Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 79-76

1979-1 C.B. 384

Section 6041
Section 6049

IRS Headnote

Information returns; interest; short-term unregistered commercial paper. A corporation issuing negotiable, unregistered, unsecured short-term notes is required to file an information return under section 6041 of the Code only for interest payments aggregating $600 or more to an individual in any calendar year. Payments to corporations are not subject to the reporting requirements.

Full Text

Rev. Rul. 79-76

ISSUE

Must a corporation that issues short-term unregistered commercial paper file information returns reporting interest paid to individual holders?

FACTS

The corporation issues unsecured short-term promissory notes. Some of the notes are negotiable by endorsement and some are negotiable to the bearer. The terms of the notes run from five days to 270 days.

LAW AND ANALYSIS

Section 6041(a) of the Internal Revenue Code of 1954 requires the filing of information by all persons engaged in a trade or business and making payment in the course of such trade or business to another person of rent, salaries, wages, premiums, annuities, compensation, remunerations, emoluments, or other fixed and determinable gains, profits and income of $600 or more in a taxable year.

Section 1.6041-1(a) of the Income Tax Regulations states that, except as provided in section 1.6041-3, every person engaged in a trade or business shall make an information return for each calendar year with respect to payments made during the calendar year in the course of such trade or business to another person of fixed or determinable interest aggregating $600 or more. These payments shall not include any payments with respect to which a statement is required by, or may be required under authority of, section 6049(a)(1) and (2) of the Code (relating to interest). Therefore, the term "interest" for purposes of section 6041 includes all interest other than that coming within the definition of interest in section 1.6049-2.

Section 1.6041-3(c) of the regulations excepts from the reporting requirement payments to corporations (other than corporations engaged in providing medical and health care services).

Section 1.6041-3(1) of the regulations states that the filing of an information return is not required for payments of interest on corporate bonds.

Section 6049(a)(1) of the Code provides that every person who makes payments of interest aggregating $10 or more to any other person during any calendar year shall make an information return, as prescribed by the Secretary or the Secretary's delegate.

"Interest," for purposes of section 6049(a)(1) and (2) of the Code is defined in section 6049(b) to include interest on evidences of indebtedness (including bonds, debentures, notes and certificates) issued by a corporation in "registered form" and, to the extent provided in regulations prescribed by the Secretary, interest on other evidences of indebtedness issued by a corporation of a type offered by corporations to the public.

Section 1.6049-2(d) of the regulations provides that an evidence of indebtedness is in "registered form" if it is registered as to both principal and interest and if its transfer must be effected by the surrender of the old instrument and either the reissuance by the corporation of the old instrument to the new holder or the issuance by the corporation of a new instrument to the new holder.

HOLDING

Since the notes are unregistered, payments of interest by the corporation do not come within the definition of interest under section 6049(b) of the Code and no statement is required or may be required under section 6049(a)(1) or (2). In addition, no regulations have been prescribed requiring the filing of a return on these payments of interest under section 6049(a)(3). Moreover, short-term notes are not corporate bonds and do not come within the exceptions provided in section 1.6041-3 of the regulations. Therefore, under section 6041 and section 1.6041-1(a), the corporation is required to file information returns reporting interest payments on its short-term promissory notes in any case in which those payments to an individual in any calendar year aggregate $600 or more. These payments are required to be reported on information returns whether or not the notes are discounted when issued. Payments of this type to corporations are not subject to the reporting requirement because of the exception provided in section 1.6041-3(c).