Bulletin: NL000016

Dear Associates:

The Energy Policy Act of 1992 changes 1099-S reporting. It requires report of the "buyer's part of the real estate tax". This change applies to transactions after December 31, 1992.

The change applies only to residences. The law does not define a residence: it should mean only one-to-four-family residences. Although 1099-S reporting also applies to other real property, you only need to report this additional information if the property is a residence.

On a residence you must show the portion of the real property tax already paid, or paid at closing, for the part of the real property tax year allocable to the buyer. This amount is that part of the real property tax apportioned for the real property tax year, beginning on the date of the sale.

The reportable tax appears on HUD-1 lines 406 and 407 (Seller). Additional lines (at 406-412) may show real estate taxes. Report only real estate taxes shown on Lines 406-412. Do not report tax prorations for amounts of taxes unpaid by the Seller (Lines 210-219; 510-519).

A real property tax is not a special benefit or assessment such as paving, street, sewer, or sidewalk assessments. Do not include these assessments in the reporting.

Example: Seller paid city taxes in advance and county taxes in advance. (Tax year July 1 to June 30). Seller paid annual paving assessment in advance for calendar year. Seller has not paid school taxes (tax year January 1 to December 31). Report city and county tax adjustments (Lines 406 and 407). Do not report paving adjustments (Line 408). IRS does not require report of adjustments for unpaid taxes (Lines 510-519) at this time.