1 See Institute Memorandum to Tax Members No. 41-97, Accounting/Treasurers Members No. 44-97,
Operations Members No. 25-97, Closed-End Investment Company Members No. 33-97, Unit Investment
Trust Members No. 46-97, Transfer Agent Advisory Committee No. 61-97 and Broker/Dealer Advisory
Committee No. 17-97, dated October 28, 1997.
[9417]
November 17, 1997
TO: TAX MEMBERS No. 46-97
ACCOUNTING/TREASURERS MEMBERS No. 49-97
OPERATIONS MEMBERS No. 31-97
TRANSFER AGENT ADVISORY COMMITTEE No. 66-97
BROKER/DEALER ADVISORY COMMITTEE No. 20-97
CLOSED-END INVESTMENT COMPANY COMMITTEE No. 45-97
UNIT INVESTMENT TRUST COMMITTEE No. 66-97
RE: IRS RELEASES FORM 1099-DIV FOR DIVIDENDS PAID DURING 1998
______________________________________________________________________________
The Internal Revenue Service ("IRS") has released the "official" IRS Form 1099-DIV
(attached) for use by payers, including regulated investment companies ("RICs"), in reporting
dividends paid to shareholders during 1998. The IRS release did not include any guidance
regarding dividend reporting on "substitute" Forms 1099-DIV.
The 1998 IRS Form 1099-DIV modifies in several respects the Form 1099-DIV used for
dividends paid during 1997. One significant modification made by the 1998 Form is the
requirement that RICs report the dollar amounts of various "subcategories" of long-term capital
gain. For capital gain dividends paid during 1997, RICs are required only to provide
"information sufficient to determine" these amounts.1
The boxes into which tax information must be placed also have been modified on the
1998 Form. First, unlike the 1997 Form, the 1998 Form does not include a "gross dividends and
other distributions on stock" box. Consequently, the 1998 Form provides that ordinary
dividends are to be reported in Box 1, rather than Box 1b; long-term capital gains are to be
reported in Box 2a, rather than Box 1c; and nontaxable distributions are to be reported in Box 3,
rather than Box 1d. Second, unlike the 1997 Form (which included only one box for the total
amount of a RIC’s capital gain distribution), the 1998 Form also includes three additional boxes
for the dollar amounts, if any, of three "subcategories" of the capital gain distribution.
Specifically, RICs will be required to report for 1998 the amount of each shareholder’s 28
percent rate gain (in Box 2b), unrecaptured section 1250 gain (in Box 2c) and section 1202 gain
2 As discussed in the Form 1099-DIV’s "instructions for recipient," the 28 percent rate gain amount will
equal the sum of gain on assets held for more than one year, but not more than 18 months, and
collectibles gains and losses. Section 1202 gain from certain small business stock is reported separately,
even though section 1202 gain is included within the definition of 28 percent rate gain (as modified by
pending technical corrections legislation). See Institute Memorandum to Tax Members No. 37-97,
Accounting/Treasurers Members No. 40-97, Operations Members No. 22-97, Closed-End Investment
Company Members No. 29-97, Unit Investment Trust Members No. 40-97 and Transfer Agent Advisory
Committee No. 56-97, dated October 10, 1997.
- 2 -
(in Box 2d).2 Third, to reflect these changes, the boxes for the other information reported, such
as federal income tax withheld, have been renumbered.
Keith D. Lawson
Associate Counsel - Tax
Attachment (in .pdf format)
Note: Not all recipients of this memo will receive an attachment. If you wish to obtain a copy
of the attachment referred to in this memo, please call the Institute’s Library Services Division
at (202)326-8304, and ask for this memo’s attachment number: 9417.