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Internal Revenue Service

and Products) at (202) 622–3950 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:

26 CFR Parts 1 and 602

Paperwork Reduction Act

[TD 9616]

The collection of information
contained in these final regulations
related to the furnishing of information
in connection with the transfer of
securities has been 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. The collection of
information in these final regulations in
§§ 1.6045–1(c)(3)(xi)(C) and 1.6045A–1
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 (Code). This 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
Act).
In addition, the collection of
information contained in § 1.6045–
1(n)(5) of these final regulations related
to the furnishing of information in
connection with the sale or transfer of
a debt instrument that is a covered
security is an increase in the total
annual burden under control number
1545–2186. Under section 6045(g), a
broker is required to determine and
report the adjusted basis upon the sale
or transfer of a debt instrument that is
a covered security. If a sale has
occurred, a broker must also determine
and report whether any gain or loss with
respect to the debt instrument is longterm or short-term in compliance with
section 6045(g). The holder of a debt
instrument is permitted to make a
number of elections that affect how
basis is computed. To minimize the
need for reconciliation between
information reported by a broker to both
a customer and the IRS and the amounts
reported on the customer’s tax return, a
broker is required to take into account
certain specified elections in reporting
information to the customer. A
customer, therefore, must provide
certain information concerning an
election to the broker in a written
notification, which includes a writing in
electronic format. The adjusted basis
information will be used for audit and
examination purposes. The likely
respondents are recipients of Form
1099–B.

DEPARTMENT OF THE TREASURY

RIN 1545–BK05; RIN 1545–BL47

Basis Reporting by Securities Brokers
and Basis Determination for Debt
Instruments and Options; Reporting
for Premium
Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary
regulations.
AGENCY:

This document contains final
regulations relating to reporting by
brokers for transactions involving debt
instruments and options. These final
regulations reflect changes in the law
made by the Energy Improvement and
Extension Act of 2008 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. These
final regulations also implement the
requirement that a broker report gross
proceeds from a sale or closing
transaction with respect to certain
options. In addition, this document
contains final 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 an option.
Moreover, this document contains final
regulations relating to the filing of Form
8281, ‘‘Information Return for Publicly
Offered Original Issue Discount
Instruments,’’ for certain debt
instruments with original issue discount
and temporary regulations relating to
information reporting for premium. The
text of the temporary regulations in this
document also serves as the text of the
proposed regulations (REG–154563–12)
set forth in the Proposed Rules section
in this issue of the Federal Register.
DATES: Effective Date: These regulations
are effective on April 18, 2013.
Applicability Dates: For dates of
applicability, see §§ 1.1275–3(c)(4),
1.6045–1(a)(15)(i)(C) through 1.6045–
1(a)(15)(i)(F), 1.6045–1(a)(18), 1.6045–
1(c)(3)(vii)(C) and (D), 1.6045–1(c)(3)(x),
1.6045–1(c)(3)(xiii), 1.6045–1(d)(2),
1.6045–1(d)(5), 1.6045–1(d)(6)(ii)(A),
1.6045–1(m), 1.6045–1(n), 1.6045A–
1(d), 1.6045B–1(j), and 1.6049–9T(a).
FOR FURTHER INFORMATION CONTACT:
Pamela Lew of the Office of Associate
Chief Counsel (Financial Institutions

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SUMMARY:

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Estimated total annual reporting
burden is 1,417 hours.
Estimated average annual burden per
respondent is 0.12 hours.
Estimated average burden per
response is 7 minutes.
Estimated number of respondents is
11,500.
Estimated total frequency of responses
is 11,500.
This collection of information is
required to comply with the provisions
of section 403 of the Act.
The burden for the collection of
information contained in the
amendment to § 1.1275–3 will be
reflected in the burden on Form 8281,
‘‘Information Return for Publicly
Offered Original Issue Discount
Instruments,’’ when revised to request
the additional information in the
regulations. The burden for the
collection of information contained in
the other amendments to § 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 regulations. The
burden for the collection of information
contained in the amendments to
§ 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
regulations. The burden for the
collection of information contained in
§ 1.6049–9T will be reflected in the
burdens on Form 1099–INT and Form
1099–OID when revised to request the
additional information in the
regulations. The information described
in this paragraph is required to enable
the IRS to verify that a taxpayer is
reporting the correct amount of income
or gain or claiming the correct amount
of losses or deductions.
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.
Books or records relating to a
collection of information must be
retained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background
This document contains 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 Code. This section

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Federal Register / Vol. 78, No. 75 / Thursday, April 18, 2013 / Rules and Regulations
was amended by section 403 of 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 if gross
proceeds reporting is required with
respect to such security. The Act also
requires the reporting of gross proceeds
for an option that is a covered security.
In addition, the Act added section
6045A, 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
2010 final regulations).
On November 25, 2011, the Treasury
Department and the IRS published in
the Federal Register (76 FR 72652)
proposed regulations (REG–102988–11)
relating to information reporting by
brokers, transferors, and issuers of
securities under sections 6045, 6045A,
and 6045B for debt instruments and
options. Written and electronic
comments responding to the notice of
proposed rulemaking were received and
are available for public inspection at
http://www.regulations.gov or upon
request. A public hearing was held on
March 16, 2012.
After considering the comments, the
Treasury Department and the IRS adopt
the proposed regulations as amended by
this Treasury decision. The comments
and revisions are discussed in this
preamble.

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Summary of Comments
A. Effective Dates and Penalty Relief
The proposed regulations had a
proposed effective date for both debt
instruments and options of January 1,
2013. The Treasury Department and the
IRS received numerous requests to delay
the proposed effective dates for both
debt instruments and options. Brokers
and other interested parties maintained
that the proposed effective date of
January 1, 2013, did not provide them
sufficient time to build and test the
systems required to implement the
reporting rules for debt instruments and
options. In response to these requests,
Notice 2012–34 (2012–21 I.R.B. 937)
was issued to announce that the
effective dates in the final regulations
would be postponed to January 1, 2014.
A number of commenters also
requested relief related to various
aspects of reporting under sections
6045, 6045A, and 6045B. One

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commenter requested a 36-month
general penalty relief period to allow
brokers to test and refine their reporting
systems.
In response to these comments, as was
announced in Notice 2012–34, the
effective date of these final regulations
is postponed so that basis reporting is
required for debt instruments and
options no earlier than January 1, 2014.
Moreover, these final regulations
implement the reporting requirements
for debt instruments in phases, as
described in more detail later in this
preamble. These final regulations also
implement transfer reporting in phases.
These features of the regulations are
intended to give brokers ample time to
develop and implement reporting
systems.
Another commenter requested a safeharbor for good faith reliance upon debt
instrument data that is provided by
third-party vendors for purposes of both
basis and transfer reporting. With
respect to information from third-party
vendors, §§ 1.6045–1(d)(2)(iv)(B) and
1.6045A–1(b)(8)(ii) of the 2010 final
regulations provide that a broker is
deemed to rely upon the information
provided by a third party in good faith
if the broker neither knows nor has
reason to know that the information is
incorrect (§ 1.6045A–1(b)(8)(ii) is
redesignated in these final regulations
as § 1.6045A–1(b)(11)(ii)). Therefore,
because the 2010 final regulations
already address the concerns raised by
these comments, no change on this issue
is needed in these final regulations.
Several commenters requested a safeharbor for purposes of both basis and
transfer reporting for good faith reliance
upon information received on a section
6045A transfer statement. With respect
to basis reporting, § 1.6045–
1(d)(2)(iv)(A) of the 2010 final
regulations provides for penalty relief if
a broker relies upon transferred
information when preparing a return
under section 6045. With respect to
transfer reporting, § 1.6045A–1(b)(8)(i)
of the 2010 final regulations
(redesignated in these final regulations
as § 1.6045A–1(b)(11)(i)) provides for
penalty relief if a broker relies upon
transferred information when preparing
a transfer statement under section
6045A. Because the 2010 final
regulations already address the concerns
raised by these comments, no change on
this issue is needed in these final
regulations.

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B. Debt Instruments
1. Scope of Debt Instrument Reporting
and Phased Implementation
The proposed regulations required
basis reporting for all debt instruments,
other than a debt instrument subject to
section 1272(a)(6) (in general, a debt
instrument with principal subject to
acceleration). Numerous commenters
requested that the final regulations
narrow the scope of basis reporting for
debt instruments. Many commenters
requested permanent exemptions from
basis reporting for debt instruments that
the commenters believe present data
collection or computational difficulties,
including convertible debt instruments,
debt instruments denominated in nonU.S. dollar currencies, contingent
payment debt instruments, variable rate
debt instruments, municipal obligations,
tax credit bonds, payment-in-kind (PIK)
bonds, certificates of deposit, debt
instruments issued by foreign persons,
U.S. Treasury strips and other stripped
debt instruments, inflation-indexed debt
instruments, privately placed debt
instruments, commercial paper, hybrid
securities, investment units, debt
instruments subject to put or call
options, debt instruments with stepped
interest rates, factored bonds, and shortterm debt instruments. Alternatively,
some commenters suggested that basis
reporting be deferred for debt
instruments until data is more readily
available for some of the instruments
described in the preceding sentence.
One commenter renewed a request for
exempting corporate trustees from basis
reporting for registered debt instruments
issued in a physical form. Some
commenters asked for a permanent
exemption or deferred reporting for debt
instruments because, unlike the rules
for equity, there are numerous rules in
the Code and regulations, including
holder elections, that affect the adjusted
basis of a debt instrument, such as the
rules relating to original issue discount
(OID), bond premium, market discount,
and acquisition premium.
Several commenters requested that
the final regulations provide a specific
list of the debt instruments subject to
basis reporting rather than a list of the
debt instruments not subject to basis
reporting. Other commenters suggested
limiting basis reporting to a debt
instrument that has a fixed yield and
fixed maturity date. One commenter
indicated that fixed yield, fixed
maturity date debt instruments
comprise approximately 90% of the
reportable debt instrument transactions.
Section 6045(g) by its terms requires
basis reporting by brokers with respect
to any note, bond, debenture, or other

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evidence of indebtedness that is a
covered security. After consideration of
the comments, however, the Treasury
Department and the IRS appreciate that
the proper implementation of broker
basis reporting for debt instruments will
require time to build and implement
reporting systems, especially for debt
instruments with more complex
features. Thus, to facilitate an orderly
transition to basis reporting for debt
instruments, these final regulations
implement basis reporting for debt
instruments in phases.
For a debt instrument with less
complex features, these final regulations
require basis reporting by a broker if the
debt instrument is acquired on or after
January 1, 2014, consistent with Notice
2012–34. This category of less complex
debt instruments includes a debt
instrument that provides for a single
fixed payment schedule for which a
yield and maturity can be determined
for the instrument under § 1.1272–1(b),
a debt instrument that provides for
alternate payment schedules for which
a yield and maturity can be determined
for the instrument under § 1.1272–1(c)
(such as a debt instrument with an
embedded put or call option), and a
demand loan for which a yield can be
determined under § 1.1272–1(d).
Commenters requested delayed
reporting for any debt instrument with
an embedded put or call option. The
Treasury Department and the IRS
believe that brokers should be able to
implement reporting for a debt
instrument with an embedded option
that entitles the issuer to call or the
holder to put the debt instrument prior
to its scheduled maturity. Moreover,
because an embedded put or call option
is a common feature of debt
instruments, delaying basis reporting for
debt instruments with such a feature
could delay basis reporting for an
unduly large proportion of debt
instruments.
Some debt instruments with a fixed
yield and a fixed maturity date
nevertheless pose challenges for
information reporting. For these debt
instruments and for more complex debt
instruments that do not have a fixed
yield and a fixed maturity date, these
final regulations require basis reporting
for debt instruments acquired on or after
January 1, 2016. The Treasury
Department and the IRS believe that
brokers may need additional time to
implement basis reporting for these debt
instruments because of their more
complex features or the lack of public
information for the debt instruments.
Fixed yield, fixed maturity debt
instruments that are subject to reporting
if they are acquired on or after January

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1, 2016, include a debt instrument that
provides for more than one rate of stated
interest (such as a debt instrument with
stepped interest rates), a convertible
debt instrument, a stripped bond or
coupon, a debt instrument that requires
payment of either interest or principal
in a non-U.S. dollar currency, certain
tax credit bonds, a debt instrument that
provides for a PIK feature, a debt
instrument issued by a non-U.S. issuer,
a debt instrument for which the terms
of the instrument are not reasonably
available to the broker within 90 days of
the date the debt instrument was
acquired by the customer, a debt
instrument that is issued as part of an
investment unit, and a debt instrument
evidenced by a physical certificate
unless such certificate is held (whether
directly or through a nominee, agent, or
subsidiary) by a securities depository or
by a clearing organization described in
§ 1.1471–1(b)(18). Other debt
instruments that do not have a fixed
yield and fixed maturity date but are
subject to reporting if they are acquired
on or after January 1, 2016, include a
contingent payment debt instrument, a
variable rate debt instrument, and an
inflation-indexed debt instrument.
As noted earlier in this preamble, due
to the difficulties in implementing basis
reporting, the proposed regulations
provided that a debt instrument
described in section 1272(a)(6) (in
general, a debt instrument with
principal subject to acceleration) would
not be subject to basis reporting. In
response to favorable comments on this
exception, these final regulations retain
this exception from basis reporting.
A number of commenters requested
delayed reporting or no basis reporting
for short-term debt instruments (that is,
debt instruments with a fixed maturity
date not more than one year from the
date of issue). One commenter argued
that the application of the OID, bond
premium, market discount, and
acquisition premium rules to a shortterm debt instrument, including the
numerous elections applicable to shortterm debt instruments, is complicated,
that the effects on the basis of a shortterm debt instrument would be
marginal, and that basis reporting for
short-term debt instruments may impose
a significant burden on brokers and
provide little benefit to taxpayers or the
IRS. Because the Treasury Department
and the IRS agree with this comment,
these final regulations except short-term
debt instruments from basis reporting.
Another commenter requested that
the rules pertaining to short-term debt
instruments be extended to all debt
instruments that are acquired with a
remaining term of one year or less. This

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exemption from information reporting
would apply to a debt instrument
originally issued with a term of greater
than one year and acquired in a
secondary market purchase when there
is a remaining term of one year or less.
The request to extend the short-term
debt instrument rules to a long-term
debt instrument with one year or less
until maturity is not adopted because
the rules that govern a debt instrument
with a term over one year do not change
when the maturity has declined to one
year or less. While the potential for
significant gain or loss on the debt
instrument usually diminishes in the
final year, the reporting is useful to the
customer and the IRS, and all
information required for reporting will
be available to the broker.
One commenter requested that the
final regulations exempt from reporting
securities issued in connection with a
bankruptcy restructuring because it is
not always clear if a particular security
is a debt instrument. After consideration
of the comment, this request was not
adopted because these final regulations
provide that a security is treated as debt
for reporting purposes only if the issuer
has classified the security as debt or, if
the issuer has not classified the security,
if the broker knows that the security is
reasonably classified as debt under
general Federal tax principles.
2. Lack of Industry Consistency Could
Affect Reporting
A number of commenters raised
concerns and suggestions about how to
make reporting more consistent, both
between transferring and receiving
brokers and between brokers and
customers. Many commenters expressed
a strong desire to ensure that a customer
who transfers a security from one broker
to another will receive consistent
reporting from the two brokers. Many
commenters also asked for assistance in
minimizing the amount of potential
reconciliation between an amount
reported by a broker to a customer and
the IRS and the amount reported by that
customer on a tax return.
a. Support of Taxpayer Elections
The proposed regulations attempted
to simplify reporting requirements by
specifying the elections brokers were to
assume to compute OID, market
discount, bond premium, and
acquisition premium reported to
holders, and not permitting brokers to
support alternative customer elections.
A number of commenters, however,
indicated a desire by brokers to support
debt instrument elections made by their
customers rather than rely on
assumptions provided in the

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regulations. Some commenters stated
that they already support some or all
elections for debt as a service to their
customers, and these commenters
predict that similar customer service
demands will eventually require all
brokers to support customer elections,
just as they support customer elections
with respect to stock. Other commenters
pointed out that the default assumptions
in the proposed regulations might be
preferred by most individual taxpayers,
but other customers, such as trusts or
partnerships, might not prefer the
default assumptions. One commenter
noted that the reporting rules provided
in the proposed regulations would make
computations by brokers simpler, but
that educating customers about
permissible elections, and the
computations that each election would
entail if an election is made, would
become critical. This commenter
recommended permitting a broker to
support customer elections in the future
as systems are upgraded.
However, other commenters indicated
that some of the statutory defaults were
generally simpler to apply and
produced economic results that were
only negligibly different than the
defaults prescribed by the proposed
regulations. For example, while the
proposed regulations would have
required reporting of market discount
using a constant yield method, several
commenters indicated a preference for
reporting accrued market discount using
a straight line method.
The Treasury Department and the IRS
also received comments regarding the
treatment of amortizable bond premium
under section 171. One commenter
requested that the section 171 election
not be mandatory for reporting purposes
because most taxpayers have not made
the election, but suggested that a broker
be required to support the section 171
election if a customer informs the broker
that the election was or will be made.
After consideration of all the
comments, the Treasury Department
and the IRS have concluded that the
best way to balance certainty and
flexibility is to require brokers to report
information using the default
assumptions provided in the relevant
statute and regulations, except in the
case of the section 171 election, but to
require brokers to accommodate
elections by taxpayers that choose to
depart from the defaults. Under these
final regulations, upon written
notification by a customer, a broker
must take into account the following
elections for basis reporting purposes:
the election to accrue market discount
using a constant yield; the election to
include market discount in income

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currently; the election to treat all
interest as OID; and the spot rate
election for interest accruals with
respect to a covered debt instrument
denominated in a currency other than
the U.S. dollar. The Treasury
Department and the IRS do not
anticipate that many taxpayers will
make these elections. As a practical
matter, by removing short-term debt
instruments from the basis reporting
rules, the number of elections available
for a covered security has been reduced
to a manageable number, and it is
reasonable to require that the remaining
debt instrument elections be supported.
These final regulations make an
exception to the general rule requiring
brokers to use the default elections
provided in the statute and regulations
in the case of bond premium. Section
171 generally requires taxpayers to
affirmatively elect to amortize bond
premium on taxable bonds, which then
offsets interest income on the bond.
Except in the rare case of a holder that
prefers a capital loss, the election to
amortize bond premium generally will
benefit the holder of a debt instrument.
Thus, consistent with the proposed
regulations, these final regulations
require brokers to assume that
customers have made the election to
amortize bond premium provided in
section 171 when reporting basis, unless
the customer has notified the broker
otherwise.
The rules regarding basis reporting for
bond premium in the proposed
regulations prompted a number of
commenters to request that the rules for
reporting interest income associated
with a bond acquired at a premium be
conformed to the rules regarding basis
reporting for these same debt
instruments. In response to these
commenters, this document contains
temporary regulations addressing
reporting of premium under section
6049. See Part H of this preamble for
additional discussion of this issue.
The Treasury Department and the IRS
considered making broker support of
debt instrument elections a permitted,
but not required, activity, but the
additional administrative problems that
can arise if a transferring broker
supports certain elections while the
receiving broker does not support the
same elections made a permissive
approach problematic. For example, if
the receiving broker did not support the
same elections as the transferring
broker, and the customer properly made
one of the elections permitted with
respect to a debt instrument and
notified the transferring broker of the
election, the information provided by
the receiving broker on the relevant

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Form 1099 would not reflect the
customer’s election, requiring the
customer to provide a reconciliation on
the customer’s income tax return. These
administrative problems lead to the
conclusion that brokers should be
required to support either all of the
permitted elections for debt instruments
or none of them. Given the numerous
requests to support customer elections,
coupled with requests to reduce the
need for a customer to reconcile tax
return data to the data provided by a
broker, the Treasury Department and the
IRS decided that support for customer
debt instrument elections would be
beneficial to taxpayers and would not
impose an undue burden on brokers. It
should be noted that supporting
customer elections will require
additional transfer statement
information to advise a receiving broker
of any elections that were used to
compute the information provided.
b. Industry Conventions
Several commenters pointed out that
brokers do not necessarily use common
terms or conventions for debt
instrument computations. For example,
30 days per month/360 days per year,
actual days per month/360 days per
year, and actual days per month/365
days per year are possible interest
computation day count conventions.
Different brokers may use different
amortization and accretion assumptions,
different accrual periods, and different
rounding conventions.
The proposed regulations prescribed
conventions to determine the accrual
period to be used for reporting
purposes. These final regulations
generally adopt the conventions in the
proposed regulations. Under these final
regulations, a broker must use the same
accrual period that is used to report OID
or stated interest to a customer under
section 6049. In any other situation, a
broker is required to use a semi-annual
accrual period unless the debt
instrument provides for scheduled
payments of principal or interest at
regular intervals of less than six months
over its term, in which case a broker
must use an accrual period equal in
length to this shorter interval. In
response to a comment, these final
regulations use a semi-annual accrual
period rather than an annual accrual
period as the default accrual period.
These final regulations do not
prescribe a particular day count
convention brokers must use for basis
reporting. Instead, these final
regulations provide that a broker may
use any reasonable day count
convention. The terms of a debt
instrument, however, generally include

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the day count convention that the issuer
will use to compute interest payments.
The Treasury Department and the IRS
expect that a broker generally will
choose to use this day count convention
to determine the accruals of interest and
OID on the debt instrument and the
related basis adjustments, which will
facilitate reconciliation of the accruals
with the amount of cash received by a
broker and distributed to a customer.
These final regulations also do not
prescribe a particular rounding
convention.
Commenters also indicated
disagreement on the effect of puts and
calls on calculations associated with a
debt instrument. One commenter asked
for clarification about whether issuer
choice or holder choice will govern the
treatment of put and call dates and
recommended amortizing all callable
debt instruments to their maturity dates
rather than call dates. Another
commenter requested standardizing the
deemed maturity date and limiting the
application of the put/call rules to cases
in which the broker has actual
knowledge of payment terms that could
result in a different maturity date if the
put/call rules are applied.
These final regulations continue the
approach taken in the proposed
regulations. The basis reporting rules
are not intended to, and do not, change
the substantive rules applicable to debt
instruments. Thus, when assessing the
effect of an embedded put or call option
on a debt instrument, a broker must
apply the rules described in § 1.1272–
1(c)(5) or § 1.171–3(c)(4), whichever is
applicable, to determine the correct date
to be used in accrual calculations. The
rules described in § 1.1272–1(c)(5) have
been in effect since 1994 and the rules
described in § 1.171–3(c)(4) have been
in effect since 1997. Both rules provide
a clear and workable framework for
determining the effect, if any, of an
embedded put or call option on a debt
instrument.
One commenter requested that, to the
extent brokers are not required to report
using a single set of assumptions and
computation conventions, explicit
language should be added to the
regulations covering transfer statements
to require transfer of all information
needed for a receiving broker to
compute adjustments in a manner
consistent with the transferor broker,
including payment terms and
assumptions used by the transferor
broker, as well as any taxpayer elections
that were supported by the transferor
broker. These final regulations adopt
this comment by expanding the
information that must be included in a
transfer statement for a debt instrument.

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3. Other Issues
One commenter stated that there
could be problems tracking the
adjustments for discount and premium
if different measurement periods are
used (for example, a daily period versus
a period ending on payment dates),
especially for a customer that has
purchased debt from the same issue at
a discount and at a premium. The
commenter indicated that tracking OID,
market discount, bond premium, and/or
acquisition premium adjustments for
multiple lots of a single issue will be
complex.
One commenter, noting that reporting
to the IRS and taxpayers is only
required once a year, asked whether a
duty exists to compute the debt
instrument accruals and display them
more frequently than once each year,
such as for each accrual or payment
period. Another commenter indicated
that to facilitate the preparation of
transfer statements at any time during a
year, it may be necessary to compute all
debt instrument accruals each day.
These final regulations generally
continue the approach taken in the
proposed regulations regarding
computations that affect the basis of a
debt instrument. In particular, these
final regulations do not require a broker
to compute debt instrument accruals
more than once per year unless a
transfer takes place during a tax year, in
which case the transferring broker must
provide a transfer statement to the
receiving broker. If a broker’s systems
generate more frequent computations to
support transfer statements, the broker
is permitted to compute the accruals
more than once per tax year.
The proposed regulations require
accrued market discount to be reported
upon the sale of a debt instrument. One
commenter asked whether accrued
market discount should be reported at
the time of a call or at maturity. The
commenter also noted that two rules in
the proposed regulations relating to
market discount may have required the
filing of a Form 1099–INT and a Form
1099–B to report accrued market
discount. The commenter recommended
that accrued market discount be
reported only on a Form 1099–B,
‘‘Proceeds from Broker and Barter
Exchange Transactions,’’ and associated
with a specific sale.
For purposes of section 6045,
§ 1.6045–1(a)(9) defines a sale to include
any disposition of a debt instrument,
which includes a retirement of a debt
instrument at or prior to its stated
maturity. These final regulations do not
change this definition of a sale with
respect to a debt instrument; however,

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these final regulations clarify that a sale
for purposes of section 6045 includes a
partial principal payment. Moreover,
under these final regulations, in the case
of a sale, accrued market discount will
be reported only on the Form 1099–B,
which would associate the accrued
market discount with a specific sale of
a single security. In connection with
this comment, these final regulations
amend the rule in § 1.6045–1(d)(3) for
reporting accrued stated interest on a
Form 1099–INT when a debt instrument
is sold between interest payment dates
to make it clear that the rule does not
apply to accrued market discount.
A number of comments were received
that address narrower issues. One
commenter requested guidance about
how to determine and translate interest
income or expense (including OID) on
certain non-functional currency debt.
Rules regarding the determination and
translation of interest income and
expense on certain debt instruments
denominated in a non-functional
currency are explicitly addressed in the
regulations under section 988. See, for
example, § 1.988–2(b).
During the preparation of these final
regulations, the Treasury Department
and the IRS reviewed the existing
reporting requirements for short-term
debt instruments. Based on this review,
these final regulations exempt from
gross proceeds reporting all short-term
debt instruments. This exemption is
consistent with the existing exemption
from reporting for certain short-term
debt instruments in § 1.6045–
1(c)(3)(vii)(C), and the provisions in
these final regulations that exempt
short-term debt instruments from basis
reporting. Moreover, almost all income
related to short-term debt instruments is
captured through the income reporting
rules under section 6049 and any capital
gain or loss related to a short-term debt
instrument is expected to be very small.
C. Comments on Option Transactions
1. Scope of Option Reporting
In general, under the proposed
regulations, basis and gross proceeds
reporting applied to the following
options granted or acquired on or after
January 1, 2013: an option on one or
more specified securities, including an
option on an index substantially all the
components of which are specified
securities; an option on financial
attributes of specified securities, such as
interest rates or dividend yields; and a
warrant or a stock right on a specified
security. The scope provisions in these
final regulations are generally the same
as the scope provisions in the proposed
regulations, except that these final

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regulations explicitly exclude a
compensatory option. As announced in
Notice 2012–34, these final regulations
generally apply to an option granted or
acquired on or after January 1, 2014.
One commenter asked for clarification
of the concept of ‘‘financial attributes’’
in the scope provision. After reviewing
the proposed language, the Treasury
Department and the IRS believe that the
list of items provided in § 1.6045–
1(m)(2)(i)(B) provides adequate detail to
describe the concept.
Commenters also requested that the
regulations not apply to options that are
subject to section 1256. As explained
immediately below, this comment was
not adopted in these final regulations.

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2. Option Transactions Subject to
Section 1256
Numerous comments were received
related to nonequity options that are
covered by section 1256(b)(1)(C)
(‘‘section 1256 options’’), which
includes a listed option on a stock index
that is not a narrow-based security
index. Several commenters noted that
the substantive rules that apply to
section 1256 options are different from
the rules that apply to non-section 1256
options and asked for different reporting
treatment for the two types of options.
Some commenters requested an
exemption from reporting for all section
1256 options. The commenters
suggested that if a blanket exemption
from reporting is not provided, the IRS
should consider extending the reporting
rules for regulated futures contracts
described in § 1.6045–1(c)(5) to section
1256 options. One commenter noted
that although the current rules only
require reporting for regulated futures
contracts on Form 1099–B, some brokers
may already be reporting section 1256
options in a similar manner.
The Treasury Department and the IRS
agree that there should be different
reporting rules for section 1256 options
and non-section 1256 options. In
general, an option is subject to reporting
under section 6045 only if the option
references one or more specified
securities. For a nonequity option
described in section 1256(b)(1)(C) on
one or more specified securities, a
broker will apply the reporting rules
that apply to a regulated futures
contract, which are described in
§ 1.6045–1(c)(5). For an option on one or
more specified securities that is not
described in section 1256(b)(1)(C), a
broker will report gross proceeds and
basis in accordance with the rules in
these final regulations for a non-section
1256 option, which are described later
in this preamble.

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a. Scope Issues Related to Section 1256
Options
A number of comments focused on
potential difficulties in distinguishing
between an option on a broad-based
index, which would be covered by
section 1256, and an option on a
narrow-based index, which would be
treated in the same manner as an option
on a single equity. Commenters
requested guidance about how to
determine whether an index is broadbased or narrow-based, and some
commenters requested that the IRS
annually publish a list of what
constitutes a section 1256 option.
Alternatively, the commenters requested
complete exclusion of all stock index
options. These final regulations do not
provide substantive rules on index
options. Rather, to determine whether
an index substantially all the
components of which are specified
securities is a broad-based index under
section 1256(g)(6)(B), a broker must look
to rules established by the Securities
Exchange Commission and the
Commodities Futures Trading
Commission that determine which
regulator has jurisdiction over an option
on the index. An option on a broadbased index is a nonequity option
described in section 1256(b)(1)(C).
Several commenters requested broker
penalty relief for good faith
determinations of section 1256 status for
index options. The Treasury Department
and the IRS appreciate the difficulty in
making determinations of section 1256
status. Therefore, these final regulations
grant relief under sections 6721 and
6722 if a broker determines in good faith
that an index is, or is not, a narrowbased index described in section
1256(g)(6) and reports in a manner
consistent with that determination.
One commenter asked for an
exemption from basis reporting for
options on foreign currency and
suggested that foreign currency be
treated as a commodity. Because
commodities and foreign currency are
not specified securities, basis reporting
by a broker for an option on foreign
currency or an option on a commodity
is not currently required under section
6045. Accordingly, no change is made
in these final regulations in response to
this comment.
b. Other Issues Related to Section 1256
Options
A number of commenters asserted
that neither the wash sale rules under
section 1091 nor the short sale rules
described in section 1233 should apply
to a section 1256 option. One
commenter asked for clarification about

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how holding period adjustments due to
application of the wash sale provisions
should be applied to section 1256
options. These comments have not been
adopted because the changes requested
are substantive in nature and outside
the scope of the reporting rules.
3. Non-Section 1256 Options
Comments were also received on the
rules in the proposed regulations
relating to non-section 1256 options.
Several commenters asserted that there
are administrative issues involved in
reporting over-the-counter (OTC)
options and asked that OTC options be
exempted from reporting. One
commenter suggested that if exemptions
were not granted, the IRS should create
a ‘‘best efforts’’ safe harbor for OTC
options. The Treasury Department and
the IRS believe that it is reasonable to
expect a broker to know the information
required to report on an OTC option
when it is entered into or when it is
transferred into a customer’s account.
Moreover, the regulations under section
6045A require the transferor of an OTC
option to provide detailed information
to a receiving broker sufficient to
describe the option. This could include
data about the underlying asset, contract
size, non-standardized strike price, and
expiration date. These final regulations
therefore apply to any OTC option on a
specified security.
For a cash settled non-section 1256
option, the proposed regulations
required a broker to adjust gross
proceeds related to an option
transaction by increasing gross proceeds
by the amount of any payments received
for issuing the option and decreasing
gross proceeds by the amount of any
payments made on the option. A
number of commenters requested that,
instead of decreasing gross proceeds by
amounts paid out, brokers be permitted
to report gross amounts paid and
received with respect to the option.
Under this approach, the gross proceeds
box on Form 1099–B would include all
payments received, and the basis box on
Form 1099–B would reflect any
payments made. These commenters
noted that some broker systems already
deal with equity options this way. This
suggestion has not been adopted
because it is not consistent with the
overall concept of gross proceeds and
basis reporting, which applies to all
covered securities. The rules in these
final regulations for a cash settled
option are based upon the basic idea
that costs related to the acquisition of a
position affect basis, while the costs
related to the sale or closeout of a
position affect gross proceeds. This is
consistent with the changes to the

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definition of gross proceeds in the
proposed regulations.
Under these final regulations,
expenses related to the sale of an asset
must be deducted from gross proceeds
and may not be added to basis. For a
purchased option, the basis in the
option will include the premium paid as
well as any commissions, fees, or other
transaction costs related to the
purchase. Gross proceeds on the cash
settlement of the purchased option
should be adjusted to account for any
commissions, fees, or other transaction
costs related to the cash settlement. In
the case of a written option, a broker
must determine the amount of
reportable proceeds by subtracting from
the amount of the premium received for
writing the option any settlement
payments, commissions, or other costs
related to the close out or cash
settlement. At the suggestion of several
commenters, a clarification has been
added that the basis under this scenario
should be reported as $0.
One commenter requested that for
cash-settled options, acquisition costs
be treated as adjustments to gross
proceeds and that no adjustments be
made to basis for acquisition costs. This
comment has not been adopted because
it is contrary to the requirements of
§ 1.263(a)-4(c), which require that
acquisition costs be treated as part of
basis.
One commenter requested that if
multiple option contracts are bundled
into a single investment vehicle and the
components cannot be separately
exercised, the investment will be treated
as a single instrument with a single
basis. These final regulations do not
adopt this comment because the basis of
each financial instrument is required to
be accounted for separately.
Another commenter asked that the
regulations explicitly address whether a
broker must take into account the
straddle rules under section 1092,
including the qualified covered call
rules in section 1092(c)(4). Consistent
with the approach taken for broker basis
reporting for stock, these final
regulations explicitly provide that a
broker will not take section 1092 into
consideration when determining basis
of an option that is a covered security.
Several comments were received
asking for guidance in determining
which options would be considered
substantially identical for the purpose of
applying the wash sale rules under
section 1091. The 2010 final regulations
only require a broker to apply the wash
sale rules when the transaction involves
covered securities with the same CUSIP
number, and these final regulations do
not change this rule.

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4. Stock Acquired Through the Exercise
of a Compensatory Option

5. Backup Withholding for Option
Transactions

The proposed regulations provided
that a broker was permitted, but not
required, to increase a customer’s initial
basis in stock for income recognized
upon the exercise of a compensatory
option or the vesting or exercise of other
equity-based compensation
arrangement. The preamble to the
proposed regulations also stated that the
IRS might add a field to Form 1099–B
to indicate when stock was acquired via
the exercise of a compensatory option.
In response, commenters asked that
there be no change to the Form 1099–
B to reflect compensation status or,
alternatively, that using the indicator be
permitted, but not required. These
commenters indicated that
compensation information is not
accessible to most brokers, and
extensive reprogramming for both the
underlying database and the reporting
process would be required. The
commenters also expressed concerns
that, in many situations, a broker would
have to accept customer-provided
information in order to track the
compensation-related status.
After consideration of the comments,
the Treasury Department and the IRS
agree a compensation-related field
should not be added to the Form 1099–
B. The lack of a mechanism to
communicate whether the basis of stock
has been adjusted for the exercise of a
compensatory option coupled with a
system involving discretionary broker
adjustments for compensatory options
would, however, be unworkable.
Therefore, these final regulations
provide that brokers are not permitted to
adjust basis to account for the exercise
of a compensatory option that is granted
or acquired on or after January 1, 2014.
This approach will eliminate confusion
and uncertainty for an employee who
has exercised a compensatory option.
Under the permissive adjustment rule in
the proposed regulations, without an
indicator on Form 1099–B, an employee
would not necessarily know whether
the basis of the stock acquired through
the exercise of a compensatory option
had been adjusted by a broker to
account for any income recognized by
the employee due to the option exercise.
By prohibiting adjustment by a broker,
an employee will know that the basis
number reported by the broker only
reflects the strike price paid for the
stock and that a basis adjustment may
be necessary to reflect the full amount
paid by the employee.

One commenter asked for guidance on
how to implement backup withholding
for option transactions. In particular, the
commenter asked for clarification about
whether a rule similar to
§ 31.3406(b)(3)–2(b)(4) applies,
permitting a broker to withhold at either
the time of sale or upon a closing
transaction or lapse. The commenter
also asked how to apply backup
withholding to several situations
involving physically settled options or
when the taxpayer transfers an option or
ends up closing out an option
transaction at a loss. This comment is
not adopted because backup
withholding rules are outside the scope
of these final regulations.

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6. Stock Rights and Warrants Under
Sections 305 and 307
Several commenters requested that
stock rights and warrants be excluded
from basis reporting. Several other
commenters addressed issues under
sections 305 and 307. One commenter
pointed out some administrative
problems with the taxpayer election to
allocate basis under section 307,
including the fact that the election to
allocate basis can be made after a
broker’s Form 1099–B reporting window
closes. This commenter recommended
requiring basis adjustments to reflect the
issuance of stock rights or warrants only
when section 307 requires allocation of
basis because the value of the stock right
or warrant represents 15% or more of
the fair market value of the old stock.
Another commenter noted that
distributions of stock rights or warrants
representing 15% or more of the value
of the old stock are uncommon and
recommended that brokers should not
make an adjustment for the effects of
section 307.
One commenter requested a
clarification of the rules for a stock right
or warrant that terminates other than by
exercise or actual sale, so that a closing
transaction that results in $0 proceeds is
not a sale subject to reporting on a Form
1099–B. The commenter was concerned
that in many cases a broker would have
to report a lapse of a stock right or
warrant by reporting $0 as proceeds on
the Form 1099–B, even in situations
where there is no basis to report.
After consideration of the comments,
these final regulations provide that a
broker is permitted, but not required, to
apply the rules of sections 305 and 307
when reporting the basis of a stock right
or warrant or any stock related to a stock
right or warrant. This rule will permit
the industry to deploy its resources

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most efficiently. A broker who already
supports adjustments under sections
305 and 307 will not need to reprogram
its systems, while a broker who does not
currently support the adjustments can
decide to do so later, or not at all. Note
that, under these final regulations, a
stock right or a warrant purchased from
the original recipient is treated as an
option.

TKELLEY on DSK3SPTVN1PROD with RULES

D. Other Financial Instruments Subject
to Reporting
One commenter asked for an explicit
exemption from reporting for single
stock futures that fall under section
1234B or for guidance on how to apply
section 1234B. This request was not
adopted; instead, these final regulations
add section 1234B contracts to the
definitions of specified security and
covered security. The Treasury
Department and the IRS believe that
there is no reason to exclude single
stock futures on a specified security
from information reporting when
information reporting is generally
required on stock, options on stock, and
regulated futures contracts.
E. Transfer Reporting Under Section
6045A
Numerous comments were received
related to transfer reporting for debt
instruments, as required by section
6045A. Many comments focused on the
information that was to be included on
the transfer statement. Some
commenters argued for the transfer of
original purchase information related to
debt instruments because some brokers
will recompute OID, market discount,
bond premium, and acquisition
premium through the transfer date and
will use the recomputed numbers,
instead of the numbers provided by the
prior broker, to populate their data
systems. Other commenters argued that
only adjusted basis needs to be
transferred to provide for subsequent
accrual computations; these
commenters point out that some
adjustments, such as wash sale loss
deferrals and holding period
adjustments, will be reported accurately
if adjusted basis is reported on a transfer
statement, but may not be reflected if
basis is recomputed based on original
purchase information. Further, to the
extent that a transferor broker might
have used a computational method that
is different from the method used by the
receiving broker, as long as each broker
is internally consistent in reporting
income and adjusting basis, permitting
the receiving broker to start from
adjusted basis will help ensure that
there is no duplication or omission of
income and adjustments. Another

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commenter argued that the market
discount, acquisition premium, and
bond premium amounts should be
implicit in the combination of adjusted
issue price and adjusted cost basis, and
transfer of the details is not needed. One
commenter suggested treating each
transfer as though it were a new
purchase. This would entail comparing
the reported adjusted basis to the
adjusted issue price, determining new
amounts of bond premium, market
discount, or acquisition premium, and
then basing all further accruals on these
numbers.
After consideration of the comments,
the Treasury Department and the IRS
believe that brokers and customers are
better served when all relevant
information is provided when a security
is transferred. These final regulations
therefore generally require the
information specified in the proposed
regulations, and have expanded the list
of information that must be provided to
support the new requirement that a
broker support customer debt
instrument elections. It is not
anticipated that a particular receiving
broker will necessarily use all of the
information received. For example, if a
receiving broker’s systems are set up to
recompute debt instrument accruals
from the issue date, that broker may not
find the data for adjusted issue price as
of the transfer date to be useful.
Several commenters also expressed
concerns about transferring data
purchased from third-party vendors.
One commenter suggested that
communicating the CUSIP identifier for
a debt instrument might be sufficient to
enable a receiving broker to retrieve
information that applies to all debt
instruments in a particular issue, such
that some of the data described in the
proposed regulations might not be
necessary. Another commenter argued
that data specific to a customer, such as
initial purchase price and date, and the
CUSIP should provide a receiving
broker with all information needed to
properly compute debt instrument
accruals.
These final regulations, like the
proposed regulations, require that a
transferor broker provide all information
necessary to allow a receiving broker to
comply with its information reporting
obligations. Consistent with the
comments, if providing a CUSIP number
or similar security identifier is adequate
to enable the receiving broker to obtain
some of the required information, a
transferring broker is permitted to
supply the CUSIP number or security
identifier as a substitute for that
information. For example, data that
applies to all debt instruments in an

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23123

issue, such as issuer name, issue date,
coupon rate, coupon payment dates, or
issue price, might be data that could be
derived from a CUSIP or other security
identifier. However, under these final
regulations, like the proposed
regulations, a receiving broker may
request to receive the information
specified in the regulations from the
transferor broker. Further, data specific
to a customer, such as price paid by the
customer, the acquisition date, or yield,
must be transmitted separately as these
data will be different for each customer
and cannot be derived from the CUSIP
number.
A few commenters focused
specifically on the list of debt
instrument-specific data that was
included in proposed § 1.6045A–1(b)(3).
One commenter asked if the amount of
acquisition premium already amortized
should be added to the list, pointing out
that accrued market discount and
amortized bond premium are already
reportable. One commenter asked that
the date through which the transferor
broker made adjustments be added to
the list. These final regulations adopt
these comments and add these data to
the list of transfer statement items.
One commenter asked whether, when
complying with the transfer statement
rules under section 6045A for a section
1256 option, a broker may report the
adjusted basis instead of the original
basis for a position that has been
marked to market. Section 1.6045A–
1(b)(1)(vii) of the 2010 final regulations
requires a broker to report the adjusted
basis of a specified security. Therefore,
no change is needed to address this
comment.
One commenter asked for penalty
relief for transfer reporting analogous to
the relief that was provided for transfer
reporting for stock in Notice 2010–67,
2010–43 I.R.B. 529. Under Notice 2010–
67, although broker reporting for basis
began for some stock acquired on or
after January 1, 2011, transferring
brokers were given penalty relief if they
did not provide transfer statements for
transfers occurring during 2011, and
receiving brokers were instructed to
treat a transfer during 2011 for which no
transfer statement was received as the
transfer of a noncovered security.
Instead of penalty relief, the Treasury
Department and the IRS believe that it
is appropriate to provide additional
time for brokers to phase in transfer
reporting for transfers of debt
instruments, options, and securities
futures contracts, and the final
regulations provide that transfer
reporting for debt instruments, options,
and securities futures contracts will be

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applicable no earlier than January 1,
2015.
F. Issuer Reporting Under Section 6045B
A number of comments were received
concerning returns relating to issuer
actions affecting the basis of securities
under section 6045B. Several
commenters asked whether certain
types of events would be reportable
under section 6045B, including the
issuance of a debt instrument, a
reissuance of a debt instrument, and a
reorganization in bankruptcy where new
debt instruments are issued for old debt
instruments. Section 6045B only applies
to an issuer action that affects basis. The
issuance of a debt instrument generally
is not an issuer action affecting the basis
of a debt instrument. Accordingly, in
many cases, the issuance of a debt
instrument is not subject to section
6045B. The legislative history, however,
indicates that reorganizations, such as
mergers and acquisitions, are among the
organizational actions that can trigger
reporting under section 6045B. Thus, for
example, the issuance of a debt
instrument in a recapitalization,
including a recapitalization resulting
from a significant modification or a
bankruptcy reorganization, can be an
issuer action affecting the basis of a debt
instrument for purposes of section
6045B.
One commenter pointed out that a
REMIC regular interest is excluded from
being a covered security, but is not
excluded from being a specified
security. With respect to reporting
under section 6045B, the commenter
requested that if a specified security is
not subject to basis reporting, issuer
reporting under section 6045B should
not be required. These final regulations
clarify that a REMIC regular interest is
not a specified security and, therefore,
is not subject to reporting under section
6045B.
Section 1.6045B–1(a)(3) of the 2010
final regulations provides that an issuer
may meet its reporting obligation under
section 6045B by posting a copy of Form
8937 to its public Web site. One
commenter renewed a request that the
IRS permit an issuer to provide the
information required by section 6045B
on a Web site without posting a copy of
Form 8937. The regulations do not
adopt this suggestion because posting a
copy of Form 8937 ensures consistent
presentation of the reported
information. Another commenter noted
that posting a copy of Form 8937 could
facilitate identity theft because the
written signature of the certifying
company official would be widely
available. These final regulations allow
an issuer to publicly post a Form 8937

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with an electronic signature as an
alternative to a written signature.
One commenter requested that a
clearing organization involved in
clearing exchange-traded options be
treated as an issuer rather than a writer
for purposes of section 6045B. Other
commenters suggested language to
clarify the identification of the party
responsible for reporting in the case of
an OTC option. In response to the
commenters, these final regulations
specify that a clearing organization that
is the counterparty to an exchangetraded option is the issuer of the option
for purposes of section 6045B, and the
writer of an OTC option is the issuer for
purposes of section 6045B.
One commenter pointed out that
currently there is no safe harbor for
modifications to non-debt instruments,
so any modification of an option
technically might result in a taxable
event. The commenter recommended
providing an assumption for brokers
that changes to option terms do not
result in a taxable event if section 1001
does not apply. This request is outside
the scope of the current project and so
no changes were made to these final
regulations in response to this comment.
It should be noted, however, that under
these final regulations, an option issuer
only needs to comply with § 1.6045B–1
if the change in the underlying asset
results in a different number of option
contracts. If the terms of the option are
changed to reflect a corporate event, but
the number of option contracts does not
change, a section 6045B event has not
occurred.
G. Foreign Intermediaries
One commenter requested that foreign
entities that are not U.S. payors and are
either qualified intermediaries or
participating foreign financial
institutions be excluded from basis
reporting requirements. The Treasury
Department and the IRS intend to issue
future guidance coordinating the
reporting requirements applicable to
qualified intermediaries and
participating foreign financial
institutions under chapter 61 (including
section 6045) with the applicable
chapter 4 reporting requirements.
H. Temporary Regulations Related to
Reporting of Bond Premium and
Acquisition Premium
As noted earlier in this preamble, a
number of commenters requested that
the rules for reporting interest income
associated with a debt instrument
acquired at a premium be conformed to
the rules regarding basis reporting for
these same debt instruments. Under the
current information reporting rules

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under section 6049, interest income is
reported without adjustment for bond
premium or acquisition premium.
Under section 171(e) (which was
added to the Code in 1988) and § 1.171–
1 (which was amended in 1997 to reflect
the addition of section 171(e)),
amortized bond premium offsets stated
interest payments. As a result, only the
portion of a stated interest payment that
is not offset by the amortized premium
is treated as interest for federal income
tax purposes. Under section 6049(a), the
Secretary can prescribe regulations to
implement the reporting of interest
payments, which includes the
determination of the amount of a
payment that is reportable interest.
Similarly, notwithstanding section
6049(d)(6)(A)(i), under section 6049(a),
the Secretary can prescribe regulations
to implement the reporting of OID,
which includes the determination of the
amount reportable as OID (interest).
The Treasury Department and the IRS
believe that the income reporting and
basis reporting rules should be
consistent. Therefore, to improve
consistency between income reporting
and basis reporting and to provide
immediate guidance to brokers and
investors, this document adds
temporary regulations under section
6049 to require broker reporting of
interest (OID) income to reflect amounts
of amortized bond premium or
acquisition premium for a covered debt
instrument.
Under the temporary regulations, for
purposes of section 6049, a broker will
assume that a customer has elected to
amortize bond premium unless the
broker has been notified that the
customer has not made the election. It
should be noted that this change applies
only to the information reported by the
broker to its customer. Thus, a customer
that does not prefer to make the section
171 election can report interest on the
customer’s income tax return
unadjusted for bond premium because
the information reporting rules do not
change the substantive rules affecting
bond premium (or any of the other rules
pertaining to OID, market discount, or
acquisition premium). Moreover, a
customer can notify a broker that the
customer has not made or has revoked
a section 171 election, and the broker is
required to reflect this fact on the Form
1099–INT and the Form 1099–B. If a
broker is required to report amounts
reflecting amortization of bond
premium, the temporary regulations
allow a broker to report either a gross
amount for both stated interest and
amortized bond premium or a net
amount of stated interest that reflects
the offset of the stated interest payment

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by the amount of amortized bond
premium allocable to the payment.
In addition, under the temporary
regulations, for purposes of section
6049, a broker must report OID adjusted
for acquisition premium in accordance
with § 1.1272–2 by assuming that a
customer has not elected to amortize
acquisition premium based on a
constant yield. However, if the broker
has been notified that the customer has
made an election to amortize acquisition
premium based on a constant yield, the
broker is required to reflect this fact on
the Form 1099–OID and the Form 1099–
B. The temporary regulations allow a
broker to report either a gross amount
for both OID and acquisition premium,
or a net amount of OID that reflects the
offset of the OID by the amount of
amortized acquisition premium
allocable to the OID.
I. Form 8281
Under § 1.1275–3(c) of the current
final regulations, an issuer of a publicly
offered debt instrument issued with OID
must file a Form 8281, ‘‘Information
Return for Publicly Offered Original
Issue Discount Instruments,’’ within 30
days after the issue date of the debt
instrument. The information from Form
8281 is used to develop the tables of
OID information that are part of
Publication 1212, ‘‘Guide to Original
Issue Discount (OID) Instruments.’’ To
be publicly offered, a debt instrument
generally must be registered with the
Securities and Exchange Commission as
of the instrument’s issue date. In many
instances, a debt instrument issued in a
private placement is registered with the
Securities and Exchange Commission
after the issue date. As a result, a Form
8281 is not required to be filed with the
IRS and, therefore, the OID information
generally does not appear in the
Publication 1212 tables. A number of
commenters on the proposed
regulations asked that OID information
on more debt instruments be provided
in the tables to Publication 1212. In
response to these comments, the
regulations under § 1.1275–3(c) are
amended to require the filing of a Form
8281 for a debt instrument that is part
of an issue the offering of which is
registered with the Securities and
Exchange Commission after the issue
date of the debt instrument. The Form
8281 is required to be filed within 30
days of the date the offering is registered
with the Securities and Exchange
Commission.
J. Consideration of Administrative
Burdens Related to Basis Reporting
A number of commenters indicated
that compliance with basis reporting

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requirements and the use of basis and
other information reported by brokers
will require considerable resources and
effort on the part of return preparers and
information recipients. The Treasury
Department and the IRS are continuing
to review all aspects of the information
reporting process and are exploring
ways to reduce the compliance burden
for both brokers and for information
recipients.
Effective/Applicability Dates
These regulations are effective 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) apply to certain debt
instruments acquired on or after January
1, 2014. See § 1.6045–1(n)(2). In general,
for all other debt instruments, the
regulations apply to debt instruments
acquired on or after January 1, 2016. See
§ 1.6045–1(n)(3). The regulations
regarding reporting of gross proceeds,
basis, and whether gain or loss on a sale
is long-term or short-term under section
6045(h) apply to options granted or
acquired on or after January 1, 2014.
The regulations regarding reporting of
basis and whether any gain or loss on
a sale is long-term or short-term apply
to securities futures contracts entered
into on or after January 1, 2014. In
general, the regulations regarding
transfer reporting for certain debt
instruments, options, and securities
futures contracts apply to transfers
occurring on or after January 1, 2015.
The regulations regarding transfer
reporting for more complex debt
instruments apply to transfers occurring
on or after January 1, 2017. See
§ 1.6045A–1(d). The regulations
regarding reporting for issuer actions
that affect the basis of certain debt
instruments, options, and securities
futures contracts apply to issuer actions
occurring on or after January 1, 2014.
The regulations regarding reporting for
issuer actions that affect the basis of
more complex debt instruments apply to
issuer actions occurring on or after
January 1, 2016. See § 1.6045B–1(j). The
final regulations regarding the filing of
Form 8281 apply to a debt instrument
that is part of an issue the offering of
which is registered with the Securities
and Exchange Commission on or after
January 1, 2014. The temporary
regulations under section 6049 relating
to the reporting of premium apply to
covered securities acquired on or after
January 1, 2014.

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Special Analyses
It has been determined that this
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 these
regulations, and because the temporary
regulations do not impose a collection
of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply to the
temporary regulations.
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby
certified that the final regulations in this
document will not have a significant
economic impact on a substantial
number of small entities. Any effect on
small entities by the rules in the final
regulations flows directly from section
403 of the Act.
Section 403(a) of the Act modifies
section 6045 to require that, when
reporting the sale of a covered security,
brokers report the adjusted basis of the
security and whether any gain or loss
with respect to the security is long-term
or short-term. 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 final regulations
generally limit reporting to information
required under the Act.
Section 403(a) of the Act requires a
broker to report the adjusted basis of a
debt instrument that is a covered
security. The holder of a debt
instrument is permitted to make a
number of elections that affect how
basis is computed. To minimize the
need for reconciliation between
information reported by a broker to both
a customer and the IRS and the amounts
reported on the customer’s tax return,
the final regulations require a broker to
take into account certain specified
elections in reporting information to the
customer. Therefore, under the final
regulations, a customer must provide
certain information concerning an
election to the broker in a written
notification, which includes a writing in
electronic format. It is anticipated that
this collection of information will not
fall on a substantial number of small
entities. Further, the final regulations
generally implement the statutory
requirements for reporting adjusted

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basis. Moreover, any economic impact is
expected to be minimal because it
should take a customer no more than
seven minutes to satisfy the
information-sharing requirement in
these final regulations.
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 modifications to § 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 final regulations do
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
offered. The modifications to § 1.6045B–
1 limit reporting to the additional
information for debt instruments and
options necessary to meet the Act’s
requirements. Additionally, the final
regulations, as modified, retain 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 final
regulations therefore do not add to the
statutory impact on small entities but
instead eases this impact to the extent
the statute permits.
Therefore, because the final
regulations in this document will not
have a significant economic impact on
a substantial number of small entities, a
regulatory flexibility analysis is not
required.
Pursuant to section 7805(f) of the
Code, the proposed regulations
preceding the final regulations in this
document were submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on their impact on small business, and
no comments were received. In
addition, the proposed regulations
accompanying the section 6049
temporary regulations in this document
have been submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on their impact on small business.

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Drafting Information
The principal author of these
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
26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping
requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read in part as
follows:

■

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

Section 1.6049–9T also issued under
26 U.S.C. 6049(a). * * *
■ Par. 2. Section 1.1271–0(b) is
amended by adding an entry for
§ 1.1275–3(c)(4) to read as follows:
§ 1.1271–0 Original issue discount;
effective date; table of contents.

*

*
*
(b) * * *
*
*
*

*

*

*

*

§ 1.1275–3 OID information reporting
requirements.

*

*
*
*
*
(c) * * *
(4) Subsequent registration.
*
*
*
*
*
■ Par. 3. Section 1.1275–3 is amended
by adding paragraph (c)(4) to read as
follows:
§ 1.1275–3 OID information reporting
requirements.

*

*
*
*
*
(c) * * *
(4) Subsequent registration. Except as
provided in paragraph (c)(3) or (d) of
this section, the information reporting
requirements of paragraph (c)(1) of this
section apply to any debt instrument
that has original issue discount if the
instrument is part of an issue the
offering of which is registered with the
Securities and Exchange Commission
(SEC) after the issue date of the debt
instrument. For example, this paragraph
(c)(4) applies to a newly issued debt
instrument (B bond) exchanged for an

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otherwise identical non-SEC-registered
debt instrument (A bond) if the B bond
is part of an issue the offering of which
is registered with the SEC and the B
bond has an issue date that is the same
as the issue date of the A bond for
federal tax purposes because the
exchange is not a realization event
under § 1.1001–3. If a debt instrument is
subject to this paragraph (c)(4), the
prescribed form (Form 8281 or any
successor) must be filed with the
Internal Revenue Service within 30 days
after the date the offering is registered
with the SEC. This paragraph (c)(4)
applies to a debt instrument that is part
of an issue the offering of which is
registered with the SEC on or after
January 1, 2014.
*
*
*
*
*
■ Par. 4. Section 1.6045–1 is amended
by:
■ 1. Revising paragraphs (a)(3)(v) and
(a)(3)(vi) and adding paragraphs
(a)(3)(vii) and (a)(3)(viii).
■ 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)(G)
and adding new paragraphs (a)(15)(i)(C)
through (a)(15)(i)(F).
■ 5. Adding a new sentence at the end
of paragraph (a)(15)(ii).
■ 6. Adding new paragraphs (a)(17) and
(a)(18).
■ 7. Adding two new sentences at the
end of paragraph (c)(3)(vii)(C) and
adding a new sentence at the end of
paragraph (c)(3)(vii)(D).
■ 8. Adding a new sentence at the end
of paragraph (c)(3)(x) and revising the
first two sentences in paragraph
(c)(3)(xi)(C).
■ 9. Adding new paragraph (c)(3)(xiii).
■ 10. Revising the last sentence of
paragraph (c)(4) Example 9 (i).
■ 11. Adding two new sentences at the
end of paragraph (d)(2)(i) and revising
paragraph (d)(2)(ii) and the first
sentence of paragraph (d)(2)(iii).
■ 12. Revising paragraph (d)(3).
■ 13. Removing the first four sentences
of paragraph (d)(5) and adding six
sentences in their place.
■ 14. Revising the second sentence and
adding two new sentences at the end of
paragraph (d)(6)(i).
■ 15. Removing the first three sentences
of paragraph (d)(6)(ii)(A) and adding
five sentences in their place.
■ 16. Revising the heading for paragraph
(d)(6)(ii)(B).
■ 17. Revising the last sentence of
paragraph (d)(6)(iii)(A).
■ 18. Revising paragraph (d)(6)(iv).
■ 19. Revising paragraph (d)(6)(vii)
Example 4.

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20. Revising the second sentence of
paragraph (d)(7)(i).
■ 21. Removing the first sentence of
paragraph (d)(8)(i)(A) and adding a
sentence and a parenthetical phrase in
its place.
■ 22. Adding paragraphs (m) and (n).
The additions and revisions read as
follows:
■

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§ 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) of this
section (but not including executory
contracts that require delivery of such
type of security);
(vii) An option described in paragraph
(m)(2) of this section; or
(viii) A securities futures contract.
*
*
*
*
*
(8) The term closing transaction
means a lapse, expiration, settlement,
abandonment, or other termination of a
position. For purposes of the preceding
sentence, a position includes a right or
an obligation under a forward contract,
a regulated futures contract, a securities
futures contract, or an option.
(9) The term sale means any
disposition of securities, commodities,
options, regulated futures contracts,
securities futures contracts, or forward
contracts, and includes redemptions of
stock, retirements of debt instruments
(including a partial retirement
attributable to a principal payment
received on or after January 1, 2014),
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, a
securities futures contract, or a forward
contract, a sale includes any closing
transaction. When a closing transaction
for a contract described in section
1256(b)(1)(A) involves making or taking
delivery, there are two sales, one
resulting in profit or loss on the
contract, and a separate sale on the
delivery. When a closing transaction for
a contract described in section 988(c)(5)
involves making delivery, there are two
sales, one resulting in profit or loss on
the contract, and a separate sale on the
delivery. For purposes of the preceding
sentence, a broker may assume that any
customer’s functional currency is the
U.S. dollar. When a closing transaction
in a forward contract involves making or
taking delivery, the broker may treat the

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delivery as 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 purchased call option for physical
delivery (except for a contract described
in section 988(c)(5)). 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 (provided
that, solely for purposes of this
paragraph (a)(14)(i), a security classified
as stock by the issuer is treated as stock,
and 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, other
than 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) or a
short-term obligation described in
section 1272(a)(2)(C);
(iii) Any option described in
paragraph (m)(2) of this section; or
(iv) Any securities futures contract.
(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 § 1.1012–1(e).
*
*
*
*
*
(C) A specified security described in
paragraphs (a)(14)(ii) and (n)(2)(i) of this
section (not including the debt
instruments described in paragraph
(n)(2)(ii) of this section) acquired for
cash in an account on or after January
1, 2014.
(D) A specified security described in
paragraphs (a)(14)(ii) and (n)(3) of this
section acquired for cash in an account
on or after January 1, 2016.
(E) An option described in paragraph
(a)(14)(iii) of this section granted or

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acquired for cash in an account on or
after January 1, 2014.
(F) A securities futures contract
described in paragraph (a)(14)(iv) of this
section entered into in an account on or
after January 1, 2014.
*
*
*
*
*
(ii) * * * Acquiring a security in an
account includes granting an option and
entering into a short sale.
*
*
*
*
*
(17) For purposes of this section, the
terms debt instrument, bond, debt
obligation, and obligation mean a debt
instrument as defined in § 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 § 1.860G–1).
Solely for purposes of this section, a
security classified as debt by the issuer
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.
(18) For purposes of this section, the
term securities futures contract means a
contract described in section 1234B(c)
whose underlying asset is described in
paragraph (a)(14)(i) of this section and
which is entered into on or after January
1, 2014.
*
*
*
*
*
(c) * * *
(3) * * *
(vii) * * *
(C) * * * The preceding sentence
does not apply to a debt instrument
issued on or after January 1, 2014. For
a short-term obligation issued on or after
January 1, 2014, see paragraph
(c)(3)(xiii) of this section.
(D) * * * The preceding sentence
does not apply to a debt instrument
issued on or after January 1, 2014.
*
*
*
*
*
(x) Certain retirements. * * * The
preceding sentence does not apply to a
debt instrument issued on or after
January 1, 2014.
(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 § 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

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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 § 601.601(d)(2) of this
chapter). * * *
*
*
*
*
*
(xiii) Short-term obligations issued on
or after January 1, 2014. No return of
information is required under this
section with respect to a sale (including
a retirement) of a short-term obligation,
as described in section 1272(a)(2)(C),
that is issued on or after January 1,
2014.
(4) * * *
Example 9. (i) * * * N indicates on the
transfer statement that the transferred stock
was borrowed in accordance with § 1.6045A–
1(b)(7).

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*

*
*
*
*
(d) * * *
(2) Transactional reporting—(i)
Required information. * * * In
addition, for a sale of a covered security
on or after January 1, 2014, a broker
must report on Form 1099–B whether
any gain or loss is ordinary. 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
§ 1.1012–1(e)(7)(ii), for a specified
security described in paragraph
(a)(14)(i) of this section sold on or after
January 1, 2011, or for a specified
security described in paragraph
(a)(14)(ii) of this section sold on or after
January 1, 2014, 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 § 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.
(iii) Sales of noncovered securities. A
broker is not required to report adjusted
basis and the character of any gain or

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loss for the sale of a noncovered security
if the return identifies the sale as a sale
of a noncovered security. * * *
*
*
*
*
*
(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 qualified
stated interest as of the sale date that
must be reported by the customer as
interest income under § 1.61–7(d). See
§ 1.1273–1(c) for the definition of
qualified stated interest. 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 qualified 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 (other than a closing
transaction related to an option) that
results in a loss, gross proceeds are the
amount debited from the customer’s
account. For sales before January 1,
2014, 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, 2014, 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, 2014, 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, 2014, or
for the treatment of an option granted or
acquired on or after January 1, 2014, see
paragraph (m) of this section. * * *
(6) Adjusted basis—(i) In general.
* * * A broker is not required to
consider transactions 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 (beginning
with the date that the broker receives a
transferred security) reported on an
issuer statement (as described in

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§ 1.6045B–1) furnished or deemed
furnished to the broker. Except as
otherwise provided in paragraph (n) of
this section, a broker is not required to
consider customer elections. 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,
2014. For rules related to options
granted or acquired on or after January
1, 2014, 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, granted or
acquired before January 1, 2014. A
broker may not increase initial basis for
income recognized upon the exercise of
a compensatory option or the vesting or
exercise of other equity-based
compensation arrangements, granted or
acquired on or after January 1, 2014.
* * *
(B) Basis of transferred securities
* * *
*
*
*
*
*
(iii) Adjustments for wash sales—(A)
In general. * * * The broker must
increase the basis of the purchased
security by the amount of loss
disallowed on the sale transaction.
*
*
*
*
*
(iv) Certain adjustments not taken
into account. A broker is not required to
apply section 1259 (regarding
constructive sales), section 475
(regarding the mark-to-market method of
accounting), section 1296 (regarding the
mark-to-market method of accounting
for marketable stock in a passive foreign
investment company), or section 1092
(regarding straddles) when reporting
adjusted basis.
*
*
*
*
*
(vii) * * *
Example 4. R, an employee of C, a
corporation, participates in C’s stock option
plan. On April 2, 2014, C grants R a
nonstatutory option under the plan to buy
100 shares of stock. The option becomes
substantially vested on April 2, 2015. On
October 2, 2015, R exercises the option and
purchases 100 shares. On December 2, 2015,

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R sells the 100 shares. Under paragraph
(d)(6)(ii)(A) of this section, C is 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 not
permitted to adjust basis for any amount R
must include as wage income with respect to
the October 2, 2015, stock purchase.

(7) Long-term or short-term gain or
loss—(i) In general. * * * 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 (beginning with the date that
the broker receives a transferred
security) reported on an issuer
statement (as described in § 1.6045B–1)
furnished or deemed furnished to the
broker.
*
*
*
*
*
(8) Conversion into United States
dollars of amounts paid or received in
foreign currency—(i) Conversion rules—
(A) When a payment other than a
payment of interest is made in a foreign
currency, a broker must determine the
U.S. dollar amount of the payment by
converting the foreign currency into
U.S. dollars on the date it receives,
credits, or makes the payment, as
applicable, at the spot rate (as defined
in § 1.988–1(d)(1)) or pursuant to a
reasonable spot rate convention. (For
interest payments, see paragraph
(n)(4)(v) of this section concerning a
customer’s spot rate election.) * * *
*
*
*
*
*
(m) Additional rules for option
transactions—(1) In general. This
paragraph (m) provides rules for a
broker to determine and report the
information required under this section
for an option that is a covered security
under paragraph (a)(15)(i)(E) of this
section.
(2) Scope—(i) In general. Paragraph
(m) of this section applies to the
following types of options granted or
acquired on or after January 1, 2014:
(A) An option on one or more
specified securities (which includes an
index substantially all the components
of which are specified securities);
(B) An option on financial attributes
of specified securities, such as interest
rates or dividend yields; or
(C) A warrant or a stock right.
(ii) Delayed effective date for certain
options. Notwithstanding paragraph
(m)(2)(i) of this section, if an option,
stock right, or warrant is issued as part
of an investment unit described in
§ 1.1273–2(h), paragraph (m) of this
section applies to the option, stock
right, or warrant if it is acquired on or
after January 1, 2016.

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(iii) Compensatory option.
Notwithstanding paragraphs (m)(2)(i)
and (m)(2)(ii) of this section, paragraph
(m) of this section does not apply to
compensatory options.
(3) Option subject to section 1256. If
an option described in paragraph (m)(2)
of this section is also described in
section 1256(b), a broker must apply the
rules described in paragraph (c)(5) of
this section by treating the option as if
it were a regulated futures contract and
must report the information required
under paragraph (c)(5) of this section. A
broker is permitted, but not required, to
report the amounts for options and the
amounts for regulated futures contracts
determined under paragraph (c)(5) of
this section as a net amount for each
reportable item.
(4) Option not subject to section 1256.
The following rules apply to an option
that is described in paragraph (m)(2) of
this section but is not also described in
paragraph (m)(3) of this section:
(i) Physical settlement. For purposes
of paragraph (d) of this section, if a
specified security (other than an option)
is acquired or disposed of pursuant to
the exercise of an option, the broker
must adjust the basis of the acquired
asset or the gross proceeds amount as
appropriate to account for any payment
related to the option, including the
premium.
(ii) Cash settlement. For purposes of
paragraph (d) of this section, for an
option that is settled for cash, a broker
must reflect on Form 1099–B all
payments made or received on the
option. For a purchased option, a broker
must report as basis the premium paid
plus any costs (for example,
commissions) related to the acquisition
of the option and must report as
proceeds the gross proceeds from
settlement minus any costs related to
the settlement of the option. For a
written option, a broker must report as
proceeds the premium received
decreased by any amounts paid on the
option and report $0 as the basis of the
option.
(iii) Rules for warrants and stock
rights acquired in a section 305
distribution. For a right (including a
warrant) to acquire stock received in the
same account as the underlying security
in a distribution that is described in
section 305(a), a broker is permitted, but
not required, to apply the rules
described in sections 305 and 307 when
reporting or accounting for the basis of
the option and the underlying equity. If
a stock right or warrant is acquired from
the initial distributee, the buyer or
transferee must treat it as an option
covered by either paragraph (m)(4)(i) or
(m)(4)(ii) of this section.

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23129

(iv) Examples. The following
examples illustrate the rules in this
paragraph (m)(4):
Example 1. (i) On January 15, 2014, C, an
individual who is neither a dealer nor a
trader in securities, writes a 2-year exchangetraded 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, the option produces capital
gain or loss and Company X stock is a capital
asset. On December 16, 2014, C pays $110 to
close out the option.
(ii) D is required to report information
about the closing transaction because the
option is a covered security as described in
paragraph (a)(15)(i)(E) of this section and was
part of a closing transaction described in
paragraph (a)(8) of this section. Under
paragraph (m)(4)(ii) of this section, D must
report as gross proceeds on C’s Form 1099–
B -$10 (the $100 received as option premium
minus the $110 C paid to close out the
option) and report $0 in the basis box on the
Form 1099–B. Under section 1234(b)(1) and
paragraph (d)(2) of this section, D must also
report the loss on the closing transaction as
a short-term capital loss.
Example 2. (i) On January 15, 2014, E, an
individual who is neither a dealer nor a
trader in securities, buys a 2-year exchangetraded option on 100 shares of Company X
through Broker F. E pays a premium of $100
for the option and pays no commission. In
E’s hands, both the option and Company X
stock are capital assets. On December 16,
2014, E receives $110 to close out the option.
(ii) F is required to report information
about the closing transaction because the
option is a covered security as described in
paragraph (a)(15)(i)(E) of this section and was
part of a closing transaction described in
paragraph (a)(8) of this section. Because the
option is on the shares of a single company,
it is an equity option described in section
1256(g)(6) and is not described in section
1256(b)(1)(C). Therefore, the rules of
paragraph (m)(3) of this section do not apply,
and F must report under paragraph (m)(4) of
this section. Under paragraph (m)(4)(ii) of
this section, F must report $110 as gross
proceeds on the Form 1099–B for the gross
proceeds E received and $100 in the basis
box on the Form 1099–B to reflect the $100
option premium paid. Under section
1234(b)(1) and paragraph (d)(2) of this
section, F must also report the gain on the
closing transaction as a short-term capital
gain.

(5) Multiple options documented in a
single contract. If more than one option
described in paragraph (m)(2) 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.
(6) Determination of index status.
Penalties will not be asserted under
sections 6721 and 6722 if a broker in
good faith determines that an index is,
or is not, a narrow-based index
described in section 1256(g)(6) and

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reports in a manner consistent with this
determination.
(n) Reporting for debt instrument
transactions—(1) In general. For
purposes of this section, this paragraph
(n) provides rules for a broker to
determine and report information for a
debt instrument that is a covered
security under paragraph (a)(15)(i)(C) or
(D) of this section. Neither a debt
instrument subject to section 1272(a)(6)
nor a short-term obligation described in
section 1272(a)(2)(C) is subject to this
paragraph (n) because neither is a
specified security under paragraph
(a)(14)(ii) of this section (a requirement
for a debt instrument to be a covered
security).
(2) Debt instruments subject to
January 1, 2014, reporting—(i) In
general. For purposes of paragraph
(a)(15)(i)(C) of this section, except as
provided in paragraph (n)(2)(ii) of this
section, a debt instrument is described
in this paragraph (n)(2)(i) if the debt
instrument is one of the following:
(A) A debt instrument that provides
for a single fixed payment schedule for
which a yield and maturity can be
determined for the instrument under
§ 1.1272–1(b);
(B) A debt instrument that provides
for alternate payment schedules for
which a yield and maturity can be
determined for the instrument under
§ 1.1272–1(c); or
(C) A debt instrument for which the
yield of the debt instrument can be
determined under § 1.1272–1(d).
(ii) Exceptions. A debt instrument is
not described in paragraph (n)(2)(i) of
this section if the debt instrument is one
of the following:
(A) A debt instrument that provides
for more than one rate of stated interest
(including a debt instrument that
provides for stepped interest rates);
(B) A convertible debt instrument
described in § 1.1272–1(e);
(C) A stripped bond or stripped
coupon subject to section 1286;
(D) A debt instrument that requires
payment of either interest or principal
in a currency other than the U.S. dollar;
(E) A debt instrument that, at one or
more times in the future, entitles a
holder to a tax credit;
(F) A debt instrument that provides
for a payment-in-kind (PIK) feature (that
is, under the terms of the debt
instrument, a holder may receive one or
more additional debt instruments of the
issuer);
(G) A debt instrument issued by a
non-U.S. issuer;
(H) A debt instrument for which the
terms of the instrument are not
reasonably available to the broker
within 90 days of the date the debt

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instrument was acquired by the
customer;
(I) A debt instrument that is issued as
part of an investment unit described in
§ 1.1273–2(h); or
(J) A debt instrument evidenced by a
physical certificate unless such
certificate is held (whether directly or
through a nominee, agent, or subsidiary)
by a securities depository or by a
clearing organization described in
§ 1.1471–1(b)(18).
(iii) Remote or incidental. For
purposes of paragraphs (n)(2)(i) and
(n)(2)(ii) of this section, a remote or
incidental contingency (as determined
under § 1.1275–2(h)) is ignored.
(iv) Penalty rate. For purposes of
paragraph (n)(2)(ii)(A) of this section, a
debt instrument does not provide for
more than one rate of stated interest
merely because the instrument provides
for a penalty interest rate or an
adjustment to the stated interest rate in
the event of a default or similar event.
(3) Debt instruments subject to
January 1, 2016, reporting. For purposes
of paragraph (a)(15)(i)(D) of this section,
a debt instrument is described in this
paragraph (n)(3) if it is described in
paragraph (n)(2)(ii) of this section or it
otherwise is not described in paragraph
(n)(2)(i) of this section. For example,
this paragraph (n)(3) applies to variable
rate debt instruments, inflation-indexed
debt instruments, and contingent
payment debt instruments because these
instruments are not described in
paragraph (n)(2)(i) of this section.
(4) Holder elections. For purposes of
this section, a broker is required to take
into account an election described in
this paragraph (n)(4), and the broker
must take the election into account in
accordance with the rules in paragraph
(n)(5) of this section. A broker, however,
may not take into account any other
election.
(i) Election to amortize bond
premium. An election under section 171
and § 1.171–4 to amortize bond
premium on a taxable debt instrument
(this election applies to all taxable debt
instruments held by a taxpayer during
the taxable year the election is effective
and thereafter; this election may be
revoked with the consent of the
Commissioner).
(ii) Election to currently include
accrued market discount. An election
under section 1278(b) to include market
discount in income as it accrues (this
election applies to all debt instruments
acquired by a taxpayer during the
taxable year the election is effective and
thereafter; this election may be revoked
with the consent of the Commissioner).
(iii) Election to accrue market
discount based on a constant yield. An

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election under section 1276(b)(2) to
compute accruals of market discount
using a constant yield method (this
election is generally made on an
instrument-by-instrument basis and
must be made for the earliest taxable
year for which the taxpayer is required
to determine accrued market discount
on the debt instrument; this election
may not be revoked).
(iv) Election to treat all interest as
OID. An election under § 1.1272–3 to
treat all interest on a taxable debt
instrument (adjusted for any acquisition
premium or premium) as original issue
discount (this election is generally made
on an instrument-by-instrument basis
and must be made for the taxable year
the debt instrument is acquired by the
taxpayer; this election may be revoked
with the consent of the Commissioner).
(v) Election to translate interest
income and expense at the spot rate. An
election under § 1.988–2(b)(2)(iii)(B) to
translate interest income and expense at
the spot rate on the last day of the
interest accrual period or, in the case of
a partial accrual period, the last day of
the taxable year (this election applies to
all taxable debt instruments held by a
taxpayer during the taxable year the
election is effective and thereafter; this
election may be revoked with the
consent of the Commissioner).
(5) Broker assumptions and customer
notice to brokers—(i) Broker
assumptions if the customer does not
notify the broker. Except as provided in
paragraph (n)(5)(ii)(A) of this section, a
broker must report the information
required under paragraph (d) of this
section by assuming that a customer has
made the election to amortize bond
premium described in paragraph
(n)(4)(i) of this section. In addition,
except as provided in paragraph
(n)(5)(ii)(B) of this section, a broker
must report the information required
under paragraph (d) of this section by
assuming that a customer has not made
an election described in paragraph
(n)(4)(ii), (n)(4)(iii), (n)(4)(iv), or (n)(4)(v)
of this section.
(ii) Effect of customer notification of
an election or revocation—(A) Election
to amortize bond premium. If a
customer notifies a broker in writing
that the customer does not want the
broker to take into account the election
to amortize bond premium, the broker
must report the information required
under paragraph (d) of this section
without taking into account the election
to amortize bond premium. The
customer must provide this notification
to the broker by the end of the calendar
year for which the customer does not
want to amortize bond premium. If for
a subsequent calendar year, the

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customer wants the broker to take into
account the election to amortize bond
premium, the customer must notify the
broker in writing by the end of the
calendar year that the customer wants to
amortize bond premium. If the customer
provides such notification, the broker
must report the information required
under paragraph (d) of this section as if
the customer made the election to
amortize bond premium for that year.
(B) Other debt elections. If a customer
notifies a broker in writing that the
customer has made or will make an
election described in paragraph
(n)(4)(ii), (iii), (iv), or (v) of this section,
the broker must report the information
required under paragraph (d) of this
section by taking into account the
election. A customer must notify the
broker in writing of the election by the
end of the calendar year in which a debt
instrument subject to the election is
acquired in, or transferred into, an
account with the broker or, if later, by
the end of the calendar year for which
the election is effective. If a customer
has revoked or will revoke an election
described in paragraph (n)(4)(ii),
(n)(4)(iv), or (n)(4)(v) of this section for
a calendar year, the customer must
notify the broker of the revocation in
writing by the end of the calendar year
for which the revocation is effective. If
the customer provides such notification,
the broker must report the information
required under paragraph (d) of this
section by taking into account the
revocation.
(iii) Electronic notification. For
purposes of paragraph (n)(5)(ii) of this
section, the written notification to the
broker includes a writing in electronic
format.
(6) 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 information
described in paragraph (n)(6)(i) or
(n)(6)(ii) of this section, whichever is
applicable. Such information must be
shown in the manner and at the time
required by Form 1099 and section
6045.
(i) Sale. A broker must report the
amount of market discount that has
accrued on a debt instrument as of the
date of the instrument’s sale, as defined
in paragraph (a)(9) of this section. See
paragraph (n)(5) of this section to
determine whether the amount reported
should take into account a customer
election under section 1276(b)(2). See
paragraph (n)(8) of this section to
determine the accrual period to be used
to compute the accruals of market

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discount. This paragraph (n)(6)(i) does
not apply if the customer notifies the
broker under the rules in paragraph
(n)(5) of this section that the customer
elects under section 1278(b) to include
market discount in income as it accrues.
(ii) Current inclusion election. If a
customer notifies a broker under the
rules in paragraph (n)(5) of this section
that the customer elects under section
1278(b) to include market discount in
income as it accrues, the broker is
required to report to the customer the
amount of market discount that accrued
on a debt instrument during a taxable
year while held by the customer in the
account. The broker also must adjust
basis in accordance with section
1278(b)(4). If a customer notifies a
broker under the rules in paragraph
(n)(5) of this section that the customer
is revoking its election under section
1278(b), the broker will not report the
market discount accrued during the
taxable year of the revocation and
thereafter and will cease to adjust basis
in accordance with section 1278(b)(4).
See paragraph (n)(8) of this section to
determine the accrual period to be used
to compute the accruals of market
discount.
(7) Adjusted basis. For purposes of
this section, a broker must use the rules
in paragraph (n) of this section to
determine the adjusted basis of a debt
instrument.
(i) Original issue discount. If a debt
instrument is subject to the original
issue discount rules in sections 1271
through 1275, section 1286, or section
1288, a broker must increase a
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. See paragraph (n)(8) of this
section to determine the accrual period
to be used to compute the accruals of
original issue discount.
(ii) Amortizable bond premium—(A)
Taxable bond. A broker is required to
adjust the customer’s basis for any
taxable bond acquired at a premium and
held in the account in accordance with
§ 1.1016–5(b). If a customer, however,
informs a broker under the rules in
paragraph (n)(5)(ii)(A) of this section
that the customer does not want to
amortize bond premium, the broker
must not adjust the customer’s basis for
any premium.
(B) Tax-exempt bonds. A broker is
required to adjust the customer’s basis
for any tax-exempt obligation acquired
at a premium and held in the account
in accordance with § 1.1016–5(b).
(iii) Acquisition premium. If a debt
instrument is acquired at an acquisition
premium (as determined under

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23131

§ 1.1272–2(b)(3)), a broker must
decrease the customer’s basis in the debt
instrument by the amount of acquisition
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 § 1.1272–2(b)(4) to
determine the amount of the acquisition
premium taken into account each year.
However, if a customer informs a broker
under the rules in paragraph (n)(5) of
this section that the customer elects
under § 1.1272–3 to use a constant yield
to amortize the acquisition premium,
then the broker must decrease the
customer’s basis in the debt instrument
by the amount of acquisition 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 in
accordance with § 1.1272–2(b)(5) and
§ 1.1272–3.
(iv) Market discount. See paragraph
(n)(6) of this section for rules to
determine the adjusted basis of a debt
instrument with market discount.
(v) Principal and certain other
payments. A broker must decrease the
customer’s basis in a debt instrument 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 § 1.1273–1(c).
(8) Accrual period. For purposes of
this section, a broker generally must use
the same accrual period that is used to
report any original issue discount or
stated interest to a customer under
section 6049 for a debt instrument. In
any other situation, a broker must use a
semi-annual accrual period or, if a debt
instrument provides for scheduled
payments of principal or interest at
regular intervals of less than six months
over the entire term of the debt
instrument, a broker must use an
accrual period equal in length to this
shorter interval. For example, if a debt
instrument provides for monthly
payments of interest over the entire term
of the debt instrument, the broker must
use a monthly accrual period. The rules
in § 1.1272–1(b)(4)(iii) apply for
purposes of an initial short accrual
period. In computing the length of an
accrual period, any reasonable counting
convention may be used (for example,
30 days per month/360 days per year, or
actual days per month/365 days per
year).
(9) Premium on convertible bond. If a
customer acquires a convertible bond
(as defined in § 1.171–1(e)(1)(iii)(C)) at a
premium (as determined under § 1.171–
1(d)), then, solely for purposes of this
section and § 1.6049–9T, a broker must

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assume that the premium is attributable
to the conversion feature. Based on this
assumption, no portion of the premium
is amortizable for purposes of this
section and § 1.6049–9T.
(10) Effect of broker assumptions on
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. In addition, a
notification to the broker under
paragraph (n)(5) of this section does not
constitute an effective election or
revocation under the applicable rules
for the election.
*
*
*
*
*
■ Par. 5. Section 1.6045A–1 is amended
by:
■ 1. Adding new paragraph (a)(1)(vi)
and revising paragraph (b)(1)
introductory text and paragraph
(b)(1)(v).
■ 2. Revising the second sentence of
paragraph (b)(1)(vii).
■ 3. Redesignating paragraphs (b)(2)
through (b)(9) as paragraphs (b)(5)
through (b)(12) respectively.
■ 4. Redesignating paragraph (b)(1)(viii)
as paragraph (b)(2).
■ 5. Revising the introductory text to
newly redesignated paragraph (b)(2).
■ 6. Adding new paragraphs (b)(3) and
(b)(4).
■ 7. Revising newly redesignated
paragraph (b)(5).
■ 8. Revising the first and last sentences
of newly redesignated paragraph (b)(6).
■ 9. Revising newly redesignated
paragraph (b)(8)(ii).
■ 10. Revising the first sentence of
newly redesignated paragraph (b)(9)(ii).
■ 11. Revising the introductory text to
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.
■ 12. Revising the last sentence of newly
redesignated paragraph (b)(10).
■ 13. Redesignating the text of newly
redesignated paragraph (b)(12) as
paragraph (b)(12)(i), adding a heading
for newly redesignated paragraph
(b)(12)(i), and adding new paragraph
(b)(12)(ii).
■ 14. Revising paragraph (d).
The additions and revisions read as
follows:
§ 1.6045A–1 Statements of information
required in connection with transfers of
securities.

(a) * * *
(1) * * *
(vi) Section 1256 options. A transferor
of an option described in § 1.6045–
1(m)(3) is not required to furnish a
transfer statement.

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(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 § 601.601(d)(2) of this
chapter), quantity of shares, units, or
amounts, and classification of the
security (such as stock or debt).
*
*
*
*
*
(vii) Adjusted basis and acquisition
date.* * * The transferor must
determine this information as provided
under §§ 1.6045–1(d), 1.6045–1(m), and
1.6045–1(n), including reporting the
adjusted basis of the security in U.S.
dollars.* * *
(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
used by the broker to compute any basis
adjustments under § 1.6045–1(n);
(ii) The issue price of the debt
instrument;
(iii) The issue date of the debt
instrument (if different from the original
acquisition 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) Any market discount that has
accrued as of the transfer date (as
determined under § 1.6045–1(n));
(vii) Any bond premium that has been
amortized as of the transfer date (as
determined under § 1.6045–1(n));
(viii) Any acquisition premium that
has been amortized as of the transfer
date (as determined under § 1.6045–
1(n)); and
(ix) Whether the transferring broker
has computed any of the information
described in this paragraph (b)(3) by
taking into account one or more
elections described in § 1.6045–1(n),
and, if so, which election or elections
were taken into account by the
transferring broker.
(4) Additional information required
for option transfers. In addition to the

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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, which may
include a security identifier used by
option exchanges, or details about the
underlying asset, quantity covered,
exercise type, strike price, and maturity
date.
(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. As another
example, a transferor and a receiving
broker may agree to use a security
identifier for an exchange-traded option
if that information would be sufficient
to inform the receiving broker of the
terms for that option.
(6) Transfers of noncovered securities.
The information described in
paragraphs (b)(1)(vii), (b)(3), (b)(4),
(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
§ 1.1012–1(e)(11)(i) as a covered
security.
*
*
*
*
*
(8) * * *
(ii) Transfers of securities to satisfy a
cash legacy. If a security is transferred
from a decedent or a decedent’s estate
to satisfy a cash legacy, paragraphs
(b)(1), (b)(3), and (b)(4) of this section
apply 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

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Federal Register / Vol. 78, No. 75 / Thursday, April 18, 2013 / Rules and Regulations
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):

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Example 1. * * * Under paragraph (b)(9)(i)
of this section, S must provide a 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.
*
*
*
*
*
(12) Failure to receive a complete
transfer statement—(i) In general. * * *
(ii) Transition rules for transfers of
debt instruments, options, and
securities futures contracts. If an option
described in § 1.6045–1(a)(14)(iii), a
securities futures contract described in
§ 1.6045–1(a)(14)(iv), or a debt
instrument described in § 1.6045–
1(a)(15)(i)(C) is transferred in 2014 and
no transfer statement is received, the
receiving broker is not required to
request a transfer statement from the
transferor and may treat the security as
a noncovered security. If a debt
instrument described in § 1.6045–
1(a)(15)(i)(D) is transferred in 2016 and
no transfer statement is received, the
receiving broker is not required to
request a transfer statement from the
transferor and may treat the security as
a noncovered security.
*
*
*
*
*
(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 § 1.1012–1(e)(5);
(2) A transfer on or after January 1,
2012, of stock in a regulated investment
company;
(3) A transfer on or after January 1,
2015, of an option described in
§ 1.6045–1(a)(14)(iii), a securities
futures contract described in § 1.6045–
1(a)(14)(iv), or a debt instrument
described in § 1.6045–1(a)(15)(i)(C); and

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(4) A transfer on or after January 1,
2017, of a debt instrument described in
§ 1.6045–1(a)(15)(i)(D).
■ Par. 6. Section 1.6045B–1 is amended
by:
■ 1. Adding two new sentences at the
end of paragraph (a)(3).
■ 2. Redesignating paragraph (h) as
paragraph (j), adding new paragraph (h),
adding and reserving paragraph (i), and
revising newly-designated paragraph (j).
The additions and revisions read as
follows:
§ 1.6045B–1 Returns relating to actions
affecting basis of securities.

(a) * * *
(3) Exception for public reporting.
* * * An issuer may electronically sign
a return that is publicly reported in
accordance with this paragraph (a)(3).
The electronic signature must identify
the individual who attests to the
declaration in the jurat.
*
*
*
*
*
(h) Rule for options—(1) In general.
For an option granted or acquired on or
after January 1, 2014, if the original
contract is replaced by a different
number of option contracts, the
following rules apply:
(i) If the option is an exchange-traded
option, any clearinghouse or clearing
facility that serves as a counterparty is
treated as the issuer of the option for
purposes of section 6045B.
(ii) If the option is not an exchangetraded option, the option writer is
treated as the issuer of the option for
purposes of section 6045B.
(2) Examples. The following examples
illustrate the rules of paragraph (h)(1) of
this section:
Example 1. On January 15, 2014, F, an
individual, purchases a one-year exchangetraded 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 executes a 2-for-1 stock split as
of April 1, 2014. 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 remain the same. Under
paragraph (h)(1)(i) of this section,
Clearinghouse G is required to prepare an
issuer report for F.
Example 2. On January 31, 2014, J, an
individual, purchases from K a non-exchange
traded 7-month call option on 100 shares of
Company X stock, with a strike price of $110.
Company X executes a 2-for-1 stock split as
of April 1, 2014. Due to the stock split, the
terms of J’s option are altered, resulting in
one option contract on 200 shares of
Company X stock with a strike price of $55.
All other terms of the option remain the
same. Under paragraph (h)(1) of this section,
because the number of option contracts did
not change, K is not required to prepare an
issuer report for J.

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(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 § 1.6045–1(a)(14)(i) other
than stock in a regulated investment
company within the meaning of
§ 1.1012–1(e)(5);
(2) Organizational actions occurring
on or after January 1, 2012, that affect
the basis of stock in a regulated
investment company;
(3) Organizational actions occurring
on or after January 1, 2014, that affect
the basis of debt instruments described
in § 1.6045–1(n)(2)(i) (not including the
debt instruments described in § 1.6045–
1(n)(2)(ii));
(4) Organizational actions occurring
on or after January 1, 2016, that affect
the basis of debt instruments described
in § 1.6045–1(n)(3);
(5) Organizational actions occurring
on or after January 1, 2014, that affect
the basis of options described in
§ 1.6045–1(a)(14)(iii); and
(6) Organizational actions occurring
on or after January 1, 2014, that affect
the basis of securities futures contracts
described in § 1.6045–1(a)(14)(iv).
■ Par. 7. Section 1.6049–9T is added to
read as follows:
§ 1.6049–9T Premium subject to reporting
for a debt instrument acquired on or after
January 1, 2014 (temporary).

(a) General rule. Notwithstanding
§ 1.6049–5(f), for a debt instrument
acquired on or after January 1, 2014, if
a broker (as defined in § 1.6045–1(a)(1))
is required to file a statement for a debt
instrument under § 1.6049–6, the broker
generally must report any bond
premium (as defined in § 1.171–1(d)) or
acquisition premium (as defined in
§ 1.1272–2(b)(3)) for the calendar year.
This section, however, only applies to a
debt instrument that is a covered
security as defined in § 1.6045–1(a)(15).
(b) Reporting of bond premium
amortization. Unless a broker has been
notified in writing in accordance with
§ 1.6045–1(n)(5) that a customer does
not want to amortize bond premium
under section 171, the broker must
report the amount of any amortizable
bond premium allocable to a stated
interest payment made to the customer
during the calendar year. See §§ 1.171–
2 and 1.171–3 to determine the amount
of amortizable bond premium allocable
to a stated interest payment. Instead of
reporting a gross amount for both stated
interest and amortizable bond premium,
a broker may report a net amount of
stated interest that reflects the offset of
the stated interest payment by the

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amount of amortizable bond premium
allocable to the payment. In this case,
the broker must not report the
amortizable bond premium as a separate
item. This paragraph (b) also applies to
amortizable bond premium on a taxexempt obligation, which is required to
be amortized under section 171.
(c) Reporting of acquisition premium
amortization. A broker must report the
amount of any acquisition premium that
reduces the amount of original issue
discount includible in income by the
customer during a calendar year. Unless
a broker has been notified in writing in
accordance with § 1.6045–1(n)(5) that a
customer has made an election under
§ 1.1272–3 to use a constant yield to
amortize the acquisition premium, the
broker must use the rules in § 1.1272–
2(b)(4) to determine the amount of
acquisition premium. Instead of
reporting a gross amount for both
original issue discount and acquisition
premium, a broker may report a net
amount of original issue discount that
reflects the offset of the original issue
discount includible in income by the
customer for the calendar year by the
amount of acquisition premium
allocable to the original issue discount.
In this case, the broker must not report
the acquisition premium as a separate
item. This paragraph (c) does not apply
to a tax-exempt obligation.
(d) Expiration date. The applicability
of this section expires on or before April
15, 2016.
PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT

Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Approved: April 11, 2013.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2013–09085 Filed 4–17–13; 8:45 am]
BILLING CODE 4830–01–P

§ 602.101

*

OMB Control numbers.

*
*
(b) * * *

*

*

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CFR part or section where
identified and described

*
*
*
1.6045–1(n)(5) ......................
*

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*

*

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Current OMB
control No.

*

*
1545–2186

*

Jkt 229001

*

DEPARTMENT OF HOMELAND
SECURITY

33 CFR Part 117
Mine Safety and Health Administration
30 CFR Part 48
Training and Retraining of Miners
CFR Correction
In Title 30 of the Code of Federal
Regulations, Parts 1 to 199, revised as of
July 1, 2012, on page 246, in § 48.6,
paragraph (b)(10) is corrected to read as
follows:
§ 48.6

Experienced miner training.

*

*
*
*
*
(b) * * *
(10) Health. The course must include
instruction on the purpose of taking
dust, noise, and other health
measurements, where applicable; must
review the health provisions of the Act;
and must explain warning labels and
any health control plan in effect at the
mine.
*
*
*
*
*

[FR Doc. 2013–09269 Filed 4–17–13; 8:45 am]
BILLING CODE 1505–01–D

DEPARTMENT OF LABOR

30 CFR Part 48
Training and Retraining of Miners

Par. 9. In § 602.101, paragraph (b) is
amended by adding the following entry
in numerical order to the table to read
as follows:

■

BILLING CODE 1505–01–D

Coast Guard

■

Authority: 26 U.S.C. 7805.

[FR Doc. 2013–09264 Filed 4–17–13; 8:45 am]

DEPARTMENT OF LABOR

Mine Safety and Health Administration
Par. 8. The authority citation for part
602 continues to read as follows:

training, and hazard training for miners
as follows:
*
*
*
*
*

CFR Correction
In Title 30 of the Code of Federal
Regulations, Parts 1 to 199, revised as of
July 1, 2012, on page 241, in § 48.3,
paragraph (a) introductory text is
corrected to read as follows:
§ 48.3 Training plans; time of submission;
where filed; information required; time for
approval; method of disapproval;
commencement of training; approval of
instructors.

(a) Except as provided in paragraphs
(o) and (p) of this section, each operator
of an underground mine shall have an
MSHA approved plan containing
programs for training new miners,
training experienced miners, training
miners for new tasks, annual refresher

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[Docket No. USCG–2013–0223]

Drawbridge Operation Regulations;
Townsend Gut, Boothbay Harbor and
Southport, ME
Coast Guard, DHS.
Notice of deviation from
drawbridge regulation.

AGENCY:
ACTION:

The Coast Guard is issuing a
temporary deviation from the regulation
governing the operation of the
Southport SR27 Bridge across
Townsend Gut, mile 0.7, between
Boothbay Harbor and Southport, Maine.
The bridge owner, Maine Department of
Transportation, will be performing
structural repairs at the bridge. This
deviation allows the bridge to operate
on a temporary schedule for eight weeks
to facilitate scheduled bridge
maintenance.

SUMMARY:

This deviation is effective from
April 27, 2013 through June 28, 2013.
ADDRESSES: Documents mentioned in
this preamble as being available in the
docket are part of docket USCG–2013–
0223 and are available online at
www.regulations.gov, inserting USCG–
2013–0223 in the ‘‘Keyword’’ and then
clicking ‘‘Search’’. They are also
available for inspection or copying at
the Docket Management Facility (M–30),
U.S. Department of Transportation,
West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this deviation,
call or email Mr. John McDonald,
Project Officer, First Coast Guard
District, telephone (617) 223–8364,
john.w.mcdonald@uscg.mil. If you have
questions on viewing the docket, call
Barbara Hairston, Program Manager,
Docket Operations, telephone 202–366–
9826.
SUPPLEMENTARY INFORMATION: The
Southport SR27 Bridge, across
Townsend Gut, mile 0.7, between
Boothbay Harbor and Southport, Maine,
DATES:

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