.  
1.6045-1(a)(14), the information required to be provided for stock 
under Sec.  1.6045A-1(b)(1) also will be required to be provided for 
debt instruments and options. Further, additional data specific to the 
transfer of a debt instrument or an option is required to be provided. 
This additional data falls into two broad categories: (1) Data that 
adequately identifies the

[[Page 72656]]

instrument; and (2) data that is specific to the particular customer, 
particularly trade date and price or premium.
    This additional information is required to enable a broker that 
receives a debt instrument pursuant to a transfer to compute OID, 
market discount, bond premium, or acquisition premium. The description 
of the payment terms may be done in any manner that fully describes the 
debt instrument. The information can be in the form of a table of 
payments, or may be a description of the payment terms. The use of a 
single identifier, such as a CUSIP number, that can be used by the 
transferee broker to identify the security and its related payment 
terms is also an acceptable means of providing the additional 
information to the transferee broker.
    For an option, a transfer statement must include the date the 
option was granted or acquired, the amount of the premium, and whether 
the premium was paid or received. The data also must include any other 
information required to describe fully the option. This information may 
be a description of the relevant terms, or it may be an identifier, 
such as a CUSIP or Options Clearing Corporation number or code that can 
be used by the transferee broker to identify the security and its 
related terms.

C. Section 1.6045B-1

    Under Sec.  1.6045B-1, if the issuer of a specified security takes 
an organizational action that affects the basis of the security, the 
issuer must file an issuer return. A commenter asked for clarification 
about how this rule applies to option writers, because an 
organizational action usually is initiated by the issuer of the 
security underlying an option. The proposed regulations amend Sec.  
1.6045B-1 to provide rules for certain option writers if there is an 
organizational action. If the organizational action results in an 
option writer replacing the original option contract with a different 
number of option contracts, the option writer must prepare an issuer 
return as required by Sec.  1.6045B-1.

Proposed Effective/Applicability Dates

    These regulations are proposed to take effect when published in the 
Federal Register as final regulations. In general, the regulations 
regarding reporting of 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 
debt instruments acquired on or after January 1, 2013. The regulations 
regarding reporting of gross proceeds, basis, and whether any gain or 
loss on a sale is long-term or short-term under section 6045(h) are 
proposed to apply to options granted or acquired on or after January 1, 
2013.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13563. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to this regulation.
    Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it 
is hereby certified that this regulation will not have a significant 
economic impact on a substantial number of small entities, because any 
effect on small entities by the rules proposed in this document flows 
directly from section 403 of the Energy Improvement and Extension Act 
of 2008, Division B of Public Law 110-343 (122 Stat. 3765, 3854 
(2008)).
    Section 403(a) of the Act modifies section 6045 to require that 
brokers report the adjusted basis of the securities and whether any 
gain or loss with respect to the securities is long-term or short-term 
when reporting the sale of a covered security. The Act also requires 
gross proceeds reporting for options. It is anticipated that these 
statutory requirements will fall only on financial services firms with 
annual receipts greater than $7 million and, therefore, on no small 
entities. Further, in implementing the statutory requirements, the 
regulation proposes to limit reporting to information required under 
the Act.
    Section 403(c) of the Act added section 6045A, which requires 
applicable persons to furnish a transfer statement in connection with 
the transfer of custody of a covered security. The proposed 
modifications to Sec.  1.6045A-1 effectuate the Act by giving the 
broker who receives the transfer statement the information necessary to 
determine and report adjusted basis and whether any gain or loss with 
respect to a debt instrument or option is long-term or short-term as 
required by section 6045 when the security is subsequently sold. 
Consequently, the regulation does not add to the impact on small 
entities imposed by the statutory scheme. Instead, it limits the 
information to be reported to only those items necessary to effectuate 
the statutory scheme.
    Section 403(d) of the Act added section 6045B, which requires 
issuer reporting by all issuers of specified securities regardless of 
size and even when the securities are not publicly traded. The proposed 
modifications to Sec.  1.6045B-1 limit reporting to the additional 
information for options necessary to meet the Act's requirements. 
Additionally, the regulation, as modified, retains the rule that 
permits an issuer to report each action publicly 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 impact 
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 required. 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 submitted to the Chief 
Counsel for Advocacy of the Small Business Administration 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 original and eight 
(8) copies) or electronic comments that are timely submitted to the 
IRS. The IRS and Treasury Department specifically request comments on 
the clarity of the proposed regulations and how they can be made easier 
to understand. The IRS and Treasury Department further request comments 
about suggested changes or improvements to sections of Sec.  1.6045-1 
that are not specifically affected by the proposed regulation. The IRS 
and Treasury Department also request comments on the accuracy of the 
certification that the regulation in this document will not have a 
significant economic impact on a substantial number of small entities. 
All comments will be available for public inspection and copying.
    A public hearing has been scheduled for Friday, March 16, 2012, 
beginning at 10 a.m. in the IRS Auditorium, 1111 Constitution Avenue 
NW., Washington, DC. Due to building security procedures, visitors must 
enter through the Constitution Avenue entrance. In addition, all 
visitors must present photo identification to enter the building. 
Because of access restrictions, visitors will not be admitted beyond 
the immediate entrance area more than 30 minutes before the hearing 
starts. For information about having your name placed on the building 
access list to attend the hearing, see the FOR FURTHER

[[Page 72657]]

INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit written or 
electronic comments by February 23, 2012 and submit an outline of the 
topics to be discussed and the time to be devoted to each topic (a 
signed original and eight (8) copies) by Friday, February 24, 2012. A 
period of 10 minutes will be allotted to each person for making 
comments. An agenda showing the scheduling of speakers will be prepared 
after the deadline for receiving outlines has passed. Copies of the 
agenda will be available free of charge at the hearing.

Drafting Information

    The principal author of these proposed regulations is Pamela Lew, 
Office of Associate Chief Counsel (Financial Institutions and 
Products). However, other personnel from the IRS and the Treasury 
Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

    Par. 2. Section 1.6045-1 is amended by:
    1. Revising paragraphs (a)(3)(v) and (a)(3)(vi) and adding 
paragraph (a)(3)(vii).
    2. Revising paragraphs (a)(8) and (a)(9).
    3. Revising paragraphs (a)(14) and (a)(15)(i)(A).
    4. Redesignating paragraph (a)(15)(i)(C) as paragraph (a)(15)(i)(E) 
and adding new paragraphs (a)(15)(i)(C) and (a)(15)(i)(D).
    5. Revising newly redesignated paragraph (a)(15)(i)(E).
    6. Adding a new sentence to the end of paragraph (a)(15)(ii).
    7. Adding a new paragraph (a)(15)(iv)(E).
    8. Adding a new paragraph (a)(17).
    9. Revising paragraph (c)(3)(x) and the first two sentences in 
paragraph (c)(3)(xi)(C).
    10. Revising the last sentence of paragraph (c)(4) Example 9 (i).
    11. Adding a sentence at the end of paragraph (d)(2)(i) and 
revising paragraph (d)(2)(ii).
    12. Revising paragraphs (d)(3), (d)(5), (d)(6)(i), and 
(d)(6)(ii)(A).
    13. Revising the heading for paragraph (d)(6)(ii)(B).
    14. Revising the sixth and seventh sentences and removing the last 
sentence in paragraph (d)(6)(vii) Example 4.
    15. Adding paragraphs (m) and (n).
    The additions and revisions read as follows:


Sec.  1.6045-1  Returns of information of brokers and barter exchanges.

    (a) * * *
    (3) * * *
    (v) An interest in or right to purchase any of the foregoing in 
connection with the issuance thereof from the issuer or an agent of the 
issuer or from an underwriter that purchases any of the foregoing from 
the issuer;
    (vi) An interest in a security described in paragraph (a)(3)(i) or 
(iv) (but not including executory contracts that require delivery of 
such type of security); or
    (vii) An option described in paragraph (m)(1) of this section.
* * * * *
    (8) The term closing transaction means any cancellation, lapse, 
expiration, settlement, abandonment, or other termination of a right or 
an obligation under a forward contract, a regulated futures contract, 
or an option.
    (9) The term sale means any disposition of securities, commodities, 
options, regulated futures contracts, or forward contracts, and 
includes redemptions of stock, retirements of debt instruments, and 
enterings into short sales, but only to the extent any of these actions 
are conducted for cash. In the case of an option, a regulated futures 
contract, or a forward contract, a sale includes 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 the delivery is a separate sale. When a closing 
transaction in a forward contract involves making or taking delivery, 
the delivery is a sale without separating the profit or loss on the 
contract from the profit or loss on the delivery, except that taking 
delivery for United States dollars is not a sale. The term sale does 
not include entering into a contract that requires delivery of personal 
property or an interest therein, the initial grant or purchase of an 
option, or the exercise of a call option for physical delivery. For 
purposes of this section only, a constructive sale under section 1259 
and a mark to fair market value under section 475 or 1296 are not 
sales.
* * * * *
    (14) The term specified security means:
    (i) Any share of stock (or any interest treated as stock, 
including, for example, an American Depositary Receipt) in an entity 
organized as, or treated for Federal tax purposes as, a corporation, 
either foreign or domestic (Solely for purposes of this paragraph 
(a)(14)(i), a security classified as stock by the issuer is treated as 
stock. If the issuer has not classified the security, the security is 
not treated as stock unless the broker knows that the security is 
reasonably classified as stock under general Federal tax principles.);
    (ii) Any debt instrument described in paragraph (a)(17) of this 
section; or
    (iii) Any option described in paragraph (m)(1) of this section.
    (15) * * *
    (i) * * *
    (A) A specified security described in paragraph (a)(14)(i) of this 
section acquired for cash in an account on or after January 1, 2011, 
except stock for which the average basis method is available under 
Sec.  1.1012-1(e).
* * * * *
    (C) A debt instrument described in paragraph (a)(14)(ii) of this 
section acquired for cash in an account on or after January 1, 2013.
    (D) An option described in paragraph (a)(14)(iii) of this section 
granted or acquired for cash in an account on or after January 1, 2013.
    (E) A specified security transferred to an account if the broker or 
other custodian of the account receives a transfer statement (as 
described in Sec.  1.6045A-1) reporting the security as a covered 
security.
    (ii) * * * Acquiring a security in an account includes a security 
that represents a liability (for example, granting an option).
* * * * *
    (iv) * * *
    (E) A debt instrument that is described in paragraph (n)(2)(ii) of 
this section.
* * * * *
    (17) For purposes of this section, the terms debt instrument, bond, 
debt obligation, and obligation mean a debt instrument as defined in 
Sec.  1.1275-1(d) and any instrument or position that is treated as a 
debt instrument under a specific provision of the Internal Revenue Code 
(for example, a regular interest in a REMIC as defined in section 
860G(a)(1) and Sec.  1.860G-1). Solely for purposes of this section, a 
security classified as debt by the issuer

[[Page 72658]]

is treated as debt. If the issuer has not classified the security, the 
security is not treated as debt unless the broker knows that the 
security is reasonably classified as debt under general Federal tax 
principles or that the instrument or position is treated as a debt 
instrument under a specific provision of the Internal Revenue Code.
* * * * *
    (c) * * *
    (3) * * *
    (x) Certain retirements. No return of information is required from 
an issuer or its agent with respect to the retirement of book entry or 
registered form debt instruments issued before January 1, 2013, as to 
which the relevant books and records indicate that no interim transfers 
have occurred.
    (xi) * * *
    (C) Short sale obligation transferred to another account. If a 
short sale obligation is satisfied by delivery of a security 
transferred into a customer's account accompanied by a transfer 
statement (as described in Sec.  1.6045A-1(b)(7)) indicating that the 
security was borrowed, the broker receiving custody of the security may 
not file a return of information under this section. The receiving 
broker must furnish a statement to the transferor that reports the 
amount of gross proceeds received from the short sale, the date of the 
sale, the quantity of shares, units, or amounts sold, and the Committee 
on Uniform Security Identification Procedures (CUSIP) number of the 
sold security (if applicable) or other security identifier number that 
the Secretary may designate by publication in the Federal Register or 
in the Internal Revenue Bulletin (see Sec.  601.601(d)(2) of this 
chapter). * * *
* * * * *
    (4) * * *
    Example 9. * * *
    (i) * * * N indicates on the transfer statement that the 
transferred stock was borrowed in accordance with Sec.  1.6045A-
1(b)(7).
* * * * *
    (d) * * *
    (2) * * *
    (i) * * * See paragraph (m) of this section for additional rules 
related to options and paragraph (n) of this section for additional 
rules related to debt instruments.
    (ii) Specific identification of securities. Except as provided in 
Sec.  1.1012-1(e)(7)(ii), for securities described in paragraph 
(a)(14)(i) of this section sold on or after January 1, 2011, or 
securities described in paragraphs (a)(14)(ii) and (a)(14)(iii) of this 
section sold on or after January 1, 2013, a broker must report a sale 
of less than the entire position in an account of a specified security 
that was acquired on different dates or at different prices 
consistently with a customer's adequate and timely identification of 
the security to be sold. See Sec.  1.1012-1(c). If the customer does 
not provide an adequate and timely identification for the sale, the 
broker must first report the sale of securities in the account for 
which the broker does not know the acquisition or purchase date 
followed by the earliest securities purchased or acquired, whether 
covered securities or noncovered securities.
* * * * *
    (3) Sales between interest payment dates. For each sale of a debt 
instrument prior to maturity with respect to which a broker is required 
to make a return of information under this section, a broker must show 
separately on Form 1099 the amount of accrued and unpaid interest as of 
the sale date that must be reported by the customer as interest income 
under Sec.  1.61-7(d) (but not the amount of any market discount on a 
noncovered security or original issue discount). Such interest 
information must be shown in the manner and at the time required by 
Form 1099 and section 6049.
* * * * *
    (5) Gross proceeds. For purposes of this section, gross proceeds on 
a sale are the total amount paid to the customer or credited to the 
customer's account as a result of the sale reduced by the amount of any 
stated interest reported under paragraph (d)(3) of this section and 
increased by any amount not paid or credited by reason of repayment of 
margin loans. In the case of a closing transaction that results in a 
loss, gross proceeds are the amount debited from the customer's 
account. For sales before January 1, 2013, a broker may, but is not 
required to, reduce gross proceeds by the amount of commissions and 
transfer taxes, provided the treatment chosen is consistent with the 
books of the broker. For sales on or after January 1, 2013, a broker 
must reduce gross proceeds by the amount of commissions and transfer 
taxes related to the sale of the security. For securities sold pursuant 
to the exercise of an option granted or acquired before January 1, 
2013, a broker may, but is not required to, take the option premiums 
into account in determining the gross proceeds of the securities sold, 
provided the treatment chosen is consistent with the books of the 
broker. For securities sold pursuant to the exercise of an option 
granted or acquired on or after January 1, 2013, see paragraph (m) of 
this section. A broker must report the gross proceeds of identical 
stock (within the meaning of Sec.  1.1012-1(e)(4)) by averaging the 
proceeds of each share if the stock is sold at separate times on the 
same calendar day in executing a single trade order and the broker 
executing the trade provides a single confirmation to the customer that 
reports an aggregate total price or an average price per share. 
However, a broker may not average the proceeds if the customer notifies 
the broker in writing of an intent to determine the proceeds of the 
stock by the actual proceeds per share and the broker receives the 
notification by January 15 of the calendar year following the year of 
the sale. A broker may extend the January 15 deadline but not beyond 
the due date for filing the return required under this section.
    (6) Adjusted basis--(i) In general. For purposes of this section, 
the adjusted basis of a security is determined from the initial basis 
under paragraph (d)(6)(ii) of this section as of the date the security 
is acquired in an account, increased by the commissions 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. A broker is 
not required to consider transactions, elections, or events occurring 
outside the account except for an organizational action taken by an 
issuer during the period the broker holds custody of the security (not 
including the settlement date that the broker received a transferred 
security) reported on an issuer statement (as described in Sec.  
1.6045B-1) furnished or deemed furnished to the broker. For rules 
related to the adjusted basis of a debt instrument, see paragraph (n) 
of this section.
    (ii) Initial basis--(A) Cost basis. For a security acquired for 
cash, the initial basis generally is the total amount of cash paid by 
the customer or credited against the customer's account for the 
security, increased by the commissions and transfer taxes related to 
its acquisition. A broker may, but is not required to, take option 
premiums into account in determining the initial basis of securities 
purchased or acquired pursuant to the exercise of an option granted or 
acquired before January 1, 2013. For rules related to options granted 
or acquired on or after January 1, 2013, see paragraph (m) of this 
section. A broker may, but is not required to, increase initial basis 
for income recognized upon the exercise of a compensatory option or the 
vesting or exercise of other equity-based compensation arrangements. A 
broker must report the basis of identical stock (within the meaning of 
Sec.  1.1012-1(e)(4))

[[Page 72659]]

by averaging the basis of each share if the stock is purchased at 
separate times on the same calendar day in executing a single trade 
order and the broker executing the trade provides a single confirmation 
to the customer that reports an aggregate total price or an average 
price per share. However, a broker may not average the basis if the 
customer timely notifies the broker in writing of an intent to 
determine the basis of the stock by the actual cost per share in 
accordance with Sec.  1.1012-1(c)(1)(ii).
    (B) Basis of transferred securities * * *

* * * * *
    (vii) * * *
    Example 4.  * * * Under paragraph (d)(6)(ii)(A) of this section, 
C is permitted, but not required, to determine adjusted basis from 
the amount R pays under the terms of the option. Under paragraph 
(d)(6)(ii)(A) of this section, C is permitted, but not required, to 
adjust basis for any amount R must include as wage income with 
respect to the October 2, 2013, stock purchase.
* * * * *
    (m) Additional rules for option transactions--(1) Scope. This 
paragraph (m) applies to the following types of options granted or 
acquired on or after January 1, 2013:
    (i) An option on one or more specified securities. For purposes of 
this paragraph (m), the phrase one or more specified securities 
includes an index substantially all the components of which are 
specified securities, and the term option includes a warrant or a stock 
right.
    (ii) An option on financial attributes of specified securities, 
such as interest rates or dividend yields.
    (2) Physically settled option. If a covered security is acquired or 
disposed of pursuant to the exercise of an option that was granted or 
acquired in the same account as the covered security, a broker must 
adjust the basis of the acquired asset or the gross proceeds amount as 
appropriate to account for any premium related to the option.
    (3) Rules for an option that is not physically settled. For 
purposes of paragraph (d) of this section, for an option that is not 
physically settled and is sold (as defined in paragraph (a)(9) of this 
section), the following rules apply:
    (i) Gross proceeds. A broker must increase gross proceeds for all 
payments received on the option and decrease gross proceeds for all 
payments paid on the option.
    (ii) Long-term or short-term gain or loss. For purposes of 
paragraph (d)(7) of this section, when determining if any gain or loss 
is long-term or short-term within the meaning of section 1222, a broker 
must apply the rules described in sections 1234 and 1234A.
    (4) Rules for warrants and stock rights. For a right to acquire 
stock (including a warrant) received in the same account as the 
underlying equity in a distribution that is described in section 
305(a), a broker must determine basis in the option in accordance with 
the rules described in sections 305 and 307. Upon exercise or sale of a 
warrant or stock right, a broker must account for the warrant or stock 
right as if it were purchased and must treat as premium paid any basis 
allocated to the warrant or stock right.
    (5) Example. The following example illustrates the rules in this 
paragraph (m):

    Example. (i) On January 15, 2013, C, an individual, sells a 2-
year exchange-traded option on 100 shares of Company X through 
Broker D. C receives a premium for the option of $100 and pays no 
commission. In C's hands, Company X stock is a capital asset. On 
December 16, 2013, C pays $110 to close out the option.
    (ii) D is required to report information about the closing 
transaction because the option is on a covered security as described 
in paragraph (a)(15)(i)(D) of this section and was part of a closing 
transaction described in paragraph (a)(8) of this section. D will 
report as gross proceeds the net of the $100 received as option 
premium minus the $110 C paid to close out the option, for a total 
of -$10. Under the rules of section 1234(b)(1) and paragraph (d)(2) 
of this section, D will also report that the loss on the closing 
transaction is a short-term loss.

    (6) Multiple options documented in a single contract. If more than 
one option described in paragraph (m)(1) of this section is documented 
in a single contract, a broker must separately report the required 
information for each option as that option is sold.
    (n) Reporting for bond transactions--(1) In general. For purposes 
of paragraph (d) of this section, this paragraph (n) provides rules for 
brokers to determine and report information for a debt instrument.
    (2) Scope--(i) In general. Except as provided in paragraph 
(n)(2)(ii) of this section, this paragraph (n) applies to a debt 
instrument that is a covered security under paragraph (a)(15)(i)(C) of 
this section.
    (ii) Excluded debt instruments. A debt instrument subject to 
section 1272(a)(6) (certain interests in or mortgages held by a REMIC, 
certain other debt instruments with payments subject to acceleration, 
and pools of debt instruments the yield on which may be affected by 
prepayments) is not a covered security.
    (3) Reporting of accrued market discount. In addition to the 
information required to be reported under paragraph (d) of this 
section, if a debt instrument is subject to the market discount rules 
in sections 1276 through 1278, a broker also must report the amount of 
market discount that has accrued on the debt instrument as of the date 
of the sale. A broker must compute the accruals of market discount by 
assuming that the customer elected to use the constant interest rate 
method under section 1276(b)(2) for the taxable year in which the 
customer acquired the debt instrument. See paragraph (n)(5) of this 
section to determine the accrual period to be used to compute the 
accruals of market discount.
    (4) Adjusted basis. For purposes of this section, a broker must use 
the rules in this paragraph (n)(4) to determine the adjusted basis of a 
debt instrument. To the extent the rules in this paragraph (n)(4) are 
inconsistent with the rules in paragraph (d)(6) of this section, the 
rules in this paragraph (n)(4) control.
    (i) Original issue discount. If a debt instrument is subject to the 
original issue discount rules in sections 1271 through 1275 and section 
6049, a broker must increase a customer's basis in the debt instrument 
by the amount of original issue discount reported to the customer under 
section 6049 for each year the debt instrument is held by the customer 
in the account. If the debt instrument is not subject to section 6049 
or is a tax-exempt debt instrument subject to section 1288, the broker 
must increase the customer's basis in the debt instrument by the amount 
of original issue discount that accrued on the debt instrument while 
held by the customer in the account. To determine this amount, the 
broker must use the accrual period required under paragraph (n)(5) of 
this section.
    (ii) Bond premium. If a debt instrument is subject to the bond 
premium rules in section 171, a broker must decrease a customer's basis 
in the debt instrument by the amount of bond premium allocable to the 
period the debt instrument is held by the customer in the account. In 
the case of a taxable debt instrument, a broker must compute any basis 
adjustment for bond premium by assuming that the customer elected to 
amortize bond premium under section 171 (c) for the taxable year in 
which the customer acquired the debt instrument and that such election 
remained in effect for all subsequent years.
    (iii) Acquisition premium. If a debt instrument is acquired at an 
acquisition premium (as determined under Sec.  1.1272-2(b)(3)), a 
broker must decrease the customer's basis in the debt instrument by the 
amount of acquisition

[[Page 72660]]

premium that is taken into account each year to reduce the amount of 
the original issue discount that is otherwise includible in the 
customer's income for that year. See Sec.  1.1272-2(b)(4) to determine 
the amount of the acquisition premium taken into account each year.
    (iv) Principal and certain other payments. A broker must decrease 
the customer's basis by the amount of any payment made to the customer 
during the period the debt instrument is held in the account, other 
than a payment of qualified stated interest as defined in Sec.  1.1273-
1(c).
    (5) Accrual period. If a debt instrument is subject both to the 
original issue discount and the market discount rules, a broker must 
use the same accrual period that is used to determine the original 
issue discount reported to the customer under section 6049 to compute 
accruals of market discount. In any other situation, a broker must use 
an annual accrual period or, if there are scheduled payments of 
principal or interest at regular intervals of one year or less over the 
entire term of the debt instrument, a broker must use an accrual period 
equal in length to this interval. For example, if a debt instrument 
provides for semiannual payments of interest over the entire term of 
the debt instrument, the broker should use a semiannual accrual period.
    (6) Broker assumptions not controlling for customer. The rules in 
this paragraph (n) only apply for purposes of a broker's reporting 
obligation under section 6045. A customer is not bound by the 
assumptions that the broker uses to satisfy the broker's reporting 
obligations under section 6045.
* * * * *
    Par. 3. Section 1.6045A-1 is amended by:
    1. Revising paragraphs (b)(1) introductory text and (b)(1)(v).
    2. Redesignating paragraphs (b)(2) through (b)(9) as paragraphs 
(b)(5) through (b)(12) respectively.
    3. Redesignating paragraph (b)(1)(viii) as paragraph (b)(2).
    4. Revising the introductory text to the examples in newly 
redesignated paragraph (b)(2).
    5. Revising newly redesignated paragraph (b)(5).
    6. Revising the first and last sentences of newly redesignated 
paragraph (b)(6).
    7. Revising newly redesignated paragraph (b)(8)(ii).
    8. Revising the first sentence of newly redesignated paragraph 
(b)(9)(ii).
    9. Revising the introductory text to the examples in newly 
redesignated paragraph (b)(9)(iii), the fifth sentence of paragraph 
(b)(9)(iii) Example 1, and the second sentence of paragraph (b)(9)(iii) 
Example 2.
    10. Revising the last sentence of newly redesignated paragraph 
(b)(10).
    11. Adding new paragraphs (b)(1)(viii), (b)(3) and (b)(4).
    12. Revising paragraph (d).
    The additions and revisions read as follows:


Sec.  1.6045A-1  Statements of information required in connection with 
transfers of securities.

* * * * *
    (b) Information required--(1) In general. For all specified 
securities, each transfer statement must include the information 
described in this paragraph (b)(1).
* * * * *
    (v) Security identifiers. The Committee on Uniform Security 
Identification Procedures (CUSIP) number of the security transferred 
(if applicable) or other security identifier number that the Secretary 
may designate by publication in the Federal Register or in the Internal 
Revenue Bulletin (see Sec.  601.601(d)(2) of this chapter), quantity of 
shares, units, or amounts, and classification of the security (such as 
stock).
* * * * *
    (viii) Relationship to a compensation arrangement. Whether the 
security was received in connection with the exercise of a compensatory 
option or the vesting or exercise of any other equity-based 
compensation arrangement and whether basis has been adjusted for any 
compensation income.
    (2) Examples. The following examples illustrate the rules of 
paragraph (b)(1) of this section:
* * * * *
    (3) Additional information required for a transfer of a debt 
instrument. In addition to the information required in paragraph (b)(1) 
of this section, for a transfer of a debt instrument that is a covered 
security, the following additional information is required:
    (i) A description of the payment terms;
    (ii) The issue price of the debt instrument;
    (iii) The issue date of the debt instrument;
    (iv) The adjusted issue price of the debt instrument as of the 
transfer date;
    (v) The customer's initial basis in the debt instrument;
    (vi) The yield used to compute any accruals of original issue 
discount, bond premium, and/or market discount;
    (vii) Any market discount that has accrued as of the transfer date 
(as determined under Sec.  1.6045-1(n)); and
    (viii) Any bond premium that has been amortized as of the transfer 
date (as determined under Sec.  1.6045-1(n)).
    (4) Additional information required for option transfers. In 
addition to the information required in paragraph (b)(1) of this 
section, for a transfer of an option that is a covered security, the 
following additional information is required:
    (i) The date of grant or acquisition of the option;
    (ii) The amount of premium paid or received; and
    (iii) Any other information required to fully describe the option.
    (5) Format of identification. An applicable person furnishing a 
transfer statement and a broker receiving the transfer statement may 
agree to combine the information required in paragraphs (b)(1), (b)(3), 
and (b)(4) of this section in any format or to use a code in place of 
one or more required items. For example, a transferor and a receiving 
broker may agree to use a single code to represent the broker instead 
of the broker's name, address, and telephone number, or may use a 
security symbol or other identification number or scheme instead of the 
security identifier required by paragraphs (b)(1), (b)(3), and (b)(4) 
of this section.
    (6) Transfers of noncovered securities. The information described 
in paragraphs (b)(1)(vii), (b)(8), and (b)(9) of this section is not 
required for a transfer of a noncovered security if the transfer 
statement identifies the security as a noncovered security. * * * For 
purposes of this paragraph (b)(6), a transferor must treat a security 
for which a broker makes a single-account election described in Sec.  
1.1012-1(e)(11)(i) as a covered security.
* * * * *
    (8) * * *
    (ii) Transfers of shares to satisfy a cash legacy. If a security is 
transferred from a decedent or a decedent's estate to satisfy a cash 
legacy, paragraph (b)(1) of this section applies and paragraph 
(b)(8)(i) of this section does not apply.
* * * * *
    (9) * * *
    (ii) Subsequent transfers of gifts by the same customer. If a 
transferor transfers to a different account of the same customer a 
security that a prior transfer statement reported as a gifted security, 
the transferor must include on the transfer statement the information 
described in paragraph (b)(9)(i) of this section for the date of the 
gift to the customer. * * *
    (iii) Examples. The following examples illustrate the rules of this 
paragraph (b)(9):

    Example 1.  * * * Under paragraph (b)(9)(i) of this section, S 
must provide a

[[Page 72661]]

transfer statement to T that identifies the securities as gifted 
securities and indicates X's adjusted basis and original acquisition 
date. * * *
    Example 2.  * * * Under paragraph (b)(9)(ii) of this section, T 
must provide a transfer statement to U that identifies the 
securities as gifted securities and indicates X's adjusted basis and 
original acquisition date of the stock. * * *

    (10) * * * If the customer does not provide an adequate and timely 
identification for the transfer, a transferor must first report the 
transfer of any securities in the account for which the transferor does 
not know the acquisition or purchase date followed by the earliest 
securities purchased or acquired, whether covered securities or 
noncovered securities.
* * * * *
    (d) Effective/applicability dates. This section applies to:
    (1) A transfer on or after January 1, 2011, of stock other than 
stock in a regulated investment company within the meaning of Sec.  
1.1012-1(e)(5);
    (2) A transfer of stock in a regulated investment company on or 
after January 1, 2012; and
    (3) A transfer of a debt instrument or an option on or after 
January 1, 2013.
    Par. 4. Section 1.6045B-1 is amended by redesignating paragraph (h) 
as paragraph (j), adding new paragraphs (h) and (i), and revising 
newly-designated paragraph (j) to read as follows:


Sec.  1.6045B-1  Returns relating to actions affecting basis of 
securities.

* * * * *
    (h) Rule for options--(1) In general. For an option granted or 
acquired on or after January 1, 2013, if the original contract is 
replaced by a different number of option contracts, the option writer 
is the issuer of the option for purposes of section 6045B and the 
option writer must prepare an issuer return.
    (2) Example. The following example illustrates the rule of 
paragraph (h)(1) of this section:

    Example. On January 15, 2013, F, an individual, purchases a one-
year exchange-traded call option on 100 shares of Company X stock, 
with a strike price of $110. The call option is cleared through 
Clearinghouse G. Company X undertakes a 2-for-1 stock split as of 
April 1, 2013. Due to the stock split, the terms of F's option are 
altered, resulting in two option contracts, each on 100 shares of 
Company X stock with a strike price of $55. All other terms of F's 
option remain the same. Under paragraph (h)(1) of this section, 
Clearinghouse G is required to prepare an issuer report to F.

    (i) [Reserved]
    (j) Effective/applicability dates. This section applies to--
    (1) Organizational actions occurring on or after January 1, 2011, 
that affect the basis of specified securities within the meaning of 
Sec.  1.6045-1(a)(14)(i) other than stock in a regulated investment 
company within the meaning of Sec.  1.1012-1(e)(5);
    (2) Organizational actions occurring on or after January 1, 2012, 
that affect stock in a regulated investment company;
    (3) Organizational actions occurring on or after January 1, 2013, 
that affect debt instruments described in Sec.  1.6045-1(a)(14)(ii), 
and
    (4) Actions occurring on or after January 1, 2013, that affect 
options described in Sec.  1.6045-1(a)(14)(iii).

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2011-30383 Filed 11-22-11; 4:15 pm]
BILLING CODE 4830-01-P