1099-S Certification Form Changes
TO ALL WASHINGTON MEMBERS OF THE AMERICAN ESCROW ASSOCIATION
1/22/07
A big surprise arrived from IRS today in the new Internal Revenue Bulletin out officially this AM. Some of your companies have apparently picked up on this. I was attempting to get some clarification of the effective date—tomorrow apparently– but since at least one company is issuing info on this I am sending out my summary and copy now.
Basically the IRS has updated the 1099-S certification for principal residence sale exceptions (what you probably think of as the $250.000/$500,000 exclusion). That is fine as it is updated for some law changes on restricting the combined use of the sec. 1031 tax-deferred exchange benefits with the exclusion. (5 year holding period to be exact). That law change was not that recent. However now we have 2 new questions on the form. The rest is pretty much the same as before.
This form is not mandatory and can be completed at any time until next 1/31 even for closings tomorrow or later in 2007.
I do not believe the IRS took into account changes needed for software and internal systems—nor did they consult with us or others apparently on the timing of this. Also the official 2007 Form 1099-S instructions do not mention this either. Something is strange here. As before the recommended form is merely an option—you can report all transactions or allow the customer to be exempt from reporting with the form.
Tomorrow’s effective date does not mean the final word on this aspect. Please feel free to review the form and apply it immediately if you wish. My question is whether customers will remember the term 1031 (even if they did one) whether it was recent or more than 5 years ago. My guess is this will have minimal impact from a transactional impact but this may lead to many questions. Again you can simply report all transactions because a partially complete form is the same as no form at all.
Art Davis
AEA Washington DC Representative
