Internal Revenue Service
Revenue Ruling
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smRev. Rul. 64-8
1964-1 C.B. 480
Sec. 6042
Sec. 6109
IRS Headnote
Use of identifying numbers and the filing of information returns in connection with investment clubs.
Full Text
Rev. Rul. 64-8
The Internal Revenue Service has received numerous inquiries relative to the use of identifying numbers and the filing of information returns in connection with investment clubs.
An investment club is formed when a group of friends, neighbors, business associates, or others, pool limited or stated amounts of funds to invest in shares of stock or other securities. The stock or securities may be purchased either in the name of the investment club or in the name of a nominal party, i.e. , the name of one or more club members.
Whether an investment club is classified as a partnership, trust, or an association taxable as a corporation for Federal income tax purposes, it is required to file the appropriate income tax return, Form 1065, U.S. Partnership Return of Income, Form 1041, U.S. Fiduciary Income Tax Return, or Form 1120, U.S. Corporation Income Tax Return. For purposes of filing the return, the club will need to obtain an employer identification number to include therein. Section 1.6109-1(b)(1)(i) of the Income Tax Regulations.
QUESTION 1. What identifying number should be furnished the payer of dividends to the club and what returns, should the recipient of those dividends file with respect to stock recorded in the name of the investment club?
Answer : The club is required to furnish its own employer identification number to the payer. If the club qualifies as a partnership or as a trust the dividend distributions to the partners and beneficiaries must be shown on Form 1065 or Form 1041, respectively, which it is required to file; and the partners' or beneficiaries' identifying numbers must be shown on the required return. If the club is properly classified as an association taxable as a corporation, any distribution it makes which qualifies as a dividend must, if of the requisite amount, be reported on Forms 1096, U.S. Annual Information Return, and 1099, U.S. Information Return, in accordance with the instructions thereon; and the name, address and identifying number of the shareholder must be shown on the Form 1099.
QUESTION 2. What identifying number should be furnished the payer of dividends to the club and what information return should the recipient of those dividends file with respect to stock recorded in the name of one member of the investment club?
Answer: The individual in whose name the stock is held is the record owner who qualifies as a nominee under section 1.6042-2(a)(2) of the regulations. As record owner, this individual is also required to furnish his identifying number to the payer of dividends. In addition, as nominee, he is required to file a Form 1087, Nominee's Information Return, showing the investment club to be the owner of the dividend, his identifying number and the identifying number of the club.
QUESTION 3. What identifying number should be furnished the payer of dividends to the club and what information return should the recipient of those dividends file with respect to stock held in the name of two or more of the investment club members?
Answer: Under the multiple payee rule outlined in section 1.6109-1(b)(2)(iii) of the regulations, the identifying number of only one of the payees is required to be furnished to the payer. The member of the club whose number is furnished to the payer is considered as the record owner for the actual owner of the stock, the investment club. This member is a nominee as defined in section 1.6042-2(a)(2) of the regulations and is required to file a Form 1087 showing the investment club to be the owner of the dividend, his identifying number and the identifying number of the club.
The answers set forth above are not intended to relieve the payers or nominees involved of their responsibility to furnish statements to recipients of dividend payments as required under section 1.60-42-4 of the regulations.