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Interest payment information reporting.

Interest Payment Information Reporting

Current income tax regulations provide that any person who pays interest totaling $10 or more in a given year to any other person must file a Form 1099-INT. The Internal Revenue Service has recently issued guidance on how this reporting requirement applies when a debtor corporation is acquired by another corporation. New Revenue Procedure 90-57 applies only when: 1) one corporation (the successor) acquires substantially all the assets and liabilities of another (the predecessor), 2) during the pre-acquisition portion of the calendar year in which the acquisition occurs, the predecessor makes interest payments and 3) during the post-acquisition portion of that year, the predecessor does not make any such payments. The revenue procedure expressly states that the new rules do not apply to the absorption of one corporation by another pursuant to a merger agreement.

Rev. Proc. 90-57 describes two acceptable procedures for meeting the reporting requirement. Under the standard procedure, each entity that makes reportable interest payments is responsible for filing Form 1099-INT. Under this method, the predecessor must report the interest paid during the pre-acquisition period and the successor must separately report any post-acquisition payments it made.

Under the alternative procedure, the predecessor is relieved of its entire obligation to file form 1099-INT if the predecessor and successor so agree. The successor must then combine: 1) the interest payments made to a person by the predecessor in the acquisition year and 2) the interest payments made to that person by the successor in that year. The single total amount is then reported on that person's 1099-INT. The successor may include information explaining to the recipient this aggregation process.

If the alternative procedure is used, the successor is required to file a separate statement with the IRS indicating that Forms 1099-INT are being filed on the combined basis. This statement should also include the name, address and taxpayer ID numbers of both the successor and predecessor. The statements must be filed by the regular due date of the 1099-INT.
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Publication:The National Public Accountant
Date:Mar 1, 1991
Words:334
Previous Article:PC-1099.
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