Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 77-26

1977-1 C.B. 370

Section 6042

IRS Headnote

Information returns; dividends combined. A bank, acting as dividend disbursing agent for a corporation and also administering a dividend reinvestment program for shareholders, may file a single information return to report on a single account, those dividends some of which were paid by the bank directly to the shareholders and some of which were reinvested in the shareholder's account.

Full Text

Rev. Rul. 77-26

Advice has been requested whether, under the circumstances described below, a bank that acts as a corporation's dividend disbursing agent may file a single information return, Form 1099-DIV, Statement for Recipients of Dividends and Distributions, to report those dividends on a single account some of which are paid by the bank directly to a shareholder of the corporation and some of which are reinvested in the shareholder's account under a dividend reinvestment plan.

A bank acts as dividend disbursing agent for a corporation. The bank also administers a dividend reinvestment program for the holders of the corporation's common shares. Under this plan, the bank designates a nominee to hold, on behalf of participating shareholders, the shares purchased under the plan. The bank files a separate information return in the name of the corporation for dividends paid directly to each shareholder and for dividends paid to the nominee for each shareholder's account in the reinvestment plan.

Section 6042(a) of the Internal Revenue Code of 1954 provides that every person who makes payments of dividends aggregating $10 or more to any other person during any calendar year shall make an information return setting forth the aggregate amount of such payments and the name and address of the person to whom paid.

Section 1.6042-2 of the Income Tax Regulations provides, in part, that for purposes of section 6042(a) of the Code every person who makes payments of dividends aggregating $10 or more shall make an information return on Forms 1096 and 1099 for the calendar year in which payments are made showing the aggregate amount of such payments.

In the instant situation, the bank has access to information regarding the dividends credited to the accounts of actual owners of shares held by the nominee under the reinvestment plan and can collate such information with information on dividends paid directly to shareholders.

Accordingly, the bank may combine the amount paid directly to the shareholder with the amount credited to the shareholder's account in the reinvestment plan and file a single information return on Form 1099-DIV reporting the combined amount. If the bank files Form 1099-DIV reporting the combined amount, a separate Form 1099-DIV should not be filed to report dividends paid by the corporation to the nominee on shares held for the reinvestment plan. Also Form 1087-DIV should not be filed by the nominee.

This Revenue Ruling also applies to those withholding agents who are required to file Form 1042S (Income Subject to Withholding Under Chapter 3, Internal Revenue Code) for shareholders who are residents of foreign countries.