Rev. Rul. 63-271

Advice has been requested as to the reporting requirements in situations where a bank collects interest from a borrower on a note, mortgage, or other evidence of indebtedness and transmits the payment to the actual owner.

Section 6041(a) of the Internal Revenue Code of 1954 provides, in pertinent part, that all persons engaged in a trade or business and making payment in the course of such trade or business to another persons of salaries, wages, compensations, or remunerations aggregating $600 or more in any taxable year shall render a true and accurate return to the Secretary of the Treasury or his delegate setting forth the amount of such income and the name and address of the recipient of such payment.

I.T. 1703, C.B. II-1, 182 (1923), holds, in general, that where a bank makes loans on farmlands and subsequently sells the loans to other investors but continues to collect the interest from the borrower, which it transmits to the purchaser or purchasers of the loan, it is required to file information returns.

Likewise, Mimeograph 3772, C.B. VIII-2, 139 (1929), holds that banks, trust companies, abstract companies and others acting as collection agents for the lessors of oil-producing properties in the collection of royalties, rentals, bonuses and related payments made to the owners of such properties are required to file information returns.

Under the provisions of section 147 of the Internal Revenue Code of 1939, all persons `in whatever capacity acting' making payment to another person of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income of $600 or more were required to file information returns.

Section 6041 of the 1954 Code retains, in general, the provisions found in section 147(a) of the 1939 Code, but requires information returns only from persons engaged in a trade or business with respect to payments made in the course of such trade or business. See House Report No. 1337, Eighty-second Congress, Second Session, at pages 104, A399; Senate Report No. 1622, Eighty-third Congress, Second Session, at pages 140, 566; and Conference Report No. 2543, Amendment 431, Eighty-third Congress, Second Session, at page 78.

Accordingly, it is concluded that a bank is required to file an information return when, in the course of its trade or business, it acts as a collection agent on notes, mortgages, or other evidences of indebtedness and receives payments of interest aggregating $600 or more which it pays over to the actual owner.