Form 8806 (Rev. 10-2016)
Page 2
Future Developments
For the latest information about
developments related to Form 8806 and
its instructions, such as legislation
enacted after they were published, go to
www.irs.gov/form8806.
General Instructions
Section references are to the Internal
Revenue Code unless otherwise noted.
Purpose of Form
A reporting corporation must file Form
8806 to report an acquisition of control
or a substantial change in the capital
structure of a domestic corporation. The
reporting corporation or any shareholder
is required to recognize gain (if any)
under section 367(a) and the related
regulations as a result of the transaction.
Definitions
Acquisition of Control of a
Corporation
Generally, an acquisition of control of a
corporation (first corporation) occurs if,
in a transaction or series of related
transactions:
• Before an acquisition of stock of the
first corporation (directly or indirectly) by
the second corporation, the second
corporation does not have control of the
first corporation;
• After the acquisition, the second
corporation has control of the first
corporation;
• The fair market value of the stock
acquired in the transaction and in any
related transactions as of the date or
dates on which such stock was acquired
is $100 million or more;
• The shareholders of the first
corporation receive stock or other
property pursuant to the acquisition; and
• The first corporation or any
shareholder of the first corporation is
required to recognize gain (if any) under
section 367(a) and the related
regulations, as a result of the
transaction.
Control. Control means the ownership
of stock possessing at least 50% of the
total combined voting power of all
classes of stock entitled to vote or at
least 50% of the total value of shares of
all classes of stock.
Substantial Change in Capital
Structure of a Corporation
A corporation has a substantial change
in capital structure if it has a change in
capital structure and the amount of any
cash and the fair market value of any
other property (including the value of any
stock) provided to the shareholders of
the corporation pursuant to the change
in capital structure, as of the date or
dates on which the cash or other
property is provided, is $100 million or
more. Generally, a corporation has a
change in capital structure if:
1. The corporation in a transaction or
series of transactions:
• Merges, consolidates, or otherwise
combines with another corporation or
transfers all or substantially all of its
assets to one or more corporations;
• Transfers all or part of its assets to
another corporation in a Title 11 or
similar case and, in pursuance of the
plan, distributes stock or securities of
that corporation; or
• Changes its identity, form, or place of
organization; and
2. The corporation or any shareholder
is required to recognize gain (if any)
under section 367(a) and the related
regulations, as a result of the transaction.
Receipt of property. A shareholder is
treated as receiving property (or as
having property provided to it) related to
an acquisition of control or a substantial
change in capital structure if a liability of
the shareholder is assumed in the
transaction and, as a result of the
transaction, an amount is realized by the
shareholder from the sale or exchange
of stock.
Reporting Corporation
A reporting corporation is a corporation
whose stock was acquired in an
acquisition of control or that had a
substantial change in its capital
structure.
Acquiring Corporation
The acquiring corporation is any
corporation that acquired control of the
reporting corporation or received assets
from the reporting corporation pursuant
to a substantial change in capital
structure of the reporting corporation.
Who Must File
A reporting corporation is required to file
Form 8806 if the reporting corporation or
any shareholder is required to recognize
gain (if any) as a result of the application
of section 367(a) to the transaction.
If the reporting corporation transfers
all or substantially all of its assets to an
acquiring corporation in a transaction
that constitutes a substantial change in
the capital structure of the reporting
corporation and the reporting
corporation does not file Form 8806,
then the acquiring corporation must file
Form 8806. If neither corporation files
Form 8806, both corporations are jointly
and severally liable for any applicable
penalties. See Penalties for Failure To
File below.
Corporations Not Required
To File
Do not file Form 8806:
• For transactions that were properly
reported under section 6043(a); or
• If the reporting corporation reasonably
determines that all of its shareholders
who receive cash, stock, or other
property related to the acquisition of
control or substantial change in capital
structure are exempt recipients under
Regulations section 1.6043-4(b)(5).
When To File
File Form 8806, within 45 days after the
transaction, or if earlier by January 5th
of the year following the calendar year in
which the acquisition of control or
substantial change in capital structure
occurred.
Where To File
Mail Form 8806 to:
Internal Revenue Service
Large Business and International Division
Attention: PFTS
1111 Constitution Ave., NW
Washington, DC 20224
Penalties for Failure To File
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CAUTION
Form 8806 and all Forms
1099-CAP, Changes in
Corporate Control and
Capital Structure, required to
be filed under Regulations sections
1.6043-4(a) and (b) will be considered as
one return for purposes of the failure to
file penalty under section 6652(l).
If a correct Form 8806 is not filed by
the due date of the corporation’s income
tax return, including extensions, it may
be penalized $500 for each day the
return is late, up to a maximum of
$100,000. The penalty will not be
imposed if the corporation can show
that the failure to file on time was due to
reasonable cause. See the corporation’s
income tax return for information on
reasonable cause.
Additional penalties may apply under
sections 7203, 7206, and 7207.
Note: Failure to file also includes the
requirement to file on magnetic media
(such as electronic filing) as required by
section 6011(e) and Regulations section
301.6011-2.
Information Returns
Regarding Shareholders
A corporation required to file Form 8806
also must file Form 1099-CAP for certain
shareholders of record who receive cash
or other property (including stock) in
exchange for their stock in the reporting
corporation due to the acquisition of
control or the substantial change in
capital structure. See Form 1099-CAP
for more information.