Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 64-68

1964-1 C.B. 449

Sec. 6042

IRS Headnote

When stock is sold prior to the ex-dividend and record dates, but not transferred to the name of the purchaser prior to the record date, the dividend on such stock may be paid to a person other than the purchaser (the actual owner of the dividend). Where the stock is traded through several dealers, the dividend is claimed by each dealer in turn and is passed on to the new owner. Held , an information return on Form 1087 should be filed by the ultimate dealer who sold the stock to the purchaser and actual owner of the dividend.

Full Text

Rev. Rul. 64-68

Advice has been requested concerning the requirement for filing Form 1099, U.S. Information Return, or Form 1087, Nominee's Information Return, under the circumstances described below.

A , a dealer in securities, purchased 100 shares of X corporation stock from his customer, B , on January 15, 1963. The stock was traded with a $50 dividend payable to the owner of record as of February 1, 1963. Dealer A sold the stock to dealer C , who, in turn, sold the stock to his customer, D . The stock certificate was not transferred from customer B before the record date and he received the $50 dividend. Dealer A claimed and received the dividend from customer B . Dealer C claimed and received the dividend from dealer A and paid the dividend to customer D , the true owner of the dividend.

The issue presented is whether dealer A (broker for the seller), customer B , or dealer C (broker for the buyer) must file either a Form 1099 or a Form 1087 under section 6042 of the Internal Revenue Code of 1954.

Under the provisions of section 1.6042-2(a)(1)(ii) of the Income Tax Regulations, every person who during a calendar year after 1962 receives payments of dividends as a nominee on behalf of another person aggregating $10 or more shall make an information return on Forms 1096 and 1087 for such calendar year showing the aggregate amount of such dividends, the name and address of the person on whose behalf received, the total of such dividends received on behalf of all persons, and such other information as is required by the forms.

In most cases, transactions involving sales and purchases of stock are entered into between investor and dealer, rather than investor and investor, and the seller is not able to ascertain who is the true owner or purchaser so he cannot furnish the information required for Form 1087. See Revenue Ruling 57-567, C.B. 1957-2, 609, at 610.

On the other hand, the dealer for the purchaser, C , has the necessary information about the purchaser and is able to provide all the information required for the Form 1087.

Accordingly, the requirements of section 1.6042-2(a)(1)(ii) will be complied with, under the circumstances presented above, if C , the dealer for the purchaser of securities, files the Form 1087 required thereunder.

Furthermore, an information return on Form 1099 need not be filed by dealer A or C , or customer B , under these circumstances.