Form 8725 (Rev. 12-2015)
Page 2
General Instructions
Section references are to the Internal
Revenue Code.
Future Developments
For the latest information about
developments related to Form 8725 and
its instructions, such as legislation
enacted after they were published, go to
www.irs.gov/form8725.
Purpose of Form
Use Form 8725 to report and pay the
50% excise tax imposed under section
5881 on the gain or other income
realized on the receipt of greenmail
(defined below). Greenmail is considered
received when the gain or other income
is realized under your method of
accounting regardless of whether the
gain or other income is recognized.
Definitions
Greenmail. The term “greenmail” means
any amount a corporation (or any person
acting in concert with a corporation)
pays to a shareholder to directly or
indirectly acquire its stock if:
1. The shareholder held the stock (as
determined under section 1223) for less
than 2 years before entering into the
agreement to make the transfer,
2. At some time during the 2-year
period ending on the date of acquisition,
the shareholder, any person acting in
concert with the shareholder, or any
person related to either of them (see
Related person, later), made or
threatened to make a public tender offer
for stock of the corporation, and
3. The acquisition was made under an
offer that was not made on the same
terms to all shareholders.
Note. Payments made in connection
with (or in transactions related to) an
acquisition are treated as payments
made for the acquisition of the stock.
Indirect acquisition of stock. Stock is
deemed to have been acquired indirectly
by the issuing corporation if such stock
is sold to an entity related to the issuing
corporation (for example, a controlled
subsidiary).
Public tender offer. The term “public
tender offer” means any offer to
purchase or otherwise acquire stock or
assets in a corporation if the offer was
required to be filed or registered with any
federal or state agency regulating
securities.
Related person. A person is considered
related to another person if the
relationship between such persons
would result in losses disallowed under
section 267 or 707(b).
Who Must File
You must file Form 8725 if you are liable
for the excise tax on greenmail under
section 5881. File a separate Form 8725
for each agreement made to transfer
stock.
When To File
File Form 8725 by the 90th day following
receipt of any portion of the greenmail. If
you need more time to file, use Form
7004, Application for Automatic
Extension of Time To File Certain
Business Income Tax, Information, and
Other Returns, by the due date of Form
8725. Form 7004 does not extend the
time for payment of tax.
Where To File
File Form 8725 at the following address:
Internal Revenue Service Center
Cincinnati, OH 45999
Rounding Off to Whole
Dollars
You may show money items on the
return as whole dollars. To do so, drop
any amount less than 50 cents and
increase any amount from 50 cents
through 99 cents to the next higher
dollar.
Amended Return
To amend a previously filed Form 8725,
file a corrected Form 8725 and write
“Amended” at the top of the form.
Attachments
If more space is needed, attach separate
sheets to Form 8725. Be sure to put your
name and identifying number on each
sheet.
Signature
See the instructions for the Signature
section of your federal income tax return.
Interest and Penalties
Interest. Interest is charged on taxes not
paid by the due date at a rate
determined under section 6621.
Late filing of return. A penalty of 5% a
month or part of a month, up to a
maximum of 25%, is imposed on the net
amount due if Form 8725 is not filed
when due.
Late payment of tax. Generally, the
penalty for not paying tax when due is ½
of 1% of the unpaid amount, up to a
maximum of 25%, for each month or
part of a month the tax remains unpaid.
The penalty is imposed on the net
amount due.
Specific Instructions
Name and address. Enter the name
shown on your most recently filed
federal income tax return. Include the
room, suite, apartment, or other unit
number after the street address. If the
Post Office does not deliver mail to the
street address and the taxpayer has a
P.O. box, show the box number instead
of the street address.
Identifying number. If you are an
individual, enter your social security
number. If you are a nonresident or
resident alien and you do not have and
are not eligible for a social security
number, enter your individual taxpayer
identification number (ITIN). Other filers
should enter their employer identification
number.
Tax Computation
Line 1. Enter the net proceeds received
from the sale of the stock subject to the
excise tax.
Column 2(a). For each separate
acquisition of stock subject to the excise
tax, enter the date acquired (for
example, the trade date for stock traded
on an exchange or over the counter).
See section 1223 for special rules on
determining the holding period of stock
received in an exchange, for stock that
has the same basis in whole or in part as
it would have in the hands of another
person, for stock subject to the “wash
sale” rules of section 1091, etc.
Column 2(c). The cost or other basis of
stock is generally the cost of the stock
plus purchase commissions. If you
inherited the stock, received it as a gift,
received it in a tax-free exchange, or re-
acquired stock in a “wash sale”
transaction subject to the rules of
section 1091, you may not be able to
use the actual cash cost as the basis. If
you do not use cash cost, attach an
explanation of your basis. Be sure to
adjust your basis by subtracting all the
nontaxable distributions you received
before the sale. Also adjust your basis
for any stock splits. For more
information, see Pub. 551, Basis of
Assets.
Line 4. If you realized any other income
that is subject to the excise tax, enter
the amount of the income on line 4.
Line 5. You must include the recognized
portion of the amount on line 5 as
income on your federal income tax
return.
Line 6. You may not claim a deduction
on your federal income tax return for the
amount shown on line 6.
Line 7. If you filed Form 7004, enter the
amount of tax paid, if any, when you filed
that form.
Line 8. You must pay the tax due in full
when you file Form 8725. Make your
check or money order payable to the
“United States Treasury.” Write your
name, address, identifying number, and
“Form 8725” on the check or money
order.
Line 9. The IRS will refund the amount
on line 9 if you owe no other taxes.
