Corporate Change of Control with the IRS

A change in control is a change in the ownership structure of a company. Such change of ownership typically involves another entity or individual acquiring more than 50% of the company’s shares. When such a change in corporate structure occurs, the company must file an “Information Return for Acquisition of Control or Substantial Change in Capital Structure” Form 8806 with the Internal Revenue Service.

What Must I File with the IRS in case of a Change of Control?

A change in control is a change in the ownership structure of a company. Such change of ownership typically involves another entity or individual acquiring more than 50% of the company’s shares. When such a change in corporate structure occurs, the company must file an “Information Return for Acquisition of Control or Substantial Change in Capital Structure” Form 8806 with the Internal Revenue Service.

Temporary Regulation § 1.6043-4T(a) governs the filing of the Form 8806 and all applicable requirements.

What Should the Form 8806 Include?

This form should include the name, address, and the taxpayer identification number (TIN) of the reporting corporation. It should also include a description of the transaction of the acquisition of control or the substantial change in capital structure of the company; the date of the acquisition of control and; a description of the fair market value of any stock and other property, if any, provided to the reporting corporation’s shareholders in exchange for their stock. 

Form 8806 must be filed on or before the 45th day following the acquisition of control of the corporation, or, if earlier, on or before January 5th of the year following the calendar year in which the acquisition of control or substantial change in capital structure occurs. § 1.6043-4T(a)

What Do Shareholders of the Corporation Have to File?

A corporation that is required to file Form 8806 has to file Forms 1096, “Annual Summary and Transmittal of U.S. Information Returns,” and 1099-CAP, “Changes in Corporate Control and Capital Structure,” for each shareholder of record in the corporation who receives cash, stock, or other property pursuant to the acquisition of control or the substantial change in capital structure. § 1.6043-4T(b). 

Forms 1096 and 1099-CAP must be filed on or before February 28 (March 31 if filed electronically) of the year following the calendar year in which the transaction occurs. Id. A separate Form 1099-CAP must be filed with respect to amounts received by each shareholder.

What Happens if my Company Doesn’t File Form 8806?

If a correct Form 8806 is not filed by the due date of the corporation’s income tax return, including extensions, it may be penalized $500 for each day the return is late, up to a maximum of $100,000. The penalty will not be imposed if the corporation can show that the failure to file on time was due to reasonable cause. 

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If you would like more information about filing Form 8806 or filing taxes in general, please contact one of our experienced Trusts and Estates Attorneys at EPGD Business Law. EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

Categories: Tax Law | Transactional

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