IRS SIMPLIFIES INTEREST INCOME INFORMATION REPORTING FOLLOWING CORPORATE ACQUISITIONS.

Rev. Proc. 90-57

SECTION 1. PURPOSE

This revenue procedure explains both the procedure otherwise required by the regulations (the "standard procedure") and an acceptable alternative procedure for preparing and filing Forms 1099- INT, Statement for Recipients of Interest Income, in certain situations where a corporation acquires substantially all the assets and assumes substantially all the liabilities of another corporation. The revenue procedure facilitates information reporting in these situations and assures that amounts are reported once and only once.

SEC. 2. BACKGROUND

Section 6011(a) of the Internal Revenue Code provides that, when required by regulations, any person made liable for any tax imposed by the Code, or for the collection of the tax, must make a return or statement according to the forms and regulations prescribed by the Secretary.

Section 3406 of the Code provides that payors of interest reportable under section 6049(a) must, in certain circumstances, deduct and withhold tax equal to 20 percent of the payments. Section 3406(a) identifies the circumstances that require the withholding of tax.

Section 6049(a) of the Code provides that every person who pays interest, as defined in section 6049(b), aggregating $10 or more to any other person during a calendar year, or who receives interest payments as a nominee and makes payments aggregating $10 or more during a calendar year to another person with respect to interest so received, must make a return according to forms or regulations prescribed by the Secretary.

Section 1.6049-4(b) of the Income Tax Regulations provides that persons required to make information returns under section 6049(a) of the Code must file Forms 1099 for the calendar year. Those returns must show the aggregate amount of the interest payments; the name, address, and taxpayer identification number of the person to whom paid; and the amount of tax deducted and withheld under the provisions concerning backup withholding.

SEC. 3. SCOPE

This revenue procedure applies only when all of the following conditions are met:

(1) One corporation (the "successor") acquires substantially all the assets and assumes substantially all the liabilities of another corporation (the "predecessor");

(2) During the pre-acquisition portion of the calendar year in which the acquisition occurs, the predecessor makes payments of interest within the meaning of section 6049(b); and

(3) During the post-acquisition portion of that year, the predecessor does not make any such interest payments.

This revenue procedure does not apply in the circumstances described in Rev. Rul. 69-556, 1969-2 C.B. 242, which relates to the absorption of one corporation by another corporation pursuant to a merger agreement.

SEC. 4. STANDARD PROCEDURE

Pursuant to section 6049(a) of the Code and section 1.6049-4 of the regulations, each person that makes interest payments is responsible for information reporting of those payments. Thus, unless the alternative procedure set forth below is used, both the predecessor and the successor must file Forms 1099-INT with respect to interest payments made in the calendar year in which the acquisition occurs (the "acquisition year"). The predecessor must perform all reporting duties with respect to the interest payments that it made during that year, and the successor must do the same with respect to the interest payments it made during the year.

SEC. 5. ALTERNATIVE PROCEDURE

In order to use the alternative procedure, the predecessor and successor must agree that the successor assumes the predecessor's entire obligation to file Forms 1099-INT with respect to interest payments made in the acquisition year.

If the predecessor and successor so agree, and if the successor satisfies the predecessor's obligation described in section 5.01 of this revenue procedure, the predecessor is relieved of the obligation. The successor then must combine (1) the interest payments made to a person by the predecessor in the acquisition year with (2) the interest payments made to that person by the successor in that year, and must report the aggregate amount on the Form 1099-INT for that person for that year. The successor may include with this form additional information explaining to the recipient the aggregate reporting of interest paid.

The successor also must combine the amount of any tax withheld for a person by the predecessor in the acquisition year pursuant to section 3406(a) with the amount of tax withheld for that person by the successor in that year and must report the aggregate amount on the Form 1099-INT for the year.

If the alternative procedure described in this section is used, the successor must file a statement with the Service indicating that Forms 1099-INT are being filed on a combined basis in accordance with the provisions of this revenue procedure. This statement is needed to assist the Service in processing the forms filed under the alternative procedure. For example, if any tax has been withheld by the predecessor pursuant to section 3406(a) during the acquisition year and reported by the predecessor on Form 941, Employer's Quarterly Federal Tax Return, the total of the withholding amounts shown on the successor's Forms 1099-INT for that year will exceed the total of the withholding amounts shown on the successor's Forms 941.

The statement required by section 5.04 of this revenue procedure must include the name, address, and taxpayer identification numbers of both the successor and predecessor corporations. The statement must be filed separately from the Forms 1099-INT for the acquisition year and must be mailed to the following address on or before the date those forms are due:

     Internal Revenue Service

This revenue procedure is effective for Forms 1099-INT filed after December 24, 1990. In addition, if a successor filed Forms 1099-INT on or before December 24, 1990, in the circumstances described in section 3 of this revenue procedure, the predecessor's filing obligations are deemed to have been satisfied with respect to amounts shown on those forms if the predecessor and successor have substantially complied with all the requirements of section 5 of this revenue procedure (except for the statement requirement of section 5.04).

DRAFTING INFORMATION

The principal author of this revenue procedure is Mark S. Smith of the Office of Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue procedure contact Mr. Smith on (202) 566-3829 (not a toll-free call).