downpayment) is $570,000. Thus, under para- graph (i)(3)(iii) of this section, assuming all contingencies are satisfied, the maximum amount of gross proceeds cannot be deter- mined with certainty. The greatest amount that can be determined with certainty at the time of the closing, assuming all contin- gencies are satisfied, is $570,000, the min- imum amount stated in the agreement. Therefore, $570,000 is the ‘‘maximum deter- minable proceeds’’ under paragraph (i)(3)(iii) of this section and is the amount reported. In addition, (to the extent required by the Form 1099 and its instructions) the reporting person must indicate that the gross proceeds cannot be determined with certainty. See paragraph (h)(1)(iv)(C) of this section.

(s) Effective/applicability date. This section applies for real estate trans- actions with dates of closing (as deter- mined under paragraph (h)(2)(ii) of this section) that occur on or after January 1, 1991. The amendments to paragraphs (b)(2)(i)(E), (b)(2)(ii) and (c)(2)(i) of this section shall apply to sales or ex- changes of standing timber for lump- sum payments completed after May 28, 2009.

[T.D. 8323, 55 FR 51284, Dec. 13, 1990; 56 FR

559, Jan. 7, 1991; 56 FR 3419, Jan. 30, 1991; T.D.

8895, 65 FR 50407, Aug. 18, 2000; T.D. 9450, 74

FR 25430, May 28, 2009; T.D. 9504, 75 FR 64097,

Oct. 18, 2010]

§ 1.6045–5 Information reporting on payments to attorneys.

(a) Requirement of reporting—(1) In general. Except as provided in para- graph (c) of this section, every payor engaged in a trade or business who, in the course of that trade or business, makes payments aggregating $600 or more during a calendar year to an at- torney in connection with legal serv- ices (whether or not the services are performed for the payor) must file an information return for such payments. The information return must be filed on the form and in the manner required by the Commissioner. For the time and place for filing the form, see § 1.6041–6. For definitions of the terms under this section, see paragraph (d) of this sec- tion. The requirements of this para- graph (a)(1) apply whether or not—

(i) A portion of a payment is kept by the attorney as compensation for legal services rendered; or

(ii) Other information returns are re- quired with respect to some or all of a payment under other provisions of the

Internal Revenue Code and the regula- tions thereunder.

(2) Information required. The informa- tion return required under paragraph (a)(1) of this section must include the following information:

(i) The name, address, and taxpayer identifying number (TIN) (as defined in section 7701(a)) of the payor;

(ii) The name, address, and TIN of the payee attorney;

(iii) The amount of the payment or payments (as defined in paragraph (d)(5) of this section); and

(iv) Any other information required by the Commissioner in forms, instruc- tions or publications.

(3) Requirement to furnish statement—

(i) General requirements. A person re- quired to file an information return under paragraph (a)(1) of this section must furnish to the attorney a written statement of the information required to be shown on the return. This re- quirement may be met by furnishing a copy of the return to the attorney. The written statement must be furnished to the attorney on or before February 15 of the year following the calendar year in which the payment was made.

(ii) Consolidated reporting. (A) The term consolidated reporting statement means a grouping of statements the same payor furnishes to the same payee or group of payees on the same date for the same reporting year that includes a statement required under this section. A consolidated reporting statement is limited to statements based on the same relationship of payor to payee as the statement re- quired to be furnished under this sec- tion.

(B) A consolidated reporting state- ment must be furnished on or before February 15 of the year following the calendar year reported. Any statement that otherwise must be furnished on or before January 31 must be furnished on or before February 15 if it is furnished in the consolidated reporting state- ment.

(b) Special rules—(1) Joint or multiple payees—(i) Check delivered to one payee attorney. If more than one attorney is listed as a payee on a check, an infor- mation return must be filed under

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paragraph (a)(1) of this section with re- spect to the payee attorney to whom the check is delivered.

(ii) Check delivered to payee non- attorney. If an attorney is listed as a payee on a check but the check is de- livered to a nonattorney who is a payee on the check, an information return must be filed under paragraph (a)(1) of this section with respect to the payee attorney listed on the check. If more than one attorney is listed as a payee on a check but the check is delivered to a nonattorney who is a payee on the check, the information return must be filed with respect to the first-listed payee attorney on the check.

(iii) Check delivered to nonpayee. If two or more attorneys are listed as payees on a check, but the check is de- livered to a person who is not a payee on the check, an information return must be filed under paragraph (a)(1) of this section with respect to the first- listed payee attorney on the check.

(2) Attorney required to report payments made to other attorneys. If an informa- tion return is required to be filed with respect to a payee attorney under para- graph (b)(1) of this section, the attor- ney with respect to whom the informa- tion return is required to be filed (tier- one attorney) must file an information return under this section for any pay- ment that the tier-one attorney makes to other payee attorneys with respect to that check, regardless of whether the tier-one attorney is a payor under paragraph (d)(3) of this section.

(c) Exceptions. Notwithstanding para- graphs (a) and (b) of this section, a re- turn of information is not required under section 6045(f) with respect to the following payments:

(1) Payments of wages or other com- pensation paid to an attorney by the attorney’s employer.

(2) Payments of compensation or profits paid or distributed to its part- ners by a partnership engaged in pro- viding legal services.

(3) Payments of dividends or cor- porate earnings and profits paid to its shareholders by a corporation engaged in providing legal services.

(4) Payments made by a person to the extent that the person is required to report with respect to the same payee the payments or portions thereof under

section 6041(a) and § 1.6041–1(a) (or would be required to so report the pay- ments or portions thereof but for the dollar amount limitation contained in section 6041(a) and § 1.6041–1(a)).

(5) Payments made to a nonresident alien individual, foreign partnership, or foreign corporation that is not engaged in trade or business within the United States, and does not perform any labor or personal services in the United States, in the taxable year to which the payment relates. For how a payor determines whether a payment is sub- ject to this exception, see § 1.6041– 4(a)(1).

(6) Payments made to an attorney in the attorney’s capacity as the person responsible for closing a transaction within the meaning of § 1.6045–4(e)(3) for the sale or exchange or financing of any present or future ownership inter- est in real estate described in § 1.6045– 4(b)(2)(i) through (iv).

(7) Payments made to an attorney in

the attorney’s capacity as a trustee in bankruptcy under Title 11, United States Code.

(d) Definitions. The following defini- tions apply for purposes of this section:

(1) Attorney means a person engaged in the practice of law, whether as a sole proprietorship, partnership, cor- poration, or joint venture.

(2) Legal services means all services related to, or in support of, the prac- tice of law performed by, or under the supervision of, an attorney.

(3) Payor means a person who makes a payment if that person is an obligor on the payment, or the obligor’s in- surer or guarantor. For example, a payor includes—

(i) A person who pays a settlement amount to an attorney of a client who has asserted a tort, contract, violation of law, or workers’ compensation claim against that person; and

(ii) The person’s insurer if the insurer pays the settlement amount to the at- torney.

(4) Payments to an attorney include payments by check or other method such as cash, wire or electronic trans- fer. Payment by check to an attorney means a check on which the attorney is named as a sole, joint, or alternative payee. The attorney is the payee on a check written to the attorney’s client

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trust fund. However, the attorney is not a payee when the attorney’s name is included on the payee line as ‘‘in care of,’’ such as a check written to ‘‘client c/o attorney,’’ or if the attor- ney’s name is included on the check in any other manner that does not give the attorney the right to negotiate the check.

(5) Amount of the payment means the amount tendered (e.g., the amount of a check) plus the amount required to be withheld from the payment under sec- tion 3406(a)(1), because a condition for withholding exists with respect to the attorney for whom an information re- turn is required to be filed under para- graph (a)(1) of this section.

(e) Attorney to furnish TIN. A payor that is required to file an information return under this section must solicit a TIN from the attorney at or before the time the payor makes a payment to the attorney. The attorney must fur- nish the correct TIN to the payor, but is not required to certify the TIN. A payment for which a return of informa- tion is required under this section is subject to backup withholding under section 3406 and the regulations there- under.

(f) Examples. The following examples

illustrate the provisions of this sec- tion. The examples assume that P is not a payor with respect to A, the at- torney, under section 6041. See section 6041 and the regulations thereunder for rules regarding whether P is required under section 6041 to file information returns with respect to C. The exam- ples are as follows:

Example 1. One check—joint payees—taxable to claimant. Employee C, who sues employer P for back wages, is represented by attorney

A. P settles the suit for $300,000. The $300,000 represents taxable wages to C under existing legal principles. P writes a settlement check payable jointly to C and A in the amount of

$200,000, net of income and FICA tax with- holding with respect to C. P delivers the check to A. A retains $100,000 of the payment as compensation for legal services and dis- burses the remaining $100,000 to C. P must file an information return with respect to A for $200,000 under paragraph (a)(1) of this sec- tion. P also must file an information return with respect to C under sections 6041 and 6051, in the amount of $300,000. See §§ 1.6041– 1(f) and 1.6041–2.

Example 2. One check—joint payees—exclud- able to claimant. C, who sues corporation P

for damages on account of personal physical injuries, is represented by attorney A. P set- tles the suit for a $300,000 damage payment that is excludable from C’s gross income under section 104(a)(2). P writes a $300,000 settlement check payable jointly to C and A and delivers the check to A. A retains

$120,000 of the payment as compensation for legal services and remits the remaining

$180,000 to C. P must file an information re- turn with respect to A for $300,000 under paragraph (a)(1) of this section. P does not file an information return with respect to tax-free damages paid to C.

Example 3. Separate checks—taxable to claim- ant. C, an individual plaintiff in a suit for lost profits against corporation P, is rep- resented by attorney A. P settles the suit for

$300,000, all of which will be includible in C’s gross income. A requests P to write two checks, one payable to A in the amount of

$100,000 as compensation for legal services and the other payable to C in the amount of

$200,000. P writes the checks in accordance with A’s instructions and delivers both checks to A. P must file an information re- turn with respect to A for $100,000 under paragraph (a)(1) of this section. Pursuant to

§ 1.6041–1(a) and (f), P must file an informa- tion return with respect to C for the $300,000. Example 4. Check made payable to claimant, but delivered to nonpayee attorney. Corpora- tion P is a defendant in a suit for damages in which C, the plaintiff, has been represented by attorney A throughout the proceeding. P settles the suit for $300,000. Pursuant to a re- quest by A, P writes the $300,000 settlement check payable solely to C and delivers it to A at A’s office. P is not required to file an in- formation return under paragraph (a)(1) of this section with respect to A, because there is no payment to an attorney within the

meaning of paragraph (d)(4) of this section.

Example 5. Multiple attorneys listed as pay- ees. Corporation P, a defendant, settles a lost profits suit brought by C for $300,000 by issuing a check naming C’s attorneys, Y, A, and Z, as payees in that order. Y, A, and Z do not belong to the same law firm. P delivers the payment to A’s office. A deposits the check proceeds into a trust account and makes payments by separate checks to Y of

$30,000 and to Z of $15,000, as compensation for legal services, pursuant to authorization from C to pay these amounts. A also makes a payment by check of $155,000 to C. A re- tains $100,000 as compensation for legal serv- ices. P must file an information return for

$300,000 with respect to A under paragraphs (a)(1) and (b)(1)(i) of this section. A, in turn, must file information returns with respect to Y of $30,000 and to Z of $15,000 under para- graphs (a)(1) and (b)(2) of this section be- cause A is not required to file information returns under section 6041 with respect to A’s payments to Y and Z because A’s role in making the payments to Y and Z is merely

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ministerial. See § 1.6041–1(e)(1), (e)(2) and (e)(5) Example 7 for information reporting re- quirements with respect to A’s payments to Y and Z. As described in Example 3, P must also file an information return with respect to C, pursuant to § 1.6041–1(a) and (f).

Example 6. Amount of the payment—attorney does not provide TIN. (i) Corporation P, a de- fendant, settles a suit brought by C for

$300,000 of damages. P will pay the damages by a joint check to C and his attorney, A. A failed to furnish P with A’s TIN. P is re- quired to deduct and withhold 28 percent tax from the $300,000 under section 3406(a)(1)(A) and paragraph (e) of this section. P writes the check to C and A as joint payees, in the amount of $216,000. P also must file an infor- mation return with respect to A under para- graph (a)(1) of this section in the amount of

$300,000, as prescribed in paragraph (d)(5) of

this section. If the damages are reportable under section 6041 because they are not ex- cludable from gross income under existing legal principles, and are not subject to any exception under section 6041, P must also file an information return with respect to C pur- suant to § 1.6041–1(a) and (f) in the amount of

$300,000.

(ii) Rather than paying by joint check to C and A, P will pay the damages by a joint check to C and F, A’s law firm. F failed to furnish its TIN to P. P is required to deduct and withhold 28 percent tax from the $300,000 under section 3406(a)(1)(A) and paragraph (e) of this section. P writes the check to C and F as joint payees, in the amount of $216,000. P also must file an information return with respect to F under paragraph (a)(1) of this section in the amount of $300,000, as pre- scribed in paragraph (d)(5) of this section. If the damages are reportable under section 6041 because they are not excludable from gross income under existing legal principles, and are not subject to any exception under section 6041, P must also file an information return with respect to C pursuant to § 1.6041– 1(a) and (f) in the amount of $300,000.

Example 7. Home mortgage lending trans-

action. (i) Individual P agrees to purchase a house that P will use solely as a residence. P obtains a loan from lender L to finance a portion of the cost of acquiring the house. L disburses loan proceeds of $300,000 to attor- ney A, who is the settlement agent, by a check naming A as the sole payee. A, in turn, writes checks from the loan proceeds and from other funds provided by P to the persons involved in the purchase of the house, including a check for $800 to attorney B, whom P hired to provide P with legal services relating to the closing.

(ii) P, not L, is the payor of the payment to A under paragraph (d)(3) of this section. P, however, is not required to file an informa- tion return with respect to A under para- graph (a)(1) of this section because the pay- ment was not made in the course of P’s trade

or business. Even if P made the payment in the course of P’s trade or business, P would not be required to file an information return under section 6045(f) with respect to A be- cause P is excepted under paragraph (c)(6) of this section.

(iii) A is not required to file an informa- tion return under paragraph (a)(1) of this section with respect to the payment to B be- cause A is not the payor as that term is de- fined under paragraph (d)(3) of this section. A is not required to file an information re- turn under paragraph (b)(2) with respect to the payment to B because A was listed as sole payee on the check it received from P. See section 6041 and § 1.6041–1(e) for whether A or L must file information returns under that section. See section 6045(e) and § 1.6045– 4 for whether A is required to file an infor- mation return under that section.

Example 8. Business mortgage lending trans- action. The facts are the same as in Example

7 except that P buys real property that P will use in a trade or business. P, not L, is the payor of the payment to A under para- graph (d)(3) of this section. P, however, is not required to file an information return under section 6045(f) with respect to A be- cause P is excepted under paragraph (c)(6) of this section. A is not required to file an in- formation return under paragraphs (a) or (b)(2) of this section with respect to the pay- ment to B. See section 6041 and § 1.6041–1(e) to determine whether P or L must file an in- formation return under that section with re- spect to the payment to A, and whether P or A must file a return with respect to the pay- ment to B. See section 6045(e) for rules re- garding whether A is required to file infor- mation returns under that section.

Example 9. Qualified settlement fund. Cor- poration P agrees to settle for $300,000 a class action lawsuit brought by attorney A on be- half of a claimant class. Pursuant to the set- tlement agreement and a preliminary order of approval by a court, A establishes a bank account in the name of Q Settlement Fund, which is a qualified settlement fund (QSF) under § 1.468B–1. A is also designated by the court as the administrator of the QSF. Cor- poration P transfers $300,000 by wire in Year 1 to A, who deposits the funds into the Q Set- tlement Fund. In Year 2, the court approves an award of attorney’s fees of $105,000 for A. In Year 2, Q Settlement Fund delivers

$105,000 to A. P is required to file an informa- tion return under paragraph (a) of this sec- tion with respect to A for Year 1 for the

$300,000 payment it made to A. The Q Settle- ment Fund is required to file an information return under section 6041(a) and § 1.468B– 2(l)(2) with respect to A for Year 2 for the

$105,000 payment it made to A.

(g) Cross reference to penalties. See the following sections regarding penalties

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Internal Revenue Service, Treasury § 1.6045A–1

for failure to comply with the require- ments of section 6045(f) and this sec- tion:

(1) Section 6721 for failure to file a correct information return.

(2) Section 6722 for failure to furnish a correct payee statement.

(3) Section 6723 for failure to comply with other information reporting re- quirements (including the requirement to furnish a TIN).

(4) Section 7203 for willful failure to supply information (including a TIN).

(h) Effective date. The rules in this section apply to payments made on or after January 1, 2007.

[T.D. 9270, 71 FR 39551, July 13, 2006, as

amended at 71 FR 47080, Aug. 16, 2006; T.D.

9504, 75 FR 64097, Oct. 18, 2010]

§ 1.6045A–1 Statements of information required in connection with trans- fers of securities.

(a) Duty to furnish transfer statement—

(1) In general—(i) Transfers bet een ac- counts. Except as provided in para- graphs (a)(1)(ii) through (v) of this sec- tion, every applicable person (trans- feror) (as described in paragraph (a)(4) of this section) that transfers custody of a specified security to a broker (as described in paragraph (a)(5) of this section) must furnish to the receiving broker a transfer statement that in- cludes the information described in paragraph (b) of this section with re- spect to the transferred security. Ex- cept as provided in paragraphs (b)(1)(vii) and (b)(3) of this section (re- lating to noncovered securities and cer- tain securities for which basis is deter- mined under an average basis method), a transferor must furnish a separate statement for each security and, if transferring custody of the same secu- rity acquired on different dates or at different prices, for each acquisition.

(ii) Cash on delivery accounts and mul- tiple broker arrangements—(A) Sales. A custodian or other transferor that transfers custody of a security to a broker solely to effect a sale must fur- nish a transfer statement only to the broker that effects the sale. However, no transfer statement is required if the transferor itself either effects the sale or is required to report the sale of the security under § 1.6045–1.

(B) Purchases. A broker that effects a purchase but does not receive custody of the security must furnish a transfer statement to the broker receiving cus- tody. However, no transfer statement is required if the broker effects the purchase solely at the instruction of the broker receiving custody.

(iii) Exempt recipients and exempt for-

eign payees. A transferor is not required to furnish a transfer statement for a security that, after the transfer, is held for a customer that is an exempt re- cipient under § 1.6045–1(c)(3)(i) or an ex- empt foreign person under § 1.6045– 1(g)(1)(i).

(iv) Securities lending transactions— transferor as principal. A transferor that lends or borrows securities as a prin- cipal is not required to furnish a trans- fer statement for a security that is transferred pursuant to such lending or borrowing arrangement (for example, when a customer opens or closes a short sale). This exception does not apply when a transferor transfers a se- curity under a lending or borrowing ar- rangement of the customer. This excep- tion also does not apply when a trans- feror transfers a previously borrowed security to another account of the same customer (for example, to satisfy an existing short sale obligation). See paragraph (b)(4) of this section.

(v) Certain money market funds. A transferor of stock in a regulated in- vestment company described in § 1.6045– 1(c)(3)(vi) is not required to furnish a transfer statement.

(2) Format of transfer statement. The transfer statement must be furnished in writing unless both the transferor and the receiving broker agree to a dif- ferent format or method before the transfer. If a transfer occurs between accounts at the same or affiliated enti- ties, a transfer statement is deemed to have been furnished and received if the required information, including any re- quired adjustments, is incorporated into the records for the recipient ac- count.

(3) Time for furnishing statement. A transferor must furnish a transfer statement within fifteen days after the date of settlement for the transfer.

(4) Applicable person effecting transfer. Applicable person means any transferor who is a person described in § 1.6045–

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