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See Material Available On-Line for links to the administrative material discussed herein.

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On November 18, 2002, the Internal Revenue Service ("IRS"), in Treasury Decision 9022, adopted temporary regulations requiring information reporting by corporations and brokers with respect to domestic corporations undergoing an "acquisition of control" or "substantial change in capital structure" after 2001. These reporting rules, which contain many exceptions and apply generally only to transactions involving $100 million or more, are aimed at large "inversion" transactions and require statements with respect to 2002 transactions (on IRS Form 1099-CAP) to be sent to affected shareholders by a reporting corporation by January 31, 2003. In addition, brokers are required to send Forms 1099-CAP for 2002 transactions to actual owners by February 28, 2003.

In Announcement 2003-7, the IRS stated that it will not impose penalties for failures to file Forms 1099-CAP by the due dates if a letter in the following form is provided to shareholders by February 15, 2003 (March 15, 2003 for brokers reporting to actual owners):

On [date], you exchanged shares in [name of corporation] for new shares [and cash and other property] in a transaction that may be subject to United States federal income tax due to the application of section 367(a) of the Internal Revenue Code. Depending on your individual circumstances, you may be required to report any gain from the exchange on your federal income tax return. You had gain from the exchange if [the cash and] the fair market value on [the date of the exchange] of the new shares [and any other property] you received exceeded your basis in the shares of [name of corporation] that you gave up in the exchange. You are not permitted to claim a loss on your tax return with respect to the exchange.

In addition, the legend "Important Tax Document Enclosed" must appear in a bold and conspicuous manner on the outside of the envelope containing the letter. A reporting corporation must also file an interim statement with the IRS reporting the transaction in accordance with the temporary regulations and must, upon inquiry by a shareholder of record on the date of the transaction (including any clearing organization or broker), identify itself as a corporation described in section 3.01 of Announcement 2003-7.

Material Available On-Line

• T.D. 9022, td9022.pdf [58K] and

• Announcement 2003-7, an20037.pdf [48K].

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