a comprehensive handbook for financial organizations · – municipal original issue discount ......

2008Tax HandBook

a Comprehensive Handbook for Financial organizations

i

TaBle oF ConTenTs

NoNretiremeNt Product tax iNformatioN

What’s New for 2008 for Nonretirement Products . . . . . . . . . . . . . . 1

General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Sample of the Tax Information Statement . . . . . . . . . . . . . . . . . . . . 3

Correcting Tax Information Statements . . . . . . . . . . . . . . . . . . . . . 19

Tax Reporting Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

IRS Form 1099-B—Proceeds From Broker and Barter Exchange Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

IRS Form 1099-INT—Interest Income . . . . . . . . . . . . . . . . . . . . . 24

IRS Form 1099-DIV—Dividends and Distributions . . . . . . . . . . . 25

IRS Form 1099-OID—Original Issue Discount . . . . . . . . . . . . . . . 25

Revised Tax Information Statements . . . . . . . . . . . . . . . . . . . . . . . . 26

Reclassified Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

IRS Form 1099-MISC—Miscellaneous Income . . . . . . . . . . . . . . . 27

Transactions Pershing Does Not Report to the IRS . . . . . . . . . . . . 27

Minimum Amounts to Be Reported and Due Dates . . . . . . . . . . . . 28

Accounts Exempt From Tax Reporting . . . . . . . . . . . . . . . . . . . . . . 28

Federal Tax Withholding (Backup Withholding) . . . . . . . . . . . . . . 29

Collateralized Debt Obligations (CDOs), Collateralized Mortgage Obligations (CMOs), Real Estate Mortgage Investment Conduits (REMICs), Financial Asset Securitization Investment Trusts (FASITs), and Widely Held Mortgage Trusts (WHMTs) . . . . . . . 30

State Information Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

IRS Form 1042-S—Foreign Person’s U .S . Source Income Subject to Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

IRS Form 2439—Notice to Shareholder of Undistributed Long-Term Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

TXAS-Tax Reporting System/TEFRA . . . . . . . . . . . . . . . . . . . . . . 34

retiremeNt Product tax iNformatioN

What’s New for 2008 for Retirement Products . . . . . . . . . . . . . . . . 39

General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Tax Reporting Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Form 1099-R Copy C with Instructions . . . . . . . . . . . . . . . . . . . . . 41

Form 1099-R Copy B and Copy 2 . . . . . . . . . . . . . . . . . . . . . . . . . 42

Guide to Form 1099-R Distribution Codes . . . . . . . . . . . . . . . . . . 43

Form 1099-Q . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Correcting Tax Information for Form 1099-R and Form 1099-Q . 46

Form 5498 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Form 5498-ESA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Correcting Tax Information for Form 5498 and Form 5498-ESA . 51

Form 1099-R Name/TIN Mismatch Notices . . . . . . . . . . . . . . . . . 54

Foreign Distribution Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . 54

Foreign Distribution Tax Treatment Grids . . . . . . . . . . . . . . . . . . . 55

IRS Publication 515 and Form 1042-S . . . . . . . . . . . . . . . . . . . . . . 56

IRS Form 990-T—Exempt Organization Business Income Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Correcting Tax Information for IRS Form 990-T . . . . . . . . . . . . . 60

Frequently Asked Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

1


General InFormaTIon

> PayerPershing LLC is the payer of income reported on Internal Revenue Service (IRS) Forms 1099-B, 1099-INT, 1099-DIV, 1099-OID, and 1099-MISC .

> Payer’s taxPayer ideNtificatioN Number (tiN)The TIN, also called the Federal Identification Number, for Pershing is 13-2741729 .

> New clieNts Tax information statements include activity for 2008 or since the

date your financial organization or your clients commenced doing business with Pershing .

> moNey market fuNdsTax information statements include income earned on money market funds for which Pershing LLC is the payer of income . When income from money market funds is not reported on the tax information statements, the fund company issues a separate IRS Form 1099 .

> tax iNformatioN statemeNt substitutioNsTax information statements are substitutes for the following IRS forms:

irs information return irs form Name 1099-B Proceeds from Broker and

Barter Exchange Transactions 1099-INT Interest Income 1099-DIV Dividends and Distributions 1099-OID Original Issue Discount 1099-MISC Miscellaneous Income

> traNsactioNs PershiNg does Not rePort to the irsTax information statements also include the following transactions which we do not report to the IRS:

– Municipal Original Issue Discount– Partnership Cash Distributions– Trust Distributions– Return of Principal Distributions– Equity Options Transactions– Securities Purchased– Accrued Interest Purchased– Margin Interest Expense

WHaT’s neW For 2008 For nonreTIremenT produCTs

> tax iNformatioN system (txas) eNhaNcemeNtsThere will be two initial mail dates for the retail 1099s . The first set of 1099s will be mailed by January 31, 2009, for those accounts that do not hold securities such as certain mutual funds, unit investment trusts (UITs), and real estate investment trusts (REITs) . Accounts that hold securities that have provided reclassification instructions in the past will be mailed with the second mailing by February 17, 2009 . Pershing believes that this change will significantly improve the accuracy of the forms initially sent to your clients . The 2008 retail 1099 tax statements for clients subject to the delayed mailing will be available for review on e-Document Suite™ by January 31, 2009 . However, they will be watermarked with the word “DRAFT” as notification that the information provided on the statement is a draft . 1099s may be subject to change if reclassification information is provided by mutual funds, UITs, or REITs .

Retail 1099 revisions will be processed beginning February 17, 2009, for customers whose statements were mailed by January 31, 2009 . The daily revision process will begin February 25, 2009, and will include Social Security number (SSN)/Taxpayer Identification Number (TIN) changes, ERISA Code A (retail exempt) to non-exempt updates, and account level adjustments . These revisions will be processed systematically on a daily basis up until May 31, 2009, with no 1099 revision request necessary in these circumstances .

> substitute form 1042-sPershing has created a substitute Form 1042-S for use for tax year 2008 reporting and going forward . The form was developed in accordance with IRS Publication 1179: General Rules and Specifications for Substitute Forms . The form was designed to emulate Pershing’s substitute Form 1099 and Pershing’s award-winning statement .

The Pershing substitute Form 1042-S will be a variable number of pages depending upon the volume of related activity in the account .

The first page will contain a summary total section, in addition to other required Form 1042-S information . Transaction details will begin on page two . The final page of the form will be the U.S. Income Tax Filing Requirements (as they appear on the IRS form which can be found at www .irs .gov) .

A sample of the form is provided on pages 31 and 32 of this document . Going forward, corrected forms for the current tax year will be generated using the newly designed form .

> tax status uPdatesRetail accounts that change their tax status from non-exempt to ERISA Code A (retail exempt) will be automatically deleted up until May 31, 2009, unless there is federal tax withholding, in which case no 1099 revision request necessary . In addition, accounts coded ERISA Code B (exempt retirement account ) that change their tax status to retail non-exempt will have 1099s systematically created . No 1099 revision request is necessary through May 31, 2009 .

> uit uPdatesUIT reporting will now reflect details and not summary . In addition, accrued income on UITs will now be reflected on the 1099 as Undistributed Income with a December 31, 2008 date .

The percentage of foreign source income will be indicated on the 1099 in the ordinary income section as long as it is available .

The 2008 Forms 2439 and 1042-S and the IRS Second B Notice mailing will all be available for review on e-Document Suite .

> t billIf you purchased a Treasury bill above par and it matured in 2008, the proceeds payable at maturity will be reported on a Form 1099-B for 2009 and no interest will be reportable for tax purposes .

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> collateralized debt obligatioNs (cdos), collateralized mortgage obligatioNs (cmos), real estate mortgage iNvestmeNt coNduits (remics), fiNaNcial asset securitizatioN iNvestmeNt trusts (fasits), aNd widely held mortgage trusts (whmts) Interest earned on certain CDOs, CMOs, REMICs, FASITs, and WHMTs is not included on the original IRS Form 1099-INT mailed in January and February 2009 . Tax information on these securities is not available until after the mailing deadline . We are required to provide this information to your clients by March 16, 2009 . Accordingly, taxpayers may choose not to file their tax returns until they receive a revised tax information statement .

> service ceNter All 1099 correction requests (current and prior year) should be submitted via Service Center on the NetExchange® platform . Please note that correction requests can only be processed for the current year, plus two years (2006-2008) .

Current year (2008) retail 1099 corrections due to Social Security number (SSN) or Tax Identification Number (TIN) updates are processed systematically until May 31, 2009 . After May 31, 2009, you can request a duplicate 1099 on TXAS after you change the SSN/TIN, and the statement will be printed in the next revision with the corrected SSN/TIN . Please note: “Prior year” SSN and TIN updates must always be submitted via Service Center, as they will not occur systematically .

For additional information on the Tax and Year-End Statement, which combines the year-end statement with the 1099 tax statement, see Correcting Tax Information Statements on page 19 .

> rePorts available oN rePort ceNter– IRS B-Notice Reports (TXA997A1 and TXA997A2)– Reasonable Cause Reports (TXA822R7 and TXA822R8)– 1099 Revision Reports (BMO521A0 and BMO521A1)– T-Bill Solicitation Reports (TXA956A1, TXA956A2,

and TXA956A6)

> e-documeNt suitetm

Original tax information statements, duplicate copies, requested courtesy tax information statements, Forms 480 .6A and 480 .6B, 1042-S Statements, IRS Form 2439, IRS Second B Notice letter, and all revised tax information statements may be accessed online via e-Document Suite .

> tax iNformatioN system (txas)You can research your clients’ tax-related inquiries in TXAS, which allows you to:

– Browse accounts updated on the previous day by account number, office number, investment professional number, and date of update

– Review tax information according to the update type– Browse Puerto Rico activity on Forms 480 .6A and 480 .6B

reporting to the Commonwealth of Puerto Rico– Browse exempt accounts coded with ERISA Code A– Browse 1099 information for foreign accounts

> multiPle tax iNformatioN statemeNtsYour clients who have multiple accounts with Pershing will receive separate tax information statements for each account .

> tax iNformatioN statemeNts versus brokerage accouNt statemeNtsBrokerage account statements provide taxpayers with a cash basis summary of their accounts for the 2008 calendar year . Tax information statements reflect information on a tax basis . Although there may be differences between the two documents, tax information statements are the authoritative document for tax reporting purposes .

The statements may differ in any of the following situations:

– Tax classifications for income paid by mutual funds, REITs, and UITs are reported on the tax information statement based on information provided by the administrators of these companies after year end . Their post year-end tax classifications often differ from the classifications reported on the monthly brokerage account statements .

– Dividends declared and made payable by mutual funds and REITs in October, November, or December 2008 are reported on the 2008 tax information statement, even when the dividends are actually paid in January 2009 . These dividends are referred to as spillover dividends and will not be reported again on the 2009 tax information statement .

– Tax information statements display trade activity based on trade date . Monthly brokerage account statements display trade activity on a settlement date basis .

– Interest income earned on REMICs is not included on the initial tax information statements . This information is due to your clients by March 16, 2009 . Income from REMICs is reported on an accrual basis when earned (not when paid) . Consequently, there may be differences between interest income credited on brokerage account statements and income reported on the tax information statement .

Our tax reporting system uses Pershing’s Security Master file to ensure the proper classification of income . External vendors (for instance, Automatic Data Processing, Inc .®, Bloomberg® Financial Services, Ernst & Young, Interactive Data Corporation, J .J . Kenny Information Services, Lipper® Analytical Services, Standard & Poor’s®, and WSC Investment Services) are used to verify classification of income .

> tax iNformatioN statemeNt cd-romsAll firms will receive a CD-ROM that contains the tax information statements for all clients and offers a variety of sort, retrieval, and print options . This CD-ROM will represent the filing to the IRS and will be available after June 2009 .

Refer to the Request for Tax Information Statements Form on page 21 for additional information on CD-ROM options .

> additioNal iNformatioNThe tax guide will be available electronically via www .mytaxhandbook .com and through the Material Catalog of The Source via NetExchange Pro . .

> who to coNtactOur Tax Reporting Help Desk provides you with a centralized source of information and assistance for tax reporting issues . The toll-free number is (800) 699-9965 for calls originating within the United States; or you can also reach the Help Desk at (201) 413-4200 .

The Tax Reporting Help Desk is not authorized to offer tax advice.

General InFormaTIon

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sample oF THe Tax InFormaTIon sTaTemenT

> for your iNformatioN (from samPle statemeNt)Making sense of your finances just got simpler, thanks to this consolidated tax and year-end statement .

The following sources of must-have, year-end information are now at your fingertips:

– Tax Statement (IRS Form 1099)—Containing a detailed summary of your reportable and other nonreportable brokerage account transactions to assist with tax preparation

– Asset Management Account Activity—Listing checking, debit card, and electronic transactions posted to your asset management account (Available for Gold and Platinum asset management accounts only)

– Portfolio Evaluation Service® (PES®)—Featuring a schedule of realized gains and losses for your investments (Available for PES accounts only)

We hope you will find the information provided by these tools helpful while preparing for the current tax-filing season .

This section is meant as a general guide and is provided for informational purposes only . The Schedule of Realized Gains and Losses is not reported to the IRS . This Schedule may not reflect all cost basis adjustments necessary for tax reporting purposes; for example, it does not reflect disallowed losses from wash sale events and differences due to reclassification of income . The Schedule of Realized Gains and Losses section on this statement and the monthly client brokerage statement will differ when adjustments are made after the closing date of the transaction . When you report your cost basis on your tax return, it should be verified with your own records . In particular, there may be other adjustments which you need to make and you should consult with your tax advisor in order to properly report your gain or loss for tax purposes .

Cost basis on fixed income securities is adjusted by several factors including: amortization, accretion, or principal paydowns . Original cost basis of these investments is provided for your convenience .

The cost basis of this security has been provided to us by you or your financial organization and we make no representation as to the accuracy of such cost basis .

Realized gains and losses are not reported for this closing transaction because the cost basis or proceeds is not available . As a result, totals will not reflect information for this security .

Realized loss for this security is net of disallowance due to a wash sale to the extent that such wash sales are reflected in our records .

There may be differences between the Schedule of Realized Gains and Losses and 1099 reporting . Below are some of the reasons for these differences:

– Account Number Changes—If your account number changed during the year, the Schedule of Realized Gains and Losses may have been transferred from the original account to the new account . The new account will provide you with the complete Schedule of Realized Gains and Losses . However, you will receive a complete Form 1099 for each account opened during the year .

– Corporate Actions—For corporate actions, especially cash and stock mergers, the Schedule of Realized Gains and Losses may report the economic gain or loss resulting from the transaction, including the value of any stock or securities received . Thus, the Schedule of Realized Gains and Losses may report no capital gain, a capital gain equal to the difference between the original cost basis versus the fair market value of the new security, or a capital gain equal to the cash received, depending on the terms of the corporate action . In all events, however, the Form 1099 will only report the cash portion of the corporate action .

– Cost Basis Service Enrollment—The Schedule of Realized Gains and Losses will only be displayed for closing transactions during the period the account was enrolled in the cost basis service . However, proceeds will be reported on the Form 1099 for the full year .

– Cost Basis Service Reenrollment—The Schedule of Realized Gains and Losses provides you with the activity after your account was reactivated in the cost basis service . However, proceeds will be reported on the Form 1099 for the full year .

– Fixed Income—Maturities and redemptions for short-term instruments (maturities of less than one year) are included in the Schedule of Realized Gains and Losses . However, this income is reported to the IRS on Form 1099-INT .

– Mortgage-Backed Securities—Each principal paydown is included in the Schedule of Realized Gains and Losses . However, proceeds are reported to the IRS on Form 1099-B only upon the sale or final redemption of the security .

– Options (Assignment)—For the Schedule of Realized Gains and Losses, the underlying security proceeds are adjusted by the premium paid or received from the options contract . However, if the assignment of the options constitutes a sale of the underlying securities, the proceeds of the sale are reported to the IRS on Form 1099-B, without taking the premium into account .

– Options (Closing Contracts)—The Schedule of Realized Gains and Losses will include options transactions . However, options transactions are generally not reported to the IRS and may not appear on the Form 1099 .

– Short Sales— Short sales are reported on the Schedule of Realized Gains and Losses in the year those sales are covered . However, short sales are reported to the IRS on Form 1099-B in the year they are sold .

The tax rules applicable to the reporting of the transactions reported on the Schedule of Realized Gains and Loss are complex . You should consult your tax advisor for the appropriate tax treatment of your transactions and the manner in which they should be reported on your tax returns .

4


iNserts from samPle statemeNt

Making sense of your finances just got simpler—thanks to this consolidated tax and year-end statement.

The following sources of must-have, year-end information are now at your fingertips:

� Tax Statement (IRS Form 1099)—containing a detailed summary of your reportable and other nonreportable brokerage account transactions to assist with tax preparation

� Asset Management Account Activity—listing checking, debit card, and electronic transactions posted to your asset management account< Available for Gold and Platinum asset management accounts only >

� Portfolio Evaluation Service (PES®)—featuring a schedule of realized gains and losses for your investments< Available for PES accounts only >

We hope you will find the information provided by these tools helpful while preparing for the current tax-filing season.

For Your Information

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This section is meant as a general guide and is provided for informational purposes only. The Schedule of Realized Gains and Losses is not reported to the IRS. This Schedule may not reflect all cost basis adjustmentsnecessary for tax reporting purposes; for example, it does not reflect disallowed losses from wash sale events and differences due to reclassification of income. The Schedule of Realized Gains and Losses section on thisstatement and the monthly client brokerage statement will differ when adjustments are made after the closing date of the transaction. When you report your cost basis on your tax return, it should be verified with yourown records. In particular, there may be other adjustments which you need to make and you should consult with your tax advisor in order to properly report your gain or loss for tax purposes.

Cost basis on fixed income securities is adjusted by several factors including: amortization, accretion, or principal paydowns. Original cost basis of these investments is provided for your convenience.

The cost basis of this security has been provided to us by you or your financial organization and we make no representation as to the accuracy of such cost basis.

Realized gains and losses are not reported for this closing transaction because the cost basis or proceeds is not available. As a result, totals will not reflect information for this security.

Realized loss for this security is net of disallowance due to a wash sale to the extent such wash sales are reflected in our records.

There may be differences between the Schedule of Realized Gains and Losses and 1099 reporting. Below are some of the reasons for these differences:

� Account Number Changes–If your account number changed during the year, the Schedule of Realized Gains and Losses may have been transferred from the original account to the new account. The newaccount will provide you with the complete Schedule of Realized Gains and Losses. However, you will receive a complete 1099 for each account open during the year.

� Corporate Actions–For corporate actions, especially cash and stock mergers, the Schedule of Realized Gains and Losses may report the economic gain or loss resulting from the transaction, including the value ofany stock or securities received. Thus, the Schedule of Realized Gains and Losses may report no capital gain, a capital gain equal to the difference between the original cost basis versus the fair market value of thenew security, or a capital gain equal to the cash received, depending on the terms of the corporate action. In all events, however, the 1099 will only report the cash portion of the corporate action.

� Cost Basis Service Enrollment–The Schedule of Realized Gains and Losses will only be displayed for closing transactions during the period the account was enrolled in the cost basis service. However, proceedswill be reported on the 1099 for the full year.

� Cost Basis Service Reenrollment–The Schedule of Realized Gains and Losses provides you with the activity after your account was reactivated in the cost basis service. However, proceeds will be reported onthe 1099 for the full year.

� Fixed Income–Maturities and redemptions for short-term instruments (maturities of less than one year) are included in the Schedule of Realized Gains and Losses. However, this income is reported to the IRS onForm 1099-INT.

� Mortgage-Backed Securities–Each principal paydown is included in the Schedule of Realized Gains and Losses. However, proceeds are reported to the IRS on Form 1099-B only upon the sale or finalredemption of the security.

� Options (Assignment)–For the Schedule of Realized Gains and Losses, the underlying security proceeds are adjusted by the premium paid or received from the options contract. However, if the assignment of theoptions constitutes a sale of the underlying securities, the proceeds of the sale are reported to the IRS on Form 1099-B, without taking the premium into account.

� Options (Closing Contracts)–The Schedule of Realized Gains and Losses will include options transactions. However, options transactions are generally not reported to the IRS and may not appear on the 1099.

� Short Sales–Short sales are reported on the Schedule of Realized Gains and Losses in the year those sales are covered. However, short sales are reported to the IRS on Form 1099-B in the year they are sold.

The tax rules applicable to the reporting of the transactions reported on the Schedule of Realized Gains and Loss are complex. You should consult your tax advisor for the appropriate tax treatment of your transactionsand the manner in which they should be reported on your tax returns.

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5


summary sectionThe top section of the tax information statement’s first page provides the account profile information illustrated below . On all subsequent pages of the tax information statement, only the account number, the recipient’s identification number, and the first two lines of the account registration appear . The account profile information includes the following:

1. Your client’s account number and the recipient’s identification number

2. Your client’s name and address

3. The investment professional’s name, address, and telephone number

4. The payer’s name and Federal Identification Number

Appearing below the account profile information on the first page are the following four summary sections:

5. Summary of Gross Proceeds and Regulated Futures Contracts

6. 2008 1099-DIV—Dividends and Distributions

7. 2008 1099-INT—Interest Income

8. Summary of Original Issue Discount

If an account has only one reportable transaction in one of the summary sections, all remaining sections will appear with zeros indicating no activity . If an account has no reportable information, this summary page is not printed .

The following are notices that may appear on the tax information statement:

9. An IRS message indicating comparison of information to the client’s tax return

10. A notice if the client held any collateralized debt securities (CDOs, CMOs, REMICs, FASITs, and WHMTs)1

11. The page number relative to all pages of the tax information statement

1 Income from these securities is reported by March 16, 2009 .


NOTICE: This tax statement is incomplete as it relates to your CDO, CMO, REMIC, FASIT, and WHMT. You should not file your tax return you receive a revised statement from us with the applicable information. (See the message at the end of this statement).

This is important tax information and is being furnished to the Internal Revenue Service (IRS). If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income istaxable and the IRS determines that it has not been reported.

Summary of Gross Proceeds and Regulated Futures ContractsAmount

Gross Proceeds (Less Commissions and Fees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,207.80 *Federal Income Tax Withheld – Gross Proceeds . . . . . . . . . . . . . . . . . . . . . . 546.12

Regulated Futures Contracts:Profit or (Loss) Realized in 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841.43Unrealized Profit or (Loss) on Open Contracts – 12/31/07 . . . . . . . . . . . . . . . . . . . . . . . . . . 141.12Unrealized Profit or (Loss) on Open Contracts – 12/31/08 . . . . . . . . . . . . . . . . . . . . . . . . 1,557.00Aggregate Profit or (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,257.31Federal Income Tax Withheld – Reg. Futures Contracts . . . . . . . . . . . . . . . . . . 0.00* Details of each Gross Proceeds transaction are reported to the IRS.

Refer to the 1099-B section of this statement for these details.

2008 1099-DIV Dividends and Distributions OMB No. 1545-0110Box Amount1a Total Ordinary Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,155.521b Qualified Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812.002a Total Capital Gain Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625.002b Unrecaptured Section 1250 Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.002c Section 1202 Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350.002d Collectibles (28%) Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Nondividend Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.004 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402.145 Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.006 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.357 Foreign Country or U.S. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a8 Cash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,094.009 NonCash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00

2008 1099-INT Interest Income OMB No. 1545-0112Box Amount1 Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,805.012 Early Withdrawal Penalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Interest on U.S. Savings Bonds & Treasury Obligations . . . . . . . . . . . . . . . . . . . . . . . 7,642.444 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.005 Investment Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.006 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.007 Foreign Country or U.S. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a8 Tax-Exempt Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,475.009 Specified Private Activity Bond Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595.00

Summary of Original Issue DiscountAmount

Original Issue Discount (Non-U.S. Treasury Obligations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531.61Other Periodic Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800.00Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00Original Issue Discount on U.S. Treasury Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00

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summary section (continued)12. Distributions reported on IRS Form 1099-MISC—Miscellaneous

Income reflect substitute payments in lieu of dividends or interest credited during 2008 . These amounts were allocated to an account pursuant to IRS regulations and represent amounts we received as a result of the deemed transfer of securities for use in a short sale .

Royalties show income earned from royalty trusts . Other Income, such as substitute payment reimbursements, should be reported as other income on your client’s tax returns .

13. The Summary of Transactions We Do Not Report to the IRS is provided to your clients to help them prepare their tax returns .

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12 Form 1099-MISC 2008 Miscellaneous Income (OMB No. 1545-0115)Box Amount2 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.004 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.008 Substitute Payments in Lieu of Dividends or Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.00

Summary Of Transactions We Do Not Report To The IRS (See enclosure for additional information)Amount

Municipal Original Issue DiscountOriginal Issue Discount – Subject to Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.75Original Issue Discount – Not Subject to Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240.48Total Municipal Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,379.23

Non-Reportable DistributionsPartnership Cash Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420.00Trust Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00Return of Principal Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300.00Total Non-Reportable Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820.00

Equity Options TransactionsCost of Equity Option Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,112.50Equity Option Proceeds and Expirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,588.99

Securities PurchasedNet Cost of Securities Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,329.56Accrued Interest Purchased

U.S. Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728.33U.S. Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,041.70U.S. Government Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.00Foreign Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250.00Tax-Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256.67Tax-Exempt – Specified Private Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170.00

Total Accrued Interest Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,506.70Margin Interest Expense Charged to Your Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662.50

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2008 Form 1099-B PROCEEDS FROM BROKER AND BARTER EXCHANGE TRANSACTIONS OMB No. 1545-0715(For individuals, report details on Form 1040, Schedule D, Line 1 or 8.)

Trade/Process Proceeds Federal IncomeDescription CUSIP Date (Less Commissions & Fees) Tax Withheld(Box 7) (Box 1b) (Box 1a) Quantity (Box 2) (Box 4)

EXXON MOBIL CORP COM 013742507 06/07/2008 500 5,000.00*10/20/2008 200 1,752.00

6,752.00

OCCUSYSTEMS INC COM 674623103 04/17/2008 100 100.00

CHEVRON CORP 009269101 09/02/2008 450 9,562.50

PENN NATL GAMING INC 8793351097 08/04/2008 100 1,950.43 546.12

UNITED STATES TREAS BILLS 912795PT2 04/08/2008 100,000 99,005.000.000% 04/08/08 B/E

U.S. TREAS NOTE 912810BU1 05/15/2008 55,000 55,837.898.250% 05/15/10 B/EDTD 05/15/98

TOTAL 173,207.80 546.12

*Short Sale

This is important tax information and is being furnished to the IRS. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determinesthat it has not been reported.


Proceeds from broker and barter exchange transactions1. Proceeds from broker and barter exchange transactions are reported

on IRS Form 1099-B—Proceeds from Broker and Barter Exchange Transactions . These transactions include sales, redemptions, tender offers, maturities, etc . Each transaction in this section is reported to the IRS .

2. Transactions are listed in CUSIP® sequence .

3. Short sales are indicated with the (*) symbol next to the amount displayed in the Proceeds (Less Commissions & Fees) (Box 2) column .

4. If proceeds were subject to federal tax withholding, the amount withheld is reported in the Federal Income Tax Withheld (Box 4) column .

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regulated futures contracts1. Regulated futures contracts are reported on IRS Form 1099-B .

2. The Profit or (Loss) Realized in 2008 subsection displays contracts settled or closed during 2008 .

3. Transactions are listed in CUSIP sequence . CUSIPs are displayed below security descriptions .

4. The expiration date and strike price are displayed in the Expiration Date/Strike Price column .

5. If any proceeds were subject to federal tax withholding, the amount withheld is reported in the Federal Income Tax Withheld (Box 4) column .

6. The Unrealized Profit or (Loss) on Open Contracts–12/31/2007 subsection provides the details of all contracts open at the end of 2007 . Open contracts are marked to market as of December 31, 2007, to determine unrealized profit or (loss) .

7. The Unrealized Profit or (Loss) on Open Contracts–12/31/2008

subsection provides the details of contracts open at the end of 2008 . Open contracts are marked to market as of December 31, 2008, to determine unrealized profit or (loss) .

8. The Aggregate Profit or (Loss)–Form 1099-B (Box 11) equals the realized profit or loss adjusted for the unrealized profit or loss at December 31, 2007 and December 31, 2008 . Aggregate profit or loss is calculated as follows:

Profit or (Loss) Realized in 2008 Less: Unrealized Profit or (Loss) on Open Contracts–12/31/2007 Plus: Unrealized Profit of (Loss) on Open Contracts–12/31/2008

Form 1099-B REGULATED FUTURES CONTRACTS

UNREALIZED PROFIT OR (LOSS) ON OPEN CONTRACTS – 12/31/07

Opening Opening Market UnrealizedExpiration Date/ Trade Number of Long/ Contract Value Profit/(Loss)

Description Strike Price Date Contracts Short Amount 12/31/07 (Box 9)

PUT 100 S & P EXP 03-19-08 @ 430 01/31/2007 10 Long 1,921.38 2,062.50 141.12100 INDEXCUSIP: 7837909TF

TOTAL 141.12

PROFIT OR (LOSS) REALIZED IN 2008

Closing Opening Closing RealizedExpiration Date/ Trade/Process Number of Sell/ Contract Contract Profit/(Loss)

Description Strike Price Date Contracts Expire Amount Amount (Box 8)

PUT 100 S & P EXP 09-20-08 @ 975 03/15/2008 10 Sell 1,921.38 2,342.76 421.38 0.00

07/10/2008 5 Sell 845.70 1,265.75 420.05 0.00

0.00

500 INDEXCUSIP: 12483B9IO

TOTAL 841.43

UNREALIZED PROFIT OR (LOSS) ON OPEN CONTRACTS – 12/31/08

Opening Opening Market Unrealized Federal IncomeExpiration Date/ Trade Number of Long/ Contract Value Profit/(Loss) Tax Withheld

Description Strike Price Date Contracts Short Amount 12/31/08 (Box 10) (Box 4)

Federal IncomeTax Withheld

(Box 4)

PUT 100 S & P EXP 01-21-09 @ 415 12/11/2008 10 Short 3,557.00 2,000.00 1,557.00 0.00100 INDEX CUSIP: 7837909TC

TOTAL 1,557.00 0.00

Aggregate Profit or (Loss) – Form 1099-B; Box 11 (Individuals report on Form 6781, line 1, column b) 2,257.31

Total Federal Income Tax Withheld on Regulated Futures Contracts 0.00


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interest income1. Interest income is reported on IRS Form 1099-INT . Details are

displayed on tax information statements to provide your clients with transaction-level information .

2. Transactions for each security are classified by CUSIP/ Security Type .

3. Transactions are listed in CUSIP sequence .

4. Separate subtotals are reported in three categories for interest earned (if applicable): U .S . corporations, foreign corporations,

U .S . government agencies, and tax-exempt interest from tax-exemptbonds, mutual funds, and UITs .

5. If any income was subject to federal tax withholding, the amount withheld is reported in the Federal Income Tax Withheld (Box 4) column .

6. Your clients may deduct investment expenses from single-class REMICs and UITs as other expenses on IRS Form 1040, Schedule A, subject to the 2% limit .


INTEREST INCOME (Details of Form 1099-INT)

Interest on U.S. Savings Federal Income Investment ForeignCUSIP/ Interest Income Bonds and Treasury Tax Withheld Expenses Tax Paid

Description Security Type Date Paid (Box 1) Obligations (Box 3) (Box 4) (Box 5) (Box 6)

BROWNING FERRIS INDS 115885AG0 12/15/2008 312.50INC SUB DEV CONV U.S. Corp.6.750% 07/18/08 B/E

CENCO INC SUB DEB CONV 151303AC8 08/30/2008 00.005.000% 11/01/11 REG Foreign

CITICORP SUB NT 173034DK2 03/15/2008 633.758.500% 02/01/19 REG U.S. Corp.

FEDL NATL MTG ASSN DEB 31358DAV6 01/10/2008 1,109.388.875% 07/10/09 REG DTD 07/10/92 Govt Agency 06/30/2008 1,109.38

2,218.76

U S TREAS BD 912810BU1 05/15/2008 1,258.058.250% 05/15/10 B/E U.S. Govt 08/29/2008 519.99#

1,778.04

U S TREAS BILL 912795PZ8 03/08/2008 4,417.500.000% 03/08/08 B/E U.S. GovtPURCHASE PRICE: 245,582.50Quantity: 250,000

U S TREAS BILL 912795QD6 06/16/2008 1,446.900.000% 06/16/08 B/E U.S. GovtIRS Publication 1212 rate per $1000: 48.23Quantity: 30,000

FEDERAL HOME LN BKS 3133M0QP9 10/21/2008 875.00CONS BD Govt Agency0.000% 10/21/08 B/EPURCHASE PRICE: 14,125.00Quantity: 15,000

FORD MOTOR CREDIT CORP 34539UP30 02/03/2008 125.00DISCOUNT COMMERCIAL U.S. Corp.PAPER0.00% 02/03/08 B/EPURCHASE PRICE: 9,785.00Quantity: 10,000

Interest on Your Credit Balance 350.00

Interest Income – U.S. Corporations and on Your Credit Balance 1,421.25

Interest Income – Foreign Corporations 200.00

Interest Income – U.S. Government Agencies 3,093.76

TOTAL 4,715.01 7,642.44# Represents Accrued Interest Sold

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dividends and distributions1. Dividends and distributions are reported on IRS Form 1099-DIV .

Details are displayed on tax information statements to provide your clients with transaction-level information .

2. Transactions are listed in CUSIP sequence (although CUSIPs are not displayed) .

3. Subtotals in the Total Ordinary Dividends (Box 1a) column are provided for income from total U .S . and foreign corporations to assist in preparing tax returns .

4. Dividends that are eligible for a 15% (or 0%) maximum rate are separated in the Qualified Dividends (Box 1b) column .


6. If any income was subject to foreign tax, the foreign tax paid is reported in the Foreign Tax Paid (Box 6) column .

tax-exempt interest income1. Tax-Exempt interest income is reported on Form 1099-INT .

2. Accrued interest received on municipal notes and bonds sold between interest payment dates is reported on a settlement date basis and is included in the tax-exempt interest income category .

Amounts representing accrued interest sold are identified with a symbol (*) on your clients’ statements . It may be necessary to reduce the amount of the tax-exempt interest income category by the amount of accrued interest purchased .

DIVIDENDS AND DISTRIBUTIONS (Details of Form 1099-DIV)

Total Ordinary Qualified *Total Capital Nondividend Federal Income Investment ForeignDividends Dividends Gain Distributions Distributions Tax Withheld Expenses Tax Paid

Description Date Paid (Box 1a) (Box 1b) (Box 2a) (Box 3) (Box 4) (Box 5) (Box 6)

BRITISH PETE PLC ADRS 07/03/2008 80.00 12.00

FORTIS CAPITAL FUND 06/17/2008 100.00 60.00 100.00

NATIONAL LOAN BK HOUSTON TEX 02/17/2008 100.00 100.00 28.00

PHILIP MORRIS COMPANIES INC 04/11/2008 276.00 276.0007/11/2008 276.00 276.00

552.00 552.00

PRICE REIT INC CL B 06/30/2008 100.00 100.00 500.00 16.00

REUTERS HLDGS INC 05/06/2008 223.52 22.35

PUTNAM FUND A ** 01/11/2008 125.00 35.00

Dividends – U.S. Corporations 852.00 812.00

Dividends – Foreign Corporations 303.52 0.00

TOTAL 1,155.52 812.00 625.00 116.00 63.00 0.00 34.35

* Refer to the Capital Gain Distributions section for details.** We have not yet received information to properly classify the income paid by this company. If we receive information, we will send you a revised tax information statement. See Tax Guide for details.

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TAX-EXEMPT INTEREST (Details of Form 1099-INT)

Tax-Exempt Specified Private Activity Federal Income Investment ForeignCUSIP/ Interest Bond Interest Tax Withheld Expenses Tax Paid

Description Security Type Date Paid (Box 8) (Box 9) (Box 4) (Box 5) (Box 6)

WESTCHESTER CNTY NY 957367AS4 02/01/2008 297.50 297.50INDL DEV AGY ARPT 08/01/2008 297.50 297.50FAC REV WESTCHESTER 595.00 595.00ARPT ASSOC-SER ADTD 02/01/96 CLB

SULLIVAN WEST CENT 865353AZ9 04/15/2008 440.00SCH DIST NY 10/17/2008 440.004.400% 04/15/24 B/E 880.00DTD 04/15/06 CLB

TOTAL 1,475.00 595.00 0.00 0.00 0.00

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capital gain distribution1. The Capital Gain Distributions section identifies various

classifications of capital gain distributions from mutual funds and REITs .

Note: This section does not include short-term capital gain distributions from mutual funds and REITs .

2. The sum of the Unrecaptured Section 1250 Gain (Box 2b) column, Section 1202 Gain (Box 2c) column, Collectibles (28%) Gain (Box 2d) column, and Long-Term Capital Gain Distributions column is displayed in the Total Capital Gain Distributions (Box 2a) column, which has been carried forward from the Dividends and Distributions section .

CAPITAL GAIN DISTRIBUTIONS(For individuals, report Total Capital Gain Distributions on Form 1040, Schedule D, Line 13, column (f).

To report Unrecaptured Section 1250 Gain, Section 1202 Gain,

Total Capital Gain Unrecaptured Section 1202 Collectibles Long-Term CapitalDistributions Section 1250 Gain Gain (28%) Gain Gain Distributions

Description Date Paid (Box 2a) (Box 2b) (Box 2c) (Box 2d)

PRICE REIT INC CL B 06/30/2008 500.00 175.00 225.00 0.00 100.00

PUTNAM FUND A 01/11/2008 125.00 0.00 125.00 0.00 0.00

TOTAL 625.00 175.00 350.00 0.00 100.00

see instructions to Form 1040, Schedule D.)and Collectibles (28%) Gain,

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liquidation distributions

LIQUIDATION DISTRIBUTIONS (Details of Form 1099-DIV)

Cash Liquidation Noncash Liquidation DistributionsDistributions (Fair Market Value) Federal Income

Description Date Paid (Box 8) (Box 9) Tax Withheld

NATIONAL LOAN BK HOUSTON TEX 02/17/2008 1,094.00 339.14

TOTAL 1,094.00 0.00 339.14

Total Federal Income Tax Withheld on Dividends and Distributions: 402.14(Box 4)

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original issue discount1. Original Issue Discount (OID) is reported on IRS Form 1099-OID .

OID on U.S. Treasury Obligations (Box 6) is reported separately .


3. If any income is subject to federal tax withholding, the amount withheld is reported in the Federal Income Tax Withheld (Box 4) column .

2008 Form 1099-OID ORIGINAL ISSUE DISCOUNT OMB No. 1545-0117(For individuals, report details on Form 1040; Schedule B; Line 1.)

Other Federal OID on U.S.Accrual Daily OID Original Issue Periodic Income Tax Treasury Investment

Lot Lot Begin/ Days Rate Discount Interest Withheld Obligations ExpensesDescription No. Quantity Entry Date Held Per $1,000 (Box 1) (Box 2) (Box 4) (Box 6) (Box 7)

FNMA GTD REMIC PASS For a Detailed Breakdown 20.30 750.00THRU CTF REMIC See the Additional Written StatementTR 1991-108 CL-108-K9.000% 02/25/21 B/ECUSIP: 31358FAN9

MAXXAM INC 1 10,000 01/01/2008 135 .0385675 52.45SR SUB RESET NT 05/15/2008 123 .0382465 47.0414.000% 05/20/07 REG 09/15/2008 107 .0380655 40.73DTD 03/01/90 365 140.22*CUSIP: 577913AD8 01/04/2008 50.00

CERTIFICATES ACCRUAL 1 12,000 01/01/2008 45 .1277990 69.01TREAS SECS SER-Z 02/15/2008 79 .1333658 126.43INT PRIN PMT ON 12% 124 195.44*2003 TREAS BD 2 12,000 01/01/2008 45 .0999655 69.010.000% 05/15/09 02/15/2008 85 .1040695 106.15CUSIP: 156883BK5 130 160.13*

Security Total – Amount Reportable to the IRS 355.57

CERTIFICATES ACCRUAL 1 6,000 01/01/2008 137 .1132877 15.52*TREAS SECS SER-JINT PMT ON 875%2012 TREAS BD0.000% 05/15/11CUSIP: 156884XE3

TOTAL 531.61 800.00 .00 .00 .00

*This may not be the correct figure to report on your income tax return. See instructions for details.


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2008 miscellaneous income1. The total amount displayed in the Miscellaneous Income section

is reported on IRS Form 1099-MISC . Details are displayed on tax information statements to provide your clients with transaction-level information .

2. Transactions are listed in CUSIP sequence (although CUSIPs are not displayed) .


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2

3

2008 MISCELLANEOUS INCOME (Details of Form 1099-MISC)

Substitute Payments in Lieu Federal IncomeRoyalties Other Income of Dividends or Interest Tax Withheld

Description Date Paid (Box 2) (Box 3) (Box 8) (Box 4)

PHILIP MORRIS COMPANIES INC 04/11/2008 25.00

PRAXAIR INC 03/15/2008 25.00

TOTAL 0.00 0.00 50.00 0.00samP

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> NoN-rePortable distributioNs4. Transactions are listed in CUSIP sequence . 5. This section displays nonreportable distributions, such as

Partnership Cash Distributions, Trust Distributions, and Return of Principal Distributions .

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MUNICIPAL ORIGINAL ISSUE DISCOUNT

Accrual Original Issue Discount Original Issue DiscountLot Rate Lot Period Days Daily OID Rate Subject to Alternative Not Subject to Alternative

Description CUSIP No. Source Quantity Begins Held per $1,000 Minimum Tax Minimum Tax

ALLEGHENY CNTY PA 017286AN5 1 Calc. 20,000 01-02 181 .0018441 6.68ARPT REV GTR PITTS 07-02 184 .0019206 7.07INTL ARPT SER D SUBJ 365 13.75TO AMT TO YLD 8.3%7.750% 01/01/21 REGDTD 07/01/90 CLB

TRIBOROUGH BRDG & 986029GD1 1 Calc. 75,000 01-02 181 .0085961 116.69TUNL AUTH N.Y. REVS 07-02 184 .0089700 123.79CONVENTION CTR PROJ 365 240.48SER D O.I.D.7.000% 01/01/14 REGDTD 06/15/87 PRF

Security Total .......................................................................................................................................

TOTAL 13.75 240.48

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transactions we do Not report to the irs1. Information regarding transactions that we do not report to

the IRS is provided to aid your clients in the preparation of their tax returns . The section consists of the following five categories: Municipal Original Issue Discount, Non-reportable Distributions, Equity Options Transactions, Securities Purchased, and Margin Interest Expense .

> muNiciPal origiNal issue discouNt2. Transactions are listed in CUSIP sequence .

3. Municipal original issue discount is classified in this section as either Original Issue Discount Subject to Alternative Minimum Tax or Original Issue Discount Not Subject to Alternative Minimum Tax .


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> equity oPtioNs traNsactioNs6. The Equity Options Transactions section includes purchases,

sales, expirations, exercises, and assignments .7. Transactions are listed in CUSIP sequence .

EQUITY OPTIONS TRANSACTIONS

Expiration Date/ Trade/ProcessDescription Strike Price Date Transaction Type Quantity Purchase Amount Proceeds

PUT 100 DELL EXP 08-19-08 @ 75 08/18/2008 Sell Open 3 88.99COMPUTER CORPCUSIP: 2470259TO

PUT 100 DELL EXP 08-19-08 @ 75 08/21/2008 Expiration 3 0.00COMPUTER CORPCUSIP: 2470259TO

CALL 100 LANCER GRP. EXP 06-30-08 @ 16 5/8 03/16/2008 Buy Open 25 6,363.80CUSIP: 51461D240

CALL 100 LANCER GRP. EXP 06-30-08 @ 16 5/8 06/30/2008 Sell Close 25 7,500.00CUSIP: 51461D240

TOTAL 6,363.80 7,588.99

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> securities Purchased8. The Securities Purchased section provides your clients

with information needed to help establish the cost basis of investments .


10. Accrued Interest Purchased related to the acquisition of debt obligations is displayed in this section .

SECURITIES PURCHASED

Trade/Process Accrued Interest PurchasedDescription CUSIP Date Quantity Net Cost Amount Security Type

GRUPO TELEVISA S A P4987VAD5 11/15/2008 20,000 17,900.00 250.00 Foreign SourceEURO BONDISIN # USP4987VAD5711.375% 05/15/09 B/EDTD 05/13/98

ANN TAYLOR INC 036117AC3 02/23/2008 50,000 41,353.16 280.75 U.S. CorporationSUB NT 09/25/2008 280.758.750% 06/15/10 REG 561.50DTD 06/28/95 CLB

FOXMEYER CORP. 351654108 01/21/2008 400 5,004.06

GNMA GTD MTG PASS 362029R51 03/08/2008 12,995 10,046.82 60.00 U.S. Government AgencyTHRU CTFSPOOL # 0041088.000% 04/15/06DTD 10/01/76

BUFFALO NY SER A 4.400% 1196744B2 02/04/2008 25,000 26,301.00 256.67 Tax-Exempt11/15/15 B/E DTD05/16/04 CLB

NEW YORK ST RFDG 649785WM0 03/03/2008 50,000 50,336.00SER B7.200% 11/15/07 REGDTD 08/01/88 CLD

PACIFIC TEL&TEL CO 694886AW2 05/11/2008 150,000 147,603.10 166.83 U.S. CorporationDEB7.800% 03/01/09 REGDTD 03/01/73

TENNESSEE HSB DEV AGY 880459T93 08/02/2008 50,000 50,562.00 170.00 Specified Private ActivityHOMEOWNERSHIPPG-2005-2C 3.600% 07/01/10B/E DTD 07/15/06

U S TREAS NT 912827E73 03/31/2008 5,000 3,223.42 1,041.70 U.S. Government6.875% 03/31/09 B/EDTD 03/31/94

TOTAL 352,329.56 2,506.70

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ADDITIONAL WRITTEN STATEMENT – COLLATERALIZED DEBT OBLIGATIONS (Including REMICs)

Per $1,000 of Original Principal Aggregate Amount Of

Daily Daily EndingAccrual Beginning Original Accrued Original Accrued Actual Market

Lot Period Days Adjusted Issue Interest Issue Interest Interest DiscountCUSIP No. Quantity Begins Held Issue Price Discount Income Discount Income Paid (Cash) Fraction

FNMA GTD REMIC PASSTHRU CTF REMIC31358FAN9 1 50,000 08/26/2008 30 990.0156 .0056711 .2500000 8.51 375.00 375.00 .0168721

50,000 09/26/2008 30 990.1857 .0078586 .2500000 11.79 375.00 375.00 .0237814Lot Total: 60 20.30 750.00 750.00Security Total: 20.30 750.00 750.00

P-B CMO TRTR 89 CMO SER 11CL 11-D69290JBC5 1 30,000 01/25/2008 30 998.4197 .2500000 225.00 225.00 .0226692

30,000 02/25/2008 30 998.4621 .2500000 225.00 225.00 .023371530.000 03/25/2008 30 998.4883 225.00 225.00 .0237944

Lot Total: 90 675.00 675.00Security Total: 675.00 675.00

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additional written statement—collateralized debt obligations (cdos) (including remics)1. We are required to report certain additional information to your

clients regarding CDOs, including REMICs . We provide this on an Additional Written Statement . Your clients need this additional information to complete their tax returns . The Additional Written Statement also provides calculations of interest income and OID . The Additional Written Statement, however, is provided only to your clients, and not to the IRS .

2. The amount displayed in the Aggregate Amount of Original Issue Discount column is calculated as [(quantity) x (days held) x (daily original issue discount)] ÷ 1,000 . For instance, using the numbers below, [(50,000) x (30) x ( .0056711)] ÷ 1,000 = 8 .51 .

3. The amount displayed in the Aggregate Amount of Accrued Interest Income column is calculated as [(quantity) x (days held) x (daily accrued interest income)] ÷ 1,000 . For instance, using the numbers below, [(50,000) x (30) x ( .2500000)] ÷ 1,000 = 375 .00 .

Depending on the type of CDO held in your client’s account, accrued interest income is reported on either IRS Form 1099-INT or 1099-OID . OID is reported on IRS Form 1099-OID .

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2 3

> margiN iNterest exPeNse11. The Margin Interest Expense Charged to Your Account

section provides the amount of margin interest charged to an account during the year . Margin interest may be deductible on a tax return .

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other deposits

OTHER DEPOSITSProcess/Settlement Date Activity Type Description Quantity Price Amount

02/01/08 CHECK RECEIVED CHECK RECEIVED 4335 18,551.35

02/25/08 CHECK RECEIVED CHECK RECEIVED 9538 16,446.31

09/09/08 FEDERAL FUNDS RECEIVED CITIBANK NA NYBD CIT 14458 20,000.00

Total Other Deposits 54,997.66samP

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checking activity

CHECKING ACTIVITYProcess Date CheckDate Written Number Payee Check Category Amount

Code 0

11/26/08 11/26/08 0651 POSTY CARDS CODE O (69.69)

11/26/08 10/26/08 0652 DR. GREENE CODE O (340.00)

12/30/08 11/30/08 0666 SILVER CREEK FARMS CODE O (390.00)

Code 0 Total (799.69)

Charitable Contributions

01/07/08 12/15/07 0642 GEORGETOWN UNIV CHARITABLE CONTRIBUTIONS (1,000.00)

01/03/08 12/15/07 0654 ST JOSEPHS PREP CHARITABLE CONTRIBUTIONS (500.00)

03/09/08 02/28/08 0661 CONVENT OF THE SACRED HEART CHARITABLE CONTRIBUTIONS (1,000.00)

Charitable Contributions Total (2,500.00)

Total Checking Activity (3,299.69)

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debit card activity

DEBIT CARD ACTIVITY

Process TransactionDate Date Vendor Location Reference Number Amount

Cash Disbursements

10/25/08 10/25/08 ATM WITHDRAWAL HOLLYWOOD 11111111111111111111111 (2,000.00)

11/22/08 11/22/08 ATM WITHDRAWAL MAIN & VINE STS 22222222222222222222222 (2,000.00)

12/25/08 12/24/08 ATM WITHDRAWAL CHRISTMAS CITY 12251225122512251122512 (5,000.00)

Cash Disbursements Total (9,000.00)

Retail Stores

06/23/08 06/22/08 MARKS & SPENCER SPRINGFIELD VA 35425155174000056422368 (208.25)

06/24/08 06/23/08 MARKS & SPENCER SPRINGFIELD VA 35425155174000056422137 45.27

Retail Stores Total (162.98)

Total Debit Card Activity (9,162.98)

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electronic deposits

ELECTRONIC DEPOSITS

Process/Settlement Date Activity Type Description Amount

01/31/08 ELECTRONIC TRANSACTION DIRECT DEPOSIT 1231231234 THE BOARD OF PEN 1,890.34

05/31/08 ELECTRONIC TRANSACTION DIRECT DEPOSIT 9999995559 TCHRS R ET SYS 808.91

Total Electronic Deposits 2,699.25samP

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electronic withdrawals

ELECTRONIC WITHDRAWALS

ProcessSettlement Date Activity Type Description Amount

01/07/08 ELECTRONIC TRANSACTION AUTHORIZED DEBIT 474747474WFHM MORTGAGE 2,425.30)

12/14/08 ELECTRONIC TRANSACTION AUTHORIZED DEBIT AMEXARCDALAMERICAN EXPRESS (2,472.95)

Total Electronic Withdrawals (4,898.25)samP

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other withdrawals

OTHER WITHDRAWALS

ProcessSettlement Date Activity Type Description Quantity Price Amount

05/02/08 FEDERAL FUNDS SENT FIRST UNION NATIONAL (23,750.00)

08/10/08 FEDERAL FUNDS SENT BOSTON SAFE DEPOSIT (5,000.00)

Total Other Withdrawals (28,750.00)samP

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schedule of realized gains and losses

SCHEDULE OF REALIZED GAINS AND LOSSES

Disposition Acquisition Closing Security RealizedDate Date Transaction Description Identifier Quantity Cost Basis Proceeds Gain/Loss

Long Term

04/17/08 05/23/05 SELL OCCUSYSTEMS INC COM OCU 100.000 115.75 100.00 (15.75)

05/15/08 05/15/98 MAT U. S. TREAS NOTE 912810BU1 55,000.000 55,000.00 55,000.00 0.008.250% 05/15/10 B/EDTD 05/15/98Original Cost Basis: 49,875.40

08/04/08 08/08/06 SELL PENN NATL GAMING INC PENN 100.000 1,779.95 1,950.43 170.48

09/02/08 01/11/02 SELL CHEVRON CORP CVX 450.000 9,400.00 9,562.50 162.50

Total Long Term 66,295.70 66,612.93 317.23

Short Term

03/15/08 09/22/07 SELL PUT 100 S&P 500 INDEX SBX-I0 10.000 1,921.38 2,342.76 421.38

04/08/08 02/25/08 SELL UNITED STATES TREAS 912795PT2 100,000.000 98,790.50 99,005.00 214.50BILLS 0.000% 04/08/08

06/30/08 03/16/08 SELL CALL 100 LANCER GRP IGG-LR 25.000 6,363.80 7,500.00 1,136.20

07/10/08 11/12/07 SELL PUT 100 S&P 500 INDEX SBX-I0 5.000 845.70 1,265.75 420.05

08/21/08 10/22/07 EXP PUT 100 DELL COMPUTER VK-ML 3.000 1,234.50 0.00 (1,234.50)

10/20/08 04/10/08 SELL EXXON MOBIL CORP COM XOM 200.000 1,690.25 1,752.00 61.75

Total Short Term 119,061.63 111,865.51 1,019.38

Total Long Term and Short Term 185,357.33 178,478.44 1,336.61

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revised tax summary statementThe revised tax summary statement, which is included with the revised tax information statement, explains revisions . The pages of the revised tax summary statement and the revised tax information statement are numbered separately .

The revised tax summary statement includes the following information:

1. Dates listed in the Date column are based on original transaction dates (not revised activity dates) .

2. The Prior Amount column displays activity amounts reported on the initial tax information statement . Amounts in this column are not displayed on the revised tax information statement .

3. Amounts displayed in the Revised Amount column are based on information we received after the initial statement was mailed .

4. The Reporting Column displays the column name of the particular statement section affected by the revision .

5. The Statement Section column displays the statement section name affected by the revision . Use the information in the Statement Section column and the Reporting Column to locate a particular transaction .

6. The message *** Descriptive Information Has Changed — See Enclosure *** indicates that some information other than a dollar amount has changed . Descriptive information may include security description, date, quantity, security type, long/short, and rate source .

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6

NOTICE: This tax statement is incomplete as it relates to your CDO, CMO, REMIC, FASIT, and WHMT. You should not file your tax return you receive a revised statement from us with the applicable information. (See the message at the end of this statement).

This is important tax information and is being furnished to the Internal Revenue Service (IRS). If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income istaxable and the IRS determines that it has not been reported.

Summary of Gross Proceeds and Regulated Futures ContractsAmount

Gross Proceeds (Less Commissions and Fees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,207.80 *Federal Income Tax Withheld – Gross Proceeds . . . . . . . . . . . . . . . . . . . . . . 546.12

Regulated Futures Contracts:Profit or (Loss) Realized in 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841.43Unrealized Profit or (Loss) on Open Contracts – 12/31/07 . . . . . . . . . . . . . . . . . . . . . . . . . . 141.12Unrealized Profit or (Loss) on Open Contracts – 12/31/08 . . . . . . . . . . . . . . . . . . . . . . . . 1,557.00Aggregate Profit or (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,257.31Federal Income Tax Withheld – Reg. Futures Contracts . . . . . . . . . . . . . . . . . . 0.00* Details of each Gross Proceeds transaction are reported to the IRS.

Refer to the 1099-B section of this statement for these details.

2008 1099-DIV Dividends and Distributions OMB No. 1545-0110Box Amount1a Total Ordinary Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,155.521b Qualified Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812.002a Total Capital Gain Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625.002b Unrecaptured Section 1250 Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.002c Section 1202 Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350.002d Collectibles (28%) Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Nondividend Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116.004 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402.145 Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.006 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.357 Foreign Country or U.S. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a8 Cash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,094.009 NonCash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00

2008 1099-INT Interest Income OMB No. 1545-0112Box Amount1 Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,805.012 Early Withdrawal Penalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.003 Interest on U.S. Savings Bonds & Treasury Obligations . . . . . . . . . . . . . . . . . . . . . . . 7,642.444 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.005 Investment Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.006 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.007 Foreign Country or U.S. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a8 Tax-Exempt Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,475.009 Specified Private Activity Bond Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595.00

Summary of Original Issue DiscountAmount

Original Issue Discount (Non-U.S. Treasury Obligations) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531.61Other Periodic Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800.00Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00Original Issue Discount on U.S. Treasury Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00

Tel:

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19


CorreCTInG Tax InFormaTIon sTaTemenTs

Tax Correction Requests must be submitted via Service Center.

> amouNtsTo correct an amount, include the following documentation:

– Trade confirmation (if applicable)– Brokerage account statement (or 12 monthly statements if

information pertains to the entire year)

> taxPayer ideNtificatioN Numbers (tiN)Current year (2008) retail Form 1099 corrections due to SSN or TIN updates are processed systematically until May 31, 2009 . After May 31, 2009, you can request a duplicate Form 1099 on TXAS after you change the SSN/TIN . The statement will be printed in the next revision with the correct SSN/TIN . Please note: “Prior year” SSN and TIN updates must always be submitted via Service Center, as they will not occur systematically .

> imProPer tax iNformatioN statemeNtsTo correct a foreign account for a foreign client who received a Tax Information Statement in error, update the following documents:

– Obtain IRS Form W-8 BEN, W-8 ECI, W-8 EXP, or W-8 IMY from the account owner and update the account’s records in accordance with your normal procedures .

– Submit Tax Correction Request via Service Center to Pershing’s Tax Reporting Department .

Foreign accounts should only receive a tax information statement if federal tax (backup withholding) is withheld .

> exemPt eNtity receiviNg tax iNformatioN statemeNtsTo correct an exempt entity account (refer to page 20) for a client who received a tax information statement, submit IRS Form W-9 to Account Services with EXEMPT PAYEE marked on the form . Once this is done, submit a Service Center request to delete the Form 1099 . If there was no backup withholding, the tax information statement will be deleted and your client will receive a confirmation .

Note: If the account status is changed (i .e ., exempt to nonexempt, foreign to U .S . living abroad, etc .), a Form 1099 correction request must be submitted via Service Center . To ensure that the proper reporting is done, the Tax Reporting Department must be made aware of these account updates .

> review of correctioN requestsRequests for corrections are reviewed upon receipt and are approved once we receive the necessary documentation . Once requests are approved and processed, the most current information can be viewed on TXAS and e-Document Suite .

> revised tax iNformatioN statemeNtsPlease note that revised statements for current year (2008) Form 1099 correction requests received before May 31, 2009 will post to e-Document Suite . After May 31, 2009, all Form 1099 correction requests received (prior and current year) will post to Online Documents, available via the NetExchange platform .

> caNceled trades, as-of trades, reversed Prior year divideNd, aNd boNd iNterest PaymeNtsIf these transactions were processed after December 31, 2008, do not send correction requests to Pershing . We will automatically generate corrected statements resulting from these transactions until May 31, 2009 .

> who to coNtact with questioNsIf you have any questions, contact Pershing’s Tax Reporting Help Desk at (800) 699-9965 for calls originating within the United States or (201) 413-4200 for calls originating outside of the United States .

Pershing LLC Attention: Tax Reporting Department One Pershing Plaza, 12th Floor Jersey City, New Jersey 07399 Fax Number: (201) 433-4199

The Tax and Year-End Statement, which combines the year-end statement with the 1099 tax statement, is a joint effort between the Tax Reporting Department and the Portfolio Evaluation area. Please note: all requests for updates to the cost basis information provided on the combined statement must first be sent via Service Center to the Portfolio Evaluation area. Once confirmation has been received that the Portfolio Evaluation area has updated the cost basis information (generally 2-3 business days), you must request a duplicate 1099 via TXAS in order for a revised statement to be mailed to the address of record and updated to e-Document Suite. See page 34 and follow the instructions for the “PRINT REQUEST ADD” screen.

20


CorreCTInG Tax InFormaTIon sTaTemenTssa

mPle

stat

emeN

t

service ceNterAll 1099 correction requests (current and prior year) should be submitted via the correct path in Service Center on the NetExchange platform . For account level corrections, the path is: Other Products/Misc . → TEFRA → 1099 ACCT Level Tax Correction; and for CUSIP wide level corrections the path is: Other Products/Misc . → TEFRA → 1099 Security ID Level Tax Correction . Please note that correction requests can only be processed for the current year plus two years (i .e ., 2006-2008) .

Account status updates (i .e ., exempt to nonexempt, foreign to U .S . living abroad, etc .) will be processed systematically until April 30, 2009 . After April 30, 2009, all requests for 1099 corrections for account status updates will have to be submitted via Service Center .

Current year (2008) retail 1099 corrections due to Social Security number (SSN) or Tax Identification Number (TIN) updates are processed systematically until April 30, 2009 . After April 30, 2009, you can request a duplicate 1099 on TXAS after you change the SSN/TIN, and the statement will be printed in the next revision with the corrected SSN/TIN . Please note: “Prior year” SSN and TIN updates must always be submitted via Service Center, as they will not occur systematically .

All requests for current year federal and the non-resident alien tax reversals must be submitted via the proper path in Service Center . Request for 1099 corrections and tax reversals should not be submitted under the “General Inquiry” Request Type .

cd-rom requests – additioNal coPiesRequests for 1099s for tax years 2003 thru 2007 should not be submitted via Service Center . In an effort to provide your office with immediate access to your client’s 1099 year end tax information, these statements are available for review and print via the e-Document Suite function on the NetExchange platform .

In addition, for record keeping purposes, each year since tax year 2001 Pershing has provided a CD-ROM to the Operations area of all broker- dealers that contains a 1099 statement for all accounts for which we produced a year end 1099 statement . You may utilize the CD-ROMs provided to obtain copies of your client’s 1099 tax statements for these tax years . If your 2001-2007 1099 CD-ROMs have been misplaced or damaged you can request a CD reburn by filling out the “Request for Tax Information Statements” form located on page 21 .

21


Fax to Pershing’s Tax Reporting Department at (201) 433-4199 .

Please PriNt or tyPe all iNformatioN:

Name: telePhoNe Number:

suNdry accouNt Number:

deliver to (Name):

address:

city: state: ziP code:

Note: This form should not be used to request duplicate monthly statements on individual accounts .

cd-rom requests—additioNal coPies

CD-ROMs will be available after June 2009 .

o cd-rom—firm sort, coPy for iNtroduciNg broker-dealer Number: __________________________________________________ This will include all 1099 tax information statements for the selected firm .

o cd-rom—sPecific office sort, for office(s): __________________________________________________________________ This will include all 1099 tax information statements for the selected office range(s) for your firm .

Note: Charges for CD-ROMs apply for additional copies and specific office sorts .

If you have any questions, please contact the Pershing Tax Reporting Help Desk at (800) 699-9965 or (201) 413-4200 for calls originating outside of the United States .

request for tax iNformat ioN s tatemeNts

frm-rftaxstmt-1-07

22


mailing Puerto rico statements

income reallocation

revision cutoff date

revision mailing

mailing revised

statements

revision reports on

report center

initial tax statement

mailing

initial tax statement

mailing, Non-ric customers

mailing remic statements

mailing 1042-s statements

income reallocation

cutoff for initial mailing

suNday

5

12

19

26

moNday

6

13

20

27

tuesday

7

14

21

28

wedNesday1

8

15

22

29

thursday2

9

16

23

30

friday3

10

17

24

saturday4

11

18

25

Tax reporTInG Calendar

march 2009

february 2009suNday

1

8

15

22

moNday2

9

16

23

tuesday3

10

17

24

wedNesday4

11

18

25

thursday5

12

19

26

friday6

13

20

27

saturday7

14

21

28

jaNuary 2009suNday

4

11

18

25

moNday

5

12

19

26

tuesday

6

13

20

27

wedNesday

7

14

21

28

thursday1

8

15

22

29

friday2

9

16

23

30

saturday3

10

17

24

31

suNday

3

10

17

24

moNday

4

11

18

25

tuesday

5

12

19

26

wedNesday

6

13

20

27

thursday

7

14

21

28

friday1

8

15

22

29

saturday2

9

16

23

30

may 2009

aPril 2009suNday

1

8

15

22

29

moNday2

9

16

23

30

tuesday3

10

17

24

31

wedNesday4

11

18

25

thursday5

12

19

26

friday6

13

20

27

saturday7

14

21

28

tax statement mailing

daily 1099 revisions and Puerto rico daily revisions







disclaimer: All dates are subject to change without prior notice .

tax statement mailing

daily 1099 revisions


income reallocation cutoff date







daily 1099 revisions and Puerto rico daily revisions31

23


Irs Form 1099-B—proCeeds From Broker and BarTer exCHanGe TransaCTIons

> securities traNsactioNs rePortedGross proceed amounts do not reflect net profit and are net of transaction costs (for instance, commissions and fees) . The following types of securities transactions are reported to the IRS:

– Sales– Redemptions– Tender offers– Mergers for cash– Maturities– Some cash-in-lieu payments– Short sales– Commercial paper sales– Final principal payments on bonds– Consent fee payments– Liquidation distributions

> imPortaNt PoiNts– Sales are reported according to the trade date . Transactions with

a December trade date and a January settlement date are reported the year in which the trade date occurred . Your clients should generally report these transactions on their tax returns for the year during which the trade date occurred .

– Sales of U .S . Treasury bills and other short-term discount obligations are reported on IRS Form 1099-B . Interest from the maturity of these securities is reported on IRS Form 1099-INT .

– We report short sales in the year during which the short sales are executed (not the year during which the short sales are covered) .

– If any proceeds were subject to federal tax withholding, the amount withheld is reported in the Federal Income Tax Withheld (Box 4) column . We report this information to the IRS on Form 1099-B .

> regulated futures coNtracts (broad-based iNdex oPtioNs)– Regulated futures contracts are reported to the IRS on

Form 1099-B .– The Profit or (Loss) Realized in 2008 subsection displays

contracts settled or closed in 2008 . – Transactions are listed in CUSIP sequence . CUSIPs are displayed

below security descriptions .– Expiration date and strike price are displayed in the Expiration

Date/Strike Price column .– The Unrealized Profit or (Loss) on Open Contracts–12/31/2007

subsection provides the details of all contracts open at the end of 2007 . Open contracts are marked to market as of December 31, 2007 to determine unrealized profit or (loss) . We report this information to the IRS on Form 1099-B .

– The Unrealized Profit or (Loss) on Open Contracts–12/31/2008 subsection provides the details of contracts open at the end of 2008 . Open contracts are marked to market as of December 31, 2008 to determine unrealized profit or (loss) . We report this information to the IRS on Form 1099-B .

– The Aggregate Profit or (Loss) equals the Realized Profit or Loss adjusted for the Unrealized Profit or Loss at December 31, 2007 and December 31, 2008 . Aggregate Profit or Loss is calculated as follows:

Profit or (Loss) Realized in 2008 Less: Unrealized Profit or (Loss) on Open Contracts–12/31/2007 Plus: Unrealized Profit of (Loss) on Open Contracts–12/31/2008

24


Irs Form 1099-InT—InTeresT InCome

The following types of interest income and tax items are reported to the IRS:

> iNterest iNcome– Interest income from U .S . corporate bonds, taxable municipal

bonds, and certain REMIC/CDO interest– Interest income from U .S . government agencies (for instance,

GNMA and FNMA)– Interest income from foreign bonds– Credit interest income (total of credit interest earned on

cash balances)– Interest on short-term discount obligations

> iNterest oN u.s. saviNgs boNds aNd treasury obligatioNs– U .S . Treasury bill maturities– Coupon payments from U .S . Treasury notes and bonds

> federal iNcome tax withheldFederal income tax withheld (backup withholding) is 28% of interest income . This amount is reported to the IRS on Form 1099-INT .

> foreigN tax PaidForeign tax withheld (paid) from foreign source interest income that was credited to your clients’ accounts in 2008 .

> tax-exemPt iNterestInterest on tax-exempt bonds, tax-exempt mutual funds, tax-exempt UITs, and specified private activity bonds .

> imPortaNt PoiNts– Interest income is reported when paid . IRS Form 1099-INT only

reflects interest paid in 2008 .– Interest on U .S . savings bonds and Treasury obligations is exempt

from state and local taxes . However, each state’s tax laws vary; your clients should consult their state taxing authorities or tax professionals .

– Interest income from U .S . Treasury bills purchased and redeemed through Pershing is reported on IRS Form 1099-INT . If the Treasury bill was not purchased through Pershing, or if the purchase price was not made available to us, we use the rate shown in IRS Publication 1212 (this rate is an estimated amount) . Your clients may need to adjust the reported amount in this situation .

– Accrued interest income received on bonds and notes is reported on a settlement date basis . Amounts representing accrued interest sold are identified with a symbol (*) on your clients’ statements . Accrued interest purchased between interest payment dates is not included on IRS Form 1099-INT . We report accrued interest purchased in the Securities Purchased section of the tax statement . Your clients may need to adjust interest income for accrued interest purchased .

– Interest income earned by certain UITs is also reported on Form 1099-INT . If the UIT is organized as a grantor trust and earned interest income, your client’s share of the UIT’s interest income is reported in this section . Refer to page 26 for additional information on interest reporting for UITs .

25


Irs Form 1099-dIV—dIVIdends and dIsTrIBuTIons

The following types of dividends and distributions are reported to the IRS:

> ordiNary divideNds– From mutual funds, REITs, UITs, and from both U .S . and

foreign corporations– Paid on money market and bond funds– From short-term capital gains paid by federal mutual funds

(including tax-exempt mutual funds)

> qualified divideNds This section lists the portion of dividends that are eligible for the 15% (or 0%) maximum rate . Certain conditions apply for these reduced tax rates . Your client should contact a tax professional for assistance .

> total caPital gaiN distributioNsThis section lists long-term capital gain distributions paid by mutual funds and REITs . The classification of certain dividend income may be reported as Unrecaptured Section 1250 Gain, Section 1202 Gain, or Collectibles (28%) Gain . The appropriate columns will reflect this income .

> NoNtaxable distributioNsThis section lists return of capital paid by corporations, mutual funds, UITs, and REITs .

> liquidatioN distributioNsThis section lists distribution of cash or securities paid in connection with a corporation’s complete or partial liquidation .

> cash value of certaiN stock divideNdsThis section lists the fair market value of the securities paid as a taxable stock dividend .

> federal iNcome tax withheldThis section lists federal income tax withheld, which is 28% of dividends and distributions—refer to Federal Tax Withholding on page 29 for additional details .

> foreigN tax PaidThis section lists foreign tax paid, which includes foreign tax withheld from foreign source dividends .

> imPortaNt PoiNts– Dividend income from equities is generally reported when paid .– Your clients may receive a revised tax information statement from

us if they owned one or more mutual funds, REITs, or UITs . Each year, these companies frequently reclassify their distributions for tax purposes based on their year-end calculations . Reclassifications are often announced after initial tax information statements are mailed . If we do not receive income reclassifications, the distributions will be classified as nonqualified dividends . Pershing will include two asterisks (**) beside income listed in the Form 1099-DIV section to indicate that we have not received information from the corresponding investment company, and there is a possibility that the tax information statement will be revised .

– Spillover distributions paid by mutual funds are reported in the year distributions are declared and are typically paid in January of the following year .

> oid defiNedOID is the difference between the stated redemption price at maturity and the issue price of a bond, debenture, note, or other evidence of indebtedness .

> rePorted oid traNsactioNs – We report OID on corporate bonds, certificate of deposits,

CDOs, CMOs, U .S . government obligations, and separate trading of registered interest and principal of securities (STRIPS) obligations .

– Other periodic interest .

> imPortaNt PoiNts– Your clients may be required to report a portion of this income

even though cash payments were not received .– Transactions are reported to the IRS on a security-level basis .– Your client may be required to recalculate OID if an acquisition

premium was paid or if Pershing reported an estimated amount based on IRS Publication 1212 . We now denote if we used Publication 1212 .

– If an OID instrument was transferred during the tax year into an account at Pershing, the OID for the period held at Pershing during 2008 is reported . Your clients should obtain another IRS Form 1099-OID from the prior firm which shows remaining OID portions to be reported .

– If a company is in Chapter 11 or has declared bankruptcy, Pershing may still be required to report OID income .

Irs Form 1099-oId—orIGInal Issue dIsCounT

26


reVIsed Tax InFormaTIon sTaTemenTs

As information becomes available to us subsequent to the initial tax information statement mailing, we process this information and provide a revised tax information statement to your clients . Tax information statements may be revised for any of the following reasons:

reClassIFIed InCome

Typically, reclassifications involve the following categories:

– Ordinary dividends*

– Qualified dividends*

– Capital gain distributions*

n Unrecaptured Section 1250 Gain*

n Section 1202 Gain*

n Collectibles (28%) Gain*

– Nontaxable distributions*

– Liquidation distributions*

– Tax-exempt income from specified private activity bonds

– Tax-exempt interest * Refer to page 25

> uit rePortiNgIncome from UITs will be reported based on information from the UIT administrators . This is necessary in order to distinguish the various types of income that a UIT could generate, such as interest income, tax-exempt income, income from specified private activity bonds, qualified dividend income, nonqualified dividend income, or OID .

Your clients who own UITs will see the following information on their tax information statement:

– iNcome classificatioN: Income from UITs will be reported in one or more of the Form 1099-DIV, INT, or OID sections of the tax information statement, depending on the nature of the income .

– accrual-based rePortiNg: Income will be reported on the tax information statement as it is earned by the UIT, which may differ from the date the UIT distributes the income . In the 1099-DIV and INT sections, separate entries will be displayed for income that is received in cash and for accrued income .

– additioNal data: Tax information statements will show “Investment Expenses” and “Foreign Tax Paid” as separate categories when the UIT administrator includes this data in the information provided to us .

> imPortaNt PoiNtsWhen reclassification information is made available, revised tax information statements are printed to reflect the corrected reporting amounts . The revised tax summary statement precedes the revised tax information statement and details all reclassifications, additions, deletions, and changes . For reclassification information available prior to February 7, 2009, the information is included in the initial tax information statement . All other reclassifications will be processed and mailed based on the calendar schedule on page 22 .

Please note that the tax information statement revision schedule is subject to change . Pershing may need to revise the revision schedule based on the timing of tax information received from mutual funds and REITs .

– Foreign tax rates on regulated investment companies’ foreign source income are generally received after the initial mailing . As this information becomes available, it will be forwarded to your clients .

– We engage an external vendor to collect income reclassification information for regulated investment companies . By obtaining this information in a timely manner, we can greatly reduce the number of revised tax information statements processed .

– If you know of companies that reclassify their income after year end, provide us with a copy of the information on the company’s letterhead . All reportable accounts holding that position will be updated .

– Revision information is updated online in TXAS after the revisions are processed and may be accessed using the Tax Report Inquiry function (see page 34 for additional information) .

– Revised tax information statements, including the revised tax summary statement page, are also uploaded to e-Document Suite after processing . Copies of individual account holder statements may be obtained from this system (a CD-ROM will be provided later in the year that will contain the final tax information statements, as filed with the IRS) .

– You can access Report Center to view a list of accounts being revised .

It may be necessary to reclassify previously reported distributions to another category, since the tax status of payments made by corporations, mutual funds, UITs, and REITs can only be determined after the end of the tax year . Some of these companies may not be able to furnish their classifications before we mail the tax information statements in February. As a result, we will issue revised tax information statements to clients who received distributions from one or more of these companies.

– Reclassified income– Changed foreign tax withholding – Adjusted income paid– Canceled trades or “as of” trades appear on tax statements– Updated OID rates (refer to page 25)– Changed TIN

– Data becomes available after tax information statement distribution, such as:

n Spillover mutual fund distributions (refer to page 25) n CDOs n CMOs n REMICs n OID rates (refer to page 25) n WHMTs

27


Irs Form 1099-mIsC—mIsCellaneous InCome

> substitute PaymeNt defiNedThe amounts in this section reflect substitute payments in lieu of dividends or interest credited during 2008 . These amounts were allocated to an account pursuant to IRS regulations and represent amounts that were credited as a result of a deemed transfer of securities for use in a short sale . Pershing is authorized to loan a client’s shares for use in a short sale when the shares are held in a margin account with an outstanding margin debt . Clients should report substitute payments as “other income” on their tax returns . We report the substitute payment in the Form 1099-MISC section of the tax information statement .

> royalties The amounts in this section show income earned from royalty trusts .

> other iNcome The amounts in this section show other income, such as substitute payment reimbursements . Report this as “other income” on your tax returns .

> imPortaNt PoiNts

– Positions are held in a margin account .– The dividend amount originally recorded is reduced by the

substitute payment amount .– Substitute payments are generally the only reporting that is done

for corporations and exempt accounts .– Substitute payments are not considered qualified dividends .

TransaCTIons persHInG does noT reporT To THe Irs

> muNiciPal oid– Municipal OID subject to Alternative Minimum Tax (AMT)– Municipal OID not subject to AMT

> imPortaNt PoiNts– Tax-exempt interest income is reported in the 1099-INT section .– Accrued interest received on municipal notes and bonds sold

between interest payment dates is reported on a settlement date basis and is included in the tax-exempt interest income category . Amounts representing accrued interest sold are identified with a symbol (*) on your clients’ statements . It may be necessary to reduce the amount of the tax-exempt interest income category by the amount of accrued interest purchased .

– If municipal bonds issued with OID were transferred to Pershing during 2008, we only calculate OID for the period during which the instruments were held at Pershing .

> NoNrePortable distributioNs– Partnership Cash Distributions n Your clients who hold limited partnership interests are sent an

IRS Schedule K-1 directly from the partnership even though the position is held in “street name” at Pershing . Pershing is required by law to provide partner information directly to the partnerships .

n Your clients should contact the partnership’s administrator if they do not receive their IRS Schedule K-1 (K-1 forms are not required to be issued until April 15, 2009) .

– Trust Distributions n Trust distributions include payments from publicly-traded

trusts . IRS Schedule K-1 and Form 1041, which are forwarded to your clients directly from the trust, reflect your clients’ share of the trust’s taxable income or loss .

– Return of Principal Distributions n Generally, return of principal distributions on bonds are

not reportable as taxable income, but reduce the tax basis of your client’s bond . In certain circumstances, however, a portion of the distributions may be reportable as taxable income . Final principal distributions from a bond are reported in the Form 1099-B section of the tax information statement and are reported to the IRS .

> equity oPtioN traNsactioNs – Equity option transactions include activities related to

sales, purchases, exercises, assignments, and expirations of equity options .

– We do not report these transactions to the IRS .

> securities Purchased – Securities Purchased includes all security purchases (except options) .– Securities Purchased includes accrued interest purchased on bonds .

> margiN iNterest exPeNse Your clients should refer to their tax professionals or obtain IRS Form 4952 (Investment Interest Expense Deduction) for more information on margin interest expense .

We do not report the following categories of information to the IRS: Municipal Original Issue Discount (OID), Nonreportable Distributions, Equity Options Transactions, Margin Interest Expense, and Securities Purchased . These items, however, are displayed on tax information statements to help your clients prepare their tax returns .

28


irs form

1099-B

1099-DIV

1099-INT

1099-OID

1099-MISC

1042-S

2439

CDO, CMO, REMIC, and FASIT Information

K-12 (from calendar year partnerships and trusts)

miNimum amouNt to rePort

All

$10 or more ($600 or more

for liquidations)

$10 or more

$10 or more

Generally $10 or more

All

All

All

All

2009 date due to the irs1

February 28

February 28

February 28

February 28

February 28

March 16

March 16 (for calendar year mutual

funds and REITs)

March 16

April 15

2009 date due to your clieNts1

February 17

February 173

February 173

February 173

January 314

March 16

March 16

April 15

mInImum amounTs To Be reporTed and due daTes

aCCounTs exempT From Tax reporTInG

– Corporations

– Qualified retirement plan accounts (including IRAs)

– Charitable organizations

– Foreign accounts (provided a valid IRS Form W-8 BEN, W-8 ECI, W-8 EXP, or W-8 IMY is on file)

– Most federal, state, and local government accounts

Note: Activity from these accounts will now be viewable on the 05 TAX REPORT INQUIRY screen .

If you are unsure whether an account is exempt, request that your client furnish a new IRS Form W-9 . If the account is exempt, they should mark EXEMPT PAYEE on IRS Form W-9 (according to the instructions) and return the completed, signed, and dated form . See Bulletin #2001-17, Self-Certification of Form W-9 Posession, for more information .

1 These are original due dates which may, in certain circumstances, be extended to later dates in 2009 . 2 K-1s are issued by the respective partnerships and trusts, not by Pershing .3 The February 17 due date applies when the forms are included in a “composite form recipient statement” as defined by the IRS .4 The due date is extended to February 17 if the Form 1099-Misc reports substitute dividends on certain other payments .

Accounts are generally subject to IRS Form 1099 tax reporting unless they meet the criteria for exemption . A complete list of the exemption criteria is provided in the Instructions to IRS Form W-9, Request for Taxpayer Identification Number and Certification . The most common types of accounts exempt from IRS Form 1099 tax reporting are:

60 days after the mutual fund’s or REIT’s tax year end

29


Federal Tax WITHHoldInG (BaCkup WITHHoldInG)

> backuP withholdiNg defiNedBackup withholding is a federal tax that we are required to withhold from certain reportable payments . Backup withholding applies to payments made that are reportable on IRS Forms 1099-B, 1099-DIV, 1099-INT, 1099-MISC, or 1099-OID, and is reported as federal tax withheld in the applicable section of the tax information statement .

Backup withholding applies to reportable payments if:

– Your client fails to provide a valid TIN .

– Your client fails to certify a TIN on an IRS Form W-9 for accounts opened after December 31, 1983 .

– The IRS mandates backup withholding due to an incorrect match between client name and TIN provided . This IRS notification is referred to as a B-Notice .

– The IRS mandates backup withholding because of underreported interest or dividends on tax returns . This IRS notification is referred to as a C-Notice .

> claimiNg backuP withholdiNg– U .S . citizens (and residents for tax purposes) should claim backup

withholding as tax payment on their federal income tax returns .

– Foreign clients may claim backup withholding on IRS Form 1040-NR (U .S . Nonresident Alien Income Tax Return) or IRS Form 1120-F (U .S . Income Tax Return of a Foreign Corporation) .

– Tax-exempt entities and corporations may claim backup withholding on either IRS Form 990-T (Exempt Organization Business Income Tax Return) used by tax-exempt organizations or IRS Form 1120 (U .S . Corporation Income Tax Return) .

Note: The federal backup withholding rate is 28% .

reasoN for withholdiNg

Client has not provided his or her TIN or has not certified his or her TIN .

B-Notice—Notification from the IRS of name or TIN mismatch .

C-Notice—Notification from the IRS stating that we must withhold tax from interest and dividends because the IRS determined that an individual underreported interest and dividends on the tax return .

how to stoP withholdiNg

Have the client complete IRS Form W-9, Request for Taxpayer Identification Number and Certification, and have an individual at your firm certify the form on Pershing’s Documentation, Recording, and Tracking (KUST) system . See Bulletin #2001-17, Self-Certification of Form W-9 Posession, for more information

For first-time recipients of a B-Notice:– Have the client complete IRS Form W-9 and send it to Pershing

For second-time recipients of a B-Notice:– Individual—Obtain Letter SSA 7028 from the Social Security

Administration and have it sent to Pershing– Account holders who are not individuals—Obtain Letter 147C

from the IRS and have it sent to Pershing

Have the IRS send Pershing a stop letter to discontinue backup withholding

stoPPiNg backuP withholdiNg

30


According to federal tax law, income from the above-mentioned securities is calculated on an accrual basis, not on a cash basis . We are required to furnish additional information to holders of these securities . Please note the following:

– Payment information is not included on the initial tax information statement for these securities as detailed in the following tax information statement message to your clients:

Our records indicate that you held collateralized debt obligations (CDOs, CMOs, REMICs, FASITs, or WHMTs) during 2008 . This statement does not include information related to those investments . Upon receipt of information from the issuer, we will promptly forward a revised statement to you . Issuers of collateralized debt obligations are not required to provide us with tax information until after this statement is mailed . Accordingly, you should not file your tax returns until you receive a revised statement from us with the applicable tax information . The following is a list of collateralized debt obligations held during 2008 .

– Revised tax information statements are mailed to your clients when information is received from the issuer . We are required by the IRS to report this information to your clients by March 16, 2009 .

– For CDOs issued with OID, income is reported in the IRS Form 1099-OID section of the tax information statement . For CDOs issued without OID, income is reported in the IRS Form 1099-INT section of the tax information statement .

sTaTe InFormaTIon reTurns

California Non-California municipal bond interest paid to accounts with June 1, 2009 California addresses

Connecticut Non-Connecticut municipal bond interest paid to accounts with June 1, 2009 Connecticut addresses

Massachusetts Proceeds, interest, and dividends paid to accounts with February 28, 2009 Massachusetts addresses

New York Non-New York municipal bond interest paid to accounts with June 1, 2009 New York addresses

Puerto Rico Interest, dividends, proceeds, and partnership distributions February 28, 2009 paid to accounts with Puerto Rico addresses (tax statements 480 .6A and 480 .6B are mailed to your clients) . 480 .6B forms are mailed to all accounts with Puerto Rico tax withholding

In addition to sending information to the IRS, Pershing will also send the following information to the taxing authorities of the following states and Puerto Rico:

CollaTeralIzed deBT oBlIGaTIons (Cdos), CollaTeralIzed morTGaGe oBlIGaTIons (Cmos), real esTaTe morTGaGe InVesTmenT ConduITs (remICs), FInanCIal asseT seCurITIzaTIon InVesTmenT TrusTs (FasITs), and

WIdely Held morTGaGe TrusTs (WHmTs)

state rePortable iNformatioN filiNg due date

31


> form reciPieNts– Nonresident alien individuals– Foreign partnerships– Foreign corporations– Foreign estates and trusts

> traNsactioNs rePorted – Interest – Dividends– Publicly-traded partnership distributions– Trust distributions– Federal taxes withheld

> imPortaNt PoiNts– March 16, 2009 is the due date for mailing IRS Form 1042-S statements .– Dividends from money market funds are reported on IRS Form

1042-S . Clients will receive a separate Form 1042-S directly from the money market fund if Pershing did not handle the processing of the fund for the entire year .

Irs Form 1042-s—ForeIGn person’s u.s. sourCe InCome suBjeCT To WITHHoldInG

Federal tax law requires separate reporting of certain transactions when an account holder is a non U .S . person for federal tax purposes . Foreign account holders are generally not subject to IRS Form 1099 information reporting and backup withholding . These account holders are subject to IRS Form 1042-S reporting and nonresident alien withholding .

Seq. #(ABC 000001)

2008 TAX INFORMATION STATEMENT

Recipient’s Name and Address:

Page 1 of 4

***** SAMPLE ACCOUNT *****JANE DOEONE MAIN STREETLONDON AIZ-3BCUNITED KINGDOM

PERSHING LLCONE PERSHING PLAZAJERSEY CITY NJ 07399

This information is being furnished to the U.S. Internal Revenue Service.The U.S. Income Tax Filing Requirement for this form are provided on the final page of this statement.

The Recipient Code, Income Description(s) and Exemption Description(s) displayed are as provided in the Explanation of Codes for IRS Form 1042-S.

Income Exemption Federal Tax Code Tax Rate Code Gross Income Withheld Section (Box 1) Income Description (Box 5) (Box 6) Exemption Description (Box 2) (Box 7) 01 01 Interest paid by U.S. Obligors – general 0.00% 05 No exemption 78,526.30 0.00 02 06 Dividends paid by U.S. Corporations – general 15.00% 00 No exemption 794.89 119.23

TOTAL 79,321.19 119.23

2008 Form 1042-S Foreign Person’s U.S. Source Income Subject to Withholding (OMB No. 1545-0096)Summary Totals

RR NAME | XXXXXXXXX XXXXXXXXXXRR ADDR | XXXXXXXXX XXXXXXXXXARR ADDR | XXXXXXXXX XXXXXXXXXBRR ADDR | XXXXXXXXX XXXXXXXXXCRR ADDR | XXXXXXXXX XXXXXXXXXDRR ADDR | XXXXXXXXX XXXXXXXXXE

ID: 789 Phone #: (987) 654-3210

Your Investment Professional: Withholding Agent’s Information:

PERSHING LLCONE PERSHING PLAZAJERSEY CITY NJ 07399

Withholding Agent’s EIN: 13-2741729

Recipient Account Number: ABC-123456Recipient Code: IndividualRecipient’s U.S. TIN: 456-78-9012Recipient’s Country of Residence for Tax Purposes: UNITED KINGDOMCountry Code: UK

Recipient’s Information:

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Seq. #(ABC 000001)


Page 2 of 4

Recipient’s Name: **** SAMPLE ACCOUNT *****JANE DOE

Account Number: ABC-123456

2008 Form 1042-S Transaction Details

Section 01 – Income Code 01: Interest paid by U.S. Obligors – general, Tax Rate: 0.00%, Exemption Code 05: Portfolio interest exempt under an Internal Revenue Code section

Gross Income Federal Tax WithheldDescription CUSIP Process Date (Box 8) (Box 7)

BAC CAP TR TX 055189203 03/31/2008 376.956.25% MAT 3/29/55 06/30/2008 376.95CAP SEC PFD 09/29/2008 376.95 1,130.85

CITIGROUP CAP XV 17310G202 03/17/2008 402.19ENHANCED TR PFD SECS 06/16/2008 402.196.50% 9/15/66 SERIES 09/15/2008 402.19 1,206.57

CITIGROUP INC SUN NT 172967CQZ 09/15/2008 500.005.00% 09/14/14 B/EDTD 09/16/04 CLB

GENERAL ELEC CAP 369622451 07/24/2008 600.00CORP 6.00% PUBLIC 10/24/2008 600.00INCOME NT PINES 1,200.00

GENERAL MTRS ACCEP 3704255J0 05/15/2008 28,125.00CORP SR NT 5.625% 05/15/09 B/E

INDYMAC BK F S B 45660RA63 01/02/2008 108.29PASADENA CALIF 02/01/2008 108.29CTF DEP ACT/365 03/07/2008 122.26 338.84

INTERNATIONAL LEASE 459745FM2 07/01/2008 23,750.00FIN CORP SR NT 4.750% 07/01/09 B/E

MGM GRAND INC SR 552953AF8 04/01/2008 7,500.00COLL BD 10/01/2008 7,500.006.000% 10/01/09 B/E 15,000.00

MORGAN STANLEY NT 61746SAM1 03/14/2008 6,543.78FLTG RATE 0.000% 03/14/08 B/E

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Seq. #(ABC 000001)


Page 3 of 4

Recipient’s Name: **** SAMPLE ACCOUNT *****JANE DOE

Account Number: ABC-123456

2008 Form 1042-S Transaction Details (Continued)

Section 01 – Income Code 50: Other income, Tax Rate: 0.00%, Exemption Code 00: No exemption


WELLS FARGO CAP VII 94979B204 08/01/2008 365.63 GTD TR PFD SECS 11/03/2008 365.635.85% MAT 05/01/33 731.26

Section 01 Total 78,526.30 0.00

Section 02 – Income Code 06: Dividends paid by U.S. Corporations – general, Tax Rate: 15.00%, Exemption Code 00: No exemption


ISHARES TR S&P 500 464287200 09/30/2008 325.89 48.88INDEX FD

ISHARES TR 1 3 YR 464287457 10/07/2008 469.00 70.35TREAS INDEX FD

Section 02 Total 794.89 119.23

Grand Total 79,321.19 119.23

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Note: The final page of the form will be the U.S. Income Tax Filing Requirements (as they appear on the IRS form which can be found at www .irs .gov) .

33


Certain regulated investment companies (RICs) elect to pay federal income tax on undistributed long-term capital gains . Your clients who hold positions in these RICs as of the RIC’s year end receive IRS Form 2439 . This form reports a client’s shares of undistributed long-term capital gains and the federal tax paid by their RICs . Your clients should include this capital gain in their income, and they are entitled to claim a credit on their income tax returns for their shares of the federal tax paid by the RICs .

Irs Form 2439—noTICe To sHareHolder oF undIsTrIBuTed lonG-Term CapITal GaIns

> imPortaNt PoiNts– The Depository Trust Company (DTCC) provides us with

information for IRS Form 2439 reporting .– IRS Form 2439 information is not included on the tax

information statement .– The date on which IRS Form 2439 is mailed varies depending

on the RIC’s year end .– Pershing LLC claims a tax credit for individual retirement

accounts (IRAs) and other retirement accounts for which Pershing LLC is the custodian . We credit IRAs and the other retirement accounts accordingly .

– Although we receive the rates used to calculate items on IRS Form 2439 from DTCC, we cannot mail IRS Form 2439 to your clients until we receive copies from DTCC showing the amount of the RIC’s long-term capital gain paid to Pershing LLC and the amount of tax paid by the RIC .

– Some companies or funds typically declare undistributed long-term capital gains . In the example that follows below, the company is expected to provide tax information for 2008 that is reportable on IRS Form 2439 .

comPaNy/fuNd cusiP comPaNy’s tax eNdiNg date

Middleton Doll Co . 59669P102 12/31/2008

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The Online Tax Information System (TXAS) provides online viewing of reportable tax transactions . The primary features of the system include:

– Quick retrieval of specific online client tax information statements

– Access to reclassified information

– Updated information on reclassification of dividends and capital gains

– The ability to review updates and confirm that tax information statements were updated and mailed to clients

Accessing the TXAS-Tax Reporting System/TEFRATo access the TXAS Main Menu in NetExchange Pro, from the Office Tab, choose OpCenter, then choose TXAS from the Online Applications Menu .

txas screeNs oPtioN tax screeN descriPtioN

01 Tax Rate Inquiry View detailed reclassification information for a specific CUSIP®

02 Tax Rate Browse View a list of all reclassifications displayed in CUSIP order

03 Print Request Add Request a duplicate copy of a statement

04 Print Request Browse View a list of all requests for duplicate copies

05 Tax Report Inquiry View a client’s tax information statement

06 Product/CUSIP Browse View securities on a client’s statement by product type or CUSIP

07 Activity Log Browse View revisions whenever a statement is updated

08 Puerto Rico Inquiry View tax statement 480 .6A and 480 .6B reporting to Commonwealth of Puerto Rico

tax rate iNquiry screeN To access the Tax Rate Inquiry screen, choose option 1 from the TXAS Main Menu .

To view the reclassification rate, type 1 in the RATE TYPE field and press Enter . To view reclassification information for a specific CUSIP, enter the CUSIP in the CUSIP field and press Enter .

Txas-Tax reporTInG sysTem/TeFra

35



The following information will automatically display: field descriPtioN

RUN DATE Date the reclassification was entered into the TXAS system

PRODUCT TYPE Original classification

PRODUCT TYPE Components of the reclassification, which may contain up to three product codes

PRODUCT RATE Rate distribution of the reclassification

tax rate browse screeN To access the Tax Rate Browse screen, choose option 2 from the TXAS Main Menu . Type 1 in the RATE TYPE field and press Enter to view a list of reclassified items . The following information will display:

field descriPtioN

CUSIP CUSIP reclassified

FROM DATE Effective date of the reclassification

RUN DATE Date the reclassification was entered into the TXAS system

PRODUCT FROM Original classification

TYPE TO Components of the reclassifications which may contain up to three product codes

PRODUCT RATE Rate distribution of the reclassification

Type I in the S field and press Enter to access the Reclassification Rate Inquiry screen .

PriNt request add screeN To access the Print Request Add screen, choose option 3 from the TXAS Main Menu . To request a duplicate copy of the tax information statement, type the account number in the ACCOUNT field, then type the following information in the corresponding fields:

field tyPe iNdicates

MEDIA P Your request will print on paper

SORT A Your request will be sorted in ascending order

DUP/REVISE D You will receive a duplicate reprint

PRINT Y Your request will print in the next print cycle

PriNt request browse screeN To access the Print Request Browse screen, choose option 4 from the TXAS Main Menu . Type 3 in the REPRINT TYPE field and the account number or introducing broker-dealer number (followed by six zeros) in the BROWSE KEY FIELD, and press Enter .

tax rePort iNquiry screeN To access the Tax Report Inquiry screen, choose option 5 from the TXAS Main Menu . When you first access your clients’ accounts, the first page of the statement (shown on the following page) is displayed . Use the function keys to scroll through the statement . To view the Supplemental Capital Gain Distribution Information, type 330 in the PROD field, and press Enter .

Note: FOR INTERNAL USE ONLY is listed at the top of all screens as a reminder to use them for reference only (printouts should not be sent to clients) .

36


**** FOR INTERNAL USE ONLY ****

TAX INFORMATION REPORTFOR THE PERIOD BEGINNING 01/01/XX (current tax year) AND ENDING 12/31/XX (current tax year)

ACCOUNT NUMBER: 511-001208 JOHN SMITH 123 MAIN STREET BROOKLYN NY 11215-0190TAXPAYER IDENTIFICATIONNUMBER: 123-45-6789LAST REVISION DATE: 10/22/XX

SUMMARY TOTALS: GROSS PROCEEDS (LESS COMMISSIONS AND FEES) 92,241 .90 FEDERAL INCOME TAX WITHHELD (GROSS PROCEEDS) 6,046 .36 PROFIT OR (LOSS) REALIZED IN 20XX (current tax year) 141 .12UNREALIZED PROFIT OR (LOSS) ON OPEN CONTRACTS—12/31/XX (previous tax year) (421 .38) UNREALIZED PROFIT OR (LOSS) ON OPEN CONTRACTS—12/31/XX (current tax year) 1,000 .00 AGGREGATE PROFIT OR (LOSS) JANUARY 1—DECEMBER 31, 20XX (current tax year) 1,562 .50 INTEREST INCOME (PRODUCT CODES 210 THRU 240) 8,417 .50 INTEREST ON U .S . SAVINGS BOND AND TREASURY OBLIGATIONS 1,591 .72 ORDINARY DIVIDENDS 500 .00 QUALIFIED DIVIDENDS 100 .00 CAPITAL GAINS DISTRIBUTIONS 200 .00 NONTAXABLE DISTRIBUTIONS 100 .00 FOREIGN TAX PAID (DIVIDENDS AND DISTRIBUTIONS) 15 .00 LIQUIDATION DISTRIBUTIONS CASH 733 .00 TOTAL ORIGINAL ISSUE DISCOUNT FOR 20XX (current tax year) 402 .06 ORIGINAL ISSUE DISCOUNT FOR 20XX (NON-U .S . TREASURY OBLIGATIONS) (current tax year) 20 .30 ORIGINAL ISSUE DISCOUNT (U .S . TREASURY OBLIGATIONS) 381 .76 OTHER PERIODIC INTEREST 750 .00 SUBSTITUTE PAYMENTS IN LIEU OF DIVIDENDS OR INTEREST 50 .00 ROYALTIES 100 .00OTHER INCOME 500 .00 TAX-EXEMPT SPECIFIED PRIVATE ACTIVITY BOND INTEREST 400 .00 TAX-EXEMPT INTEREST 1,000 .00 MUNICIPAL ORIGINAL ISSUE DISCOUNT—SUBJECT TO AMT 21 .98 MUNICIPAL ORIGINAL ISSUE DISCOUNT—NOT SUBJECT TO AMT 145 .64 PARTNERSHIP CASH DISTRIBUTIONS 200 .00 TRUST DISTRIBUTIONS 200 .00 RETURN OF PRINCIPAL DISTRIBUTIONS 243 .37 EQUITY OPTION PROCEEDS AND EXPIRATIONS 6,188 .29 NET COST OF SECURITIES PURCHASED 206,346 .98 ACCRUED INTEREST PURCHASED—U .S . CORPORATIONS 280 .75 ACCRUED INTEREST PURCHASED—U .S . GOVERNMENT AGENCIES 75 .71 ACCRUED INTEREST PURCHASED—FOREIGN SOURCES 250 .00 ACCRUED INTEREST PURCHASED—U .S . GOVERNMENT 464 .67 TAX-EXEMPT SPECIFIED PRIVATE ACTIVITY BOND INTEREST 270 .49 TAX-EXEMPT INTEREST 105 .56

PROCEEDS FROM BROKER AND BARTER EXCHANGE TRANSACTIONS

TRADE/PROCESS

DESCRIPTION CUSIP DATE QUANTITY PROCEEDS FEDERAL TAX ALCIDE CORP 123456789 06/05/20XX 1,750 .00NEW **added**SHORT SALE **uPdated** 09/04/20XX 500 5,200 .00


37



Product/cusiP browse screeN To access the Product/CUSIP Browse screen and view a list of transactions by product type, CUSIP, or both, choose option 6 from the TXAS Main Menu . To view these items on the tax information statement, type S in the S field, and press Enter .

activity log browse screeN To access the Activity Log Screen, choose option 7 from the TXAS Main Menu . To view statement revisions, enter the account number/introducing broker-dealer number in the ACCOUNT field and press Enter . To further refine your search, type the investment professional’s (IP) number in the IP field, the activity date in the ACTIVITY DATE field, or the CUSIP in the CUSIP# field, and press Enter . To view any information that changed on a statement, type S in the SEL field, and press Enter .

Puerto rico iNquiry screeN To Access the Puerto Rico Inquiry Screen, choose option 8 from the TXAS Main Menu . When you first access your clients’ accounts, the first page of the statement is displayed . Use the function keys to scroll through the statement .

Product codes There are both general and specific product codes . Type the general product code (for instance, 200, 300, 400) in the PRODUCT TYPE field of an applicable TXAS screen to view related tax information, and press Enter . Type a specific product code (for instance, 230, 240, 250) in the PRODUCT TYPE field to view tax information related to a particular reportable or nonreportable income item, and press Enter .

Note: Typing a general product code (200) allows you to view the specific product codes (210, 220, 230, 240, and 250) without retyping each product code . Refer to the following tables for a list of product codes for reportable and nonreportable income .

rePortable iNcome Product code

Gross proceeds—1099-B 100

Gross proceeds (less commissions and fees) 110

Unrealized profit or loss on open contracts—20XX (previous tax year) 120

Profit or loss realized—20XX (current tax year) 130

Unrealized profit or loss on open contracts—20XX (current tax year) 140

Interest—1099-INT 200

Interest income (U .S . corporations and other) 210

Interest income (U .S . government agencies) 220

Interest income (foreign source) 230

Interest income (credit interest) 240

Government interest income 250

Dividends—1099-DIV 300

Ordinary dividends (U .S . corporations) 310

Qualified dividends (U .S . corporations) 315

Ordinary dividends (foreign corporations) 320

Qualified dividends (foreign corporations) 325

Capital gain distributions 330

Nontaxable distributions 340

Liquidation distributions 350

Original issue discount—1099-OID 400

Original issue discount (non-U .S . Treasury obligations) 410

Original issue discount (U .S . Treasury obligations) 420

38



rePortable iNcome (coNtiNued) Product code

Other periodic interest 430

Substitute payments in lieu of dividends or interest—1099-MISC 490

Royalties—1099-MISC 492

Other income—1099-MISC 494

Tax-exempt interest income 500

Tax-exempt-specified private bond interest 510

Tax-exempt interest 515

NoNrePortable iNcome Product code

Municipal original issue discount (not subject to AMT) 522

Partnership cash distributions 525

Return of principal distributions 530

Trust distributions 535

Equity option transactions 540

Accrued interest purchased 600

Accrued interest purchased (U .S . corporations) 610

Accrued interest purchased (U .S . government agencies) 615

Accrued interest purchased (foreign source) 620

Accrued interest purchased (U .S . government bonds and notes) 625

Accrued interest purchased (tax-exempt-specified private bond interest) 630

Accrued interest purchased (tax-exempt interest) 635

Margin interest expense 690

Securities purchased and accrued interest purchased 700

Securities purchased 710

Collateralized debt obligations (CDOs)/real estate mortgage investment conduits (REMICs) 800

CDOs/REMICs (description only) 810

CDOs/REMICs 820

tax statemeNt correctioNsTXAS allows you to view your clients’ tax information statements online . If you have a correction, you must submit the proper documentation to Pershing . We will verify the information upon receipt and post any corrections online; corrections can be immediately viewed online . Once corrected, the word ADDED, UPDATED, or DELETED will appear next to each item . Also, a new statement will be printed and mailed to your client . When the revised tax information statement is printed, the online statement will display the most recent revision date under the LAST REVISION DATE field .

additioNal iNformatioNIf you have any questions about TXAS, please call Pershing’s Tax Reporting Help Desk at (800) 699-9965, (201) 413-4687 for calls originating outside of the United States, or send a fax to (201) 433-4199 .

Note: Pershing is not authorized to offer tax advice .

39


General InFormaTIon

> PayerPershing LLC is the payer of income reported on IRS Forms 1099-R and 1099-Q for those custodians participating in the Combined State and Federal Tax Withholding program .

> Payer’s taxPayer ideNtificatioN Number (tiN)Pershing’s TIN for 1099-R and 1099-Q reporting is 13-3718556 . Pershing’s TIN for 5498 and 5498-ESA reporting is 13-2741729 . Note: For 5498 and 5498-ESA reporting, if your client has a custodian other than Pershing, that custodian’s TIN will be used for reporting .

> miNimum distributioN amouNtsIn accordance with regulatory requirements, Pershing will issue a Form 1099-R to report all distributions of $10 or more from individual retirement accounts, qualified plans, and 403(b) accounts to the IRS and your clients .

> New clieNtsThe tax forms will include tax reporting activity for the 2008 tax year . If your firm joined Pershing after January 1, 2008, your clients may receive tax forms from Pershing and the previous payer . Questions regarding tax forms should be directed to the appropriate payer .

> qualified retiremeNt PlaN (qrP)QRP omnibus accounts pool assets for multiple employees of the same employer . Generally, these accounts bear the name and TIN of the employer . Pershing does not issue IRS Form 1099-R to participants for distributions that occur from omnibus accounts . Instead, these forms are issued by the plan trustee(s) .

> fair market value (fmv)IRA owners will receive their December 31, 2008 FMV report as part of their January 2009 account statement .

> retiremeNt Product iNformatioN You can research your clients’ tax-related inquiries by using our Individual Retirement Account System (IRAS) . IRAS provides online viewing of reportable and certain nonreportable transactions, at both summary and detail levels, in retirement accounts for which Pershing LLC acts as custodian or servicing agent .

> cd-romTax forms for the 2008 tax year will be available on SelectView® CD-ROMs, using the same Digital Xpress Reports (DXR)

technology as our statements and confirmations . IRS Forms 1099-R and 1099-Q for 2008 will be available beginning February 2009, and IRS Forms 5498 and 5498-ESA will be available beginning June 2009 . These CD-ROMs will be sorted and distributed to your firm and will include all office ranges . The CD-ROM provides access to tax reporting forms for your clients’ accounts, and allows you to search and print the forms by using your client’s Social Security Number, account number, office range, and investment professional number (IP) . The tax CD-ROM passwords are the same passwords your firm used for your brokerage account statements and trade confirmations . There is no longer a separate password matrix .

> e-documeNt suiteCopies of original and corrected IRS Forms 1099-R, 1099-Q, 5498, and 5498-ESA are available online via e-Document Suite in NetExchange Pro .

> coverdell educatioN saviNgs accouNts (esa) rePortiNgCoverdell ESA contributions will be reported on Form 5498-ESA, Coverdell ESA Contribution Information . Coverdell ESA distributions will be reported on IRS Form 1099-Q, Payments from Qualified Education Programs (under Sections 529 and 530) .

Direct transfers into a Coverdell ESA will be reported in Box 2 (Rollover Contributions) of IRS Form 5498-ESA . The transfer amounts will be included with any rollover contributions . Direct transfers have historically been nonreportable . As a result, the amount reported in Box 2 may be different than the rollover contribution amount reported on the brokerage account statement or in IRAS .

Form 5498-ESA will be mailed to clients by May 31, 2009, instead of April 30, as a result of Pershing filing for an extension with the IRS . The additional time is needed to accommodate contributions for 2008 that can be made as late as April 15, 2009 .

> who to coNtactPlease contact the Pershing Credit Services Customer Service Group at (888) 367-2563 or your tax professional with questions about tax reporting issues related to retirement products . A list of Frequently Asked Questions regarding tax forms is available via The Source in NetExchange Pro and on pages 61 and 62 .

Pershing is not qualified to offer tax advice.

> direct rollovers from a qualified retiremeNt PlaN (qrP) to a roth iraA provision of the Pension Protection Act of 2006 made possible the direct rollover of funds from a QRP to a Roth IRA beginning January 1, 2008 . These transactions are reported as direct rollovers (distribution code G) on Form 1099-R and as rollovers in Box 2 on Form 5498 . Please see PPA on Point in the Retirement Products section of The Source in NetExchange Pro for more information .

> required miNimum distributioN (rmd) waived for 2009 On Tuesday, December 23, 2008, the President signed into law H .R . 7327, the Worker, Retiree, and Employer Recovery Act of 2008, which waives RMDs for 2009 .

If an account holder reached the age of 70 ½ in 2009, that individual is not required to begin taking a RMD in 2009 . If an account holder is over the age of 70½ in 2009, that individual is not required to continue to take a RMD for 2009 . An individual may still choose to take a distribution but it is not required .

If an account holder turned 70½ during 2008, then that individual must continue to meet their RMD for 2008 . In these cases, an individual has until April 1, 2009 to complete their 2008 RMD requirement .

For an inherited account, if RMDs had begun the beneficiary is not required to continue taking RMDs in 2009 .

WHaT’s neW For 2008 For reTIremenT produCTs

40


irs forms 5498 and 5498-esa

due2

irs forms 1099-r

and 1099-q due2

Tax reporTInG Calendar

juNe 2009suNday

7

14

21

28

moNday1

8

15

22

29

tuesday2

9

16

23

30

wedNesday3

10

17

24

thursday4

11

18

25

friday5

12

19

26

saturday6

13

20

27

completion of irs forms 5498 and 5498-esa cd-rom mailing to your firm

corrected irs forms 5498 and 5498-esa mailings to your clients and Posted to e-document suite weekly through december 31

1 Withholding adjustment will not be processed in 2009 for 2008 distributions .2 IRS Forms 1099-R, 1099-Q, 5498, and 5498-ESA are due to the IRS . We typically request an extension of time to file with the IRS to ensure that all corrected data is submitted to the IRS .3 NRA refers to nonresident alien individuals .4 If Pershing receives Schedule K-1 from the Limited Partnership by March 20, 2009 . Please see page 57 for more information .

march 2009

february 2009

aPril 2009

suNday1

8

15

22

moNday2

9

16

23

tuesday3

10

17

24

wedNesday4

11

18

25

thursday5

12

19

26

friday6

13

20

27

saturday7

14

21

28

suNday1

8

15

22

29

moNday2

9

16

23

30

tuesday3

10

17

24

31

wedNesday4

11

18

25

thursday5

12

19

26

friday6

13

20

27

saturday7

14

21

28

completion of irs forms 1099-r and 1099-q cd-rom mailing to your firm

suNday

5

12

19

26

moNday

6

13

20

27

tuesday

7

14

21

28

wedNesday1

8

15

22

29

thursday2

9

16

23

30

friday3

10

17

24

saturday4

11

18

25

corrected irs forms 1099-r and 1099-q mailings to your clients and Posted to e-document suite (daily until april 30 and then weekly through december 31)

jaNuary 2009suNday

4

11

18

25

moNday

5

12

19

26

tuesday

6

13

20

27

wedNesday

7

14

21

28

thursday1

8

15

22

29

friday2

9

16

23

30

saturday3

10

17

24

31

irs forms 1099-r and 1099-q mailed to your clients and Posted to e-document suite

december 31 final day for 2008

distributions1

may 2009suNday

3

10

17

24

moNday

4

11

18

25

tuesday

5

12

19

26

wedNesday

6

13

20

27

thursday

7

14

21

28

friday1

8

15

22

29

saturday2

9

16

23

30

irs forms 5498 and 5498-esa mailed to your clients and Posted to e-document suite31

irs forms 1042-s mailed to your Nra3 clients and Posted to e-document suite

april 15: deadline for filing form 990-t4

april 15: Participant ira contribution deadline

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Form 1099-r Copy C WITH InsTruCTIonssa

mPle

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form

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stru

ctio

Ns

Note: For corrected forms, “Corrected as of MM/DD/YYYY” will be displayed in the upper right corner of the form, directly below “2008 Retirement Account Tax Information Statement .” The date will be the day the process was run to generate the corrected form . The following additional note will appear at the bottom of the note section: “This form contains revised information to correct reporting previously provided for your account for tax year 2008 .”

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Form 1099-r Copy B and Copy 2sa

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GuIde To Form 1099-r dIsTrIBuTIon Codes

Internal Revenue Service http://www .irs .gov/formspubs/index .html

Guide to Distribution Codes

*Used with code ...(ifDistribution Codes Explanations applicable)

1—Early distribution, no known exception. Use Code 1 only if the employee/taxpayer has not reached age 591/2, 8, B, D, L, or Pand you do not know if any of the exceptions under Distribution Code2, 3, or 4 apply. Use Code 1 even if the distribution is made formedical expenses, health insurance premiums, qualified highereducation expenses, or a first-time home purchase under section72(t)(2)(B), (D), (E), or (F). Code 1 must also be used even if ataxpayer is 591/2 or older and he or she modifies a series ofsubstantially equal periodic payments under section 72(q), (t), or (v)prior to the end of the 5-year period.

2—Early distribution, exception applies. Use Code 2 only if the employee/taxpayer has not reached age 591/2 8, B, D, or Pand the distribution is:• A Roth IRA conversion (an IRA converted to a Roth IRA).• A distribution made from a qualified retirement plan or IRA becauseof an IRS levy under section 6331.• A section 457(b) plan distribution that is not subject to theadditional 10% tax. But see Section 457(b) plan distributions on page10 for information on distributions that may be subject to the 10%additional tax.• A distribution from a qualified retirement plan after separation fromservice in or after the year the taxpayer has reached age 55.• A distribution from a governmental defined benefit plan to a publicsafety employee after separation from service in or after the year theemployee has reached age 50.• A distribution that is part of a series of substantially equal periodicpayments as described in section 72(q), (t), or (v).• A distribution that is a permissible withdrawal under an eligibleautomatic contribution arrangement.• Any other distribution subject to an exception under section 72(q),(t), or (v) that is not required to be reported using Code 1, 3, or 4.

3—Disability. enoN.)7()m(27 noitces ees ,sesoprup eseht roF4—Death. Use Code 4 regardless of the age of the employee/taxpayer to 8, A, B, D, G, H, L, or P

indicate payment to a decedent’s beneficiary, including an estate ortrust. Also use it for death benefit payments made by an employer butnot made as part of a pension, profit-sharing, or retirement plan.

5—Prohibited transaction. Use Code 5 if there was a prohibited (improper) use of the account. NoneCode 5 means the account is no longer an IRA.

6—Section 1035 exchange. Use Code 6 to indicate the tax-free exchange of life insurance, Noneannuity, or endowment contracts under section 1035.

7—Normal distribution. Use Code 7: (a) for a normal distribution from a plan, including a Atraditional IRA, section 401(k), or section 403(b) plan, if the employee/taxpayer is at least age 591/2, (b) for a Roth IRA conversion orreconversion if the participant is at least age 591/2, and (c) to report adistribution from a life insurance, annuity, or endowment contract andfor reporting income from a failed life insurance contract undersections 7702(g) and (h). See Rev. Rul. 91-17, 1991-1 C.B. 190. UseCode 7 with Code A, if applicable. Generally, use Code 7 if no othercode applies. Do not use Code 7 for a Roth IRA.Note: Code 1 must be used even if a taxpayer is 591/2 or older and heor she modifies a series of substantially equal periodic paymentsunder section 72(q), (t), or (v) prior to the end of the 5-year period.

8—Excess contributions plus earnings/ Use Code 8 for an IRA distribution under section 408(d)(4), unless 1, 2, 4, B, or Jexcess deferrals (and/or earnings) taxable in Code P applies. Also use this code for corrective distributions of2008. excess deferrals, excess contributions, and excess aggregate

contributions, unless Code D or P applies. See CorrectiveDistributions on page 4 and IRA Revocation or Account Closure onpage 2 for more information.

9—Cost of current life insurance protection. Use Code 9 to report premiums paid by a trustee or custodian for Nonecurrent life or other insurance protection. See box 2a on page 7 formore information.

A—May be eligible for 10-year tax option. Use Code A only for participants born before January 2, 1936, or their 4 or 7beneficiaries to indicate the distribution may be eligible for the 10-yeartax option method of computing the tax on lump-sum distributions (onForm 4972, Tax on Lump-Sum Distributions). To determine whetherthe distribution may be eligible for the tax option, you need notconsider whether the recipient used this method (or capital gaintreatment) in the past.

B—Designated Roth account distribution. Use Code B for a distribution from a designated Roth account that is 1, 2, 4, 8, D, G, L, or Pnot a qualified distribution. But use Code E for a section 415 excess.

D—Excess contributions plus earnings/ See the explanation for Code 8. Generally, do not use Code D for an 1, 2, 4, or Bexcess deferrals taxable in 2006. IRA distribution under section 408(d)(4) or 408(d)(5).


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*Used with code ...(ifDistribution Codes Explanations applicable)

E—Excess annual additions under section See Excess Annual Additions Under Section 415 on page 5. None415/certain excess amounts under section403(b) plans.

F—Charitable gift annuity. See Charitable gift annuities enoN.7 egap no G—Direct rollover and rollover contribution. Use Code G for a direct rollover from a qualified plan (including a 4 or B

governmental section 457(b) plan) or section 403(b) plan to an eligibleretirement plan (another qualified plan, a section 403(b) plan, or anIRA). See Direct Rollovers on page 3. Also use Code G for certaindistributions from conduit IRAs to an employer plan and IRA rollovercontributions to an accepting employer plan. See Conduit IRAs onpage 2.Note: Do not use Code G for a direct rollover from a designated Rothaccount to a Roth IRA. Use Code H.

H—Direct rollover of a designated Roth Use Code H for a direct rollover of a distribution from a designated 4account distribution to a Roth IRA. Roth account to a Roth IRA.J—Early distribution from a Roth IRA. Use Code J for a distribution from a Roth IRA when Code Q or Code T 8 or P

does not apply. But use Code 2 for an IRS levy and Code 5 for aprohibited transaction.

L—Loans treated as deemed distributions Do not use Code L to report a loan offset. See Loans Treated as 1, 4, or Bunder section 72(p). Distributions on page 5.N—Recharacterized IRA contribution made Use Code N for a recharacterization of an IRA contribution made for Nonefor 2008. 2008 and recharacterized in 2008 to another type of IRA by a

trustee-to-trustee transfer or with the same trustee.P—Excess contributions plus earnings/ See the explanation for Code 8. The IRS suggests that anyone using 1, 2, 4, B, or Jexcess deferrals taxable in 2007. Code P for the refund of an IRA contribution under section 408(d)(4),

including excess Roth IRA contributions, advise payees, at the timethe distribution is made, that the earnings are taxable in the year inwhich the contributions were made.

Q—Qualified distribution from a Roth IRA. Use Code Q for a distribution from a Roth IRA if you know that the Noneparticipant meets the 5-year holding period and:• The participant has reached age 591/2,• The participant died, or• The participant is disabled.Note: If any other code, such as 8 or P, applies, use Code J.

R—Recharacterized IRA contribution made Use Code R for a recharacterization of an IRA contribution made for Nonefor 2007. 2007 and recharacterized in 2008 to another type of IRA by a

trustee-to-trustee transfer or with the same trustee.S—Early distribution from a SIMPLE IRA in Use Code S only if the distribution is from a SIMPLE IRA in the first 2 Nonethe first 2 years, no known exception. years, the employee/taxpayer has not reached age 591/2, and none of

the exceptions under section 72(t) are known to apply when thedistribution is made. The 2-year period begins on the day contributionsare first deposited in the individual’s SIMPLE IRA. Do not use Code Sif Code 3 or 4 applies.

T—Roth IRA distribution, exception applies. Use Code T for a distribution from a Roth IRA if you do not know if the None5-year holding period has been met but:• The participant has reached age 591/2,• The participant died, or• The participant is disabled.Note: If any other code, such as 8 or P, applies, use Code J.

*See the first Caution for box 7 instructions on page 10.


GuIde To Form 1099-r dIsTrIBuTIon Codes

Internal Revenue Service http://www .irs .gov/formspubs/index .html

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1. The 1099-R Tax Correction Request Form is used for all Form 1099-R correction requests (refer to page 47) .

2. The 1099-Q Tax Correction Request Form is used for all Coverdell ESA correction requests on Form 1099-Q (refer to page 48) .

3. If your client’s account moved from a Coverdell ESA (reported on Form 1099-Q) to another plan type, you will need to complete both correction forms to properly process this request .

4. Correction requests should include a copy of your client’s brokerage account statement or a NetExchange Pro History screen printout with errors clearly highlighted . If the correction involves an account name or TIN, enclose a copy of the executed Adoption Agreement after the account has been updated .

5. We may need to speak with you about these corrections, so please provide a contact name, telephone number, and signature with the appropriate paperwork .

6. Duplicate copies of Forms 1099-R and 1099-Q can be found in NetExchange Pro . For original 2008 forms mailed by January 31, 2009, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statement type . Pershing provides for the correction of tax forms for the immediately preceding three tax years . Corrected forms for tax year 2008 will be generated in the format of the Pershing substitute form . These forms will be available in e-Document Suite, as noted, for the original forms . Corrections to forms for 2007 and 2006 tax years generated in 2009 will be produced using the standard IRS form . To obtain copies of these forms, go to Online Documents and enter the account number to locate the imaged form .

If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563 and select the option for retirement accounts .

7. Fax or send correction requests to:

Requests for corrections are reviewed upon receipt, and are approved once we receive the necessary documentation . Correction requests for Forms 1099-R and 1099-Q should be submitted on the appropriate tax correction form, accompanied by supporting documentation . A reject Service Center notification will be sent within 48 hours of a correction request being received if the request is not in proper order . A corrected Form 1099-R or 1099-Q will be mailed to your client within five business days after an adjustment is made to the account (generated and mailed daily from February 9 to April 30 and weekly from May 1 to December 31), as appropriate . Corrected forms will be available in e-Document Suite on the day the form is mailed to the account holder or in Online Documents, as previously noted .

If you need help or have questions about Forms 1099-R or 1099-Q tax corrections, or would like to obtain the status of a correction request, please call the Customer Service Group .

CorreCTInG Tax InFormaTIon For Form 1099-r and Form 1099-Q

Pershing LLC Attention: Retirement Products Department One Pershing Plaza, 11th Floor Jersey City, New Jersey 07399Toll-Free Fax Number: (866) 355-5572 Direct Fax Number: (201) 333-8842 (for calls originating outside of the United States)

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Please issue a corrected irs form 1099-r for the followiNg category:

o tax iNformatioN statemeNt/rePorto NetexchaNge Pro® screeN PriNtout

o brokerage accouNt statemeNto other

reasoN for correctioN:

sigNature:Note: Duplicate copies of Form 1099-R can be found in NetExchange Pro . For original forms mailed by January 31 each year, and for the corrections related to that tax year, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statement type . For corrected or new original forms done for a year other than the immediately preceding year, go to Online Documents and enter the account number to locate the imaged form . If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563 and select the option for retirement accounts .

the followiNg documeNts are eNclosed with error(s) clearly highlighted:

distributioNs 1099-r iNformatioN requested correctioN

early distributions, no known exceptions

early distributions exception applies (substantially equal series or roth conversions under the age of 591/2)

disability

death

Normal (includes roth conversions at the age of 591/2 or older)

excess contributions plus earnings taxable in 2nd prior year (for tax year: ______) (qualified plans only)

excess contributions plus earnings taxable in prior year removed by filing deadline (for tax year: ______)

excess contributions plus earnings taxable in current year removed by filing deadline (for tax year:______)

excess contributions removed after filing deadline

direct rollover to an ira/qrP

early distribution from a roth ira, no known exceptions

roth ira distribution, exception applies

loans treated as deemed distributions

loans treated as offset

recharacterized ira contributions for prior year (for tax year: ______)

recharacterized ira contributions for current year (for tax year: ______)

early distributions from a simPle ira in the first two years, no known exception

taxpayer identification Number

federal taxes withheld (no adjustments to amounts after 12/31 of the withholding year)

state taxes withheld (no adjustments to amounts after 12/31 of the withholding year)

state of residence adjustment

client name (client name adjustment)

1099 -r tax correct ioN request


date: accouNt Number:

requested by: firm Name:

requester’s telePhoNe: Number of Pages:

Fax the completed form to Pershing’s Retirement Products Department . Toll-Free Fax Number: (866) 355-5572 Direct Fax Number: (201) 333-8842 (for calls originating outside of the United States)

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Please issue a corrected irs form 1099-q for the followiNg category:




sigNature:Note: Duplicate copies of Form 1099-Q can be found in NetExchange Pro . For original forms mailed by January 31 each year, and for the corrections related to that tax year, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statement type . For corrected or new original forms done for a year other than the immediately preceding year, go to Online Documents and enter the account number to locate the imaged form . If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563 and select the option for retirement accounts .


distributioNs 1099-q iNformatioN requested correctioN

gross distribution amount (distribution code 1)

excess contributions plus earnings taxable in 2008 (distribution code 2)

excess contributions plus earnings taxable in 2007 (distribution code 3)

fair market value (fmv) (distribution code 4)

death (distribution code 5)

recipient’s social security Number

client name (client name adjustment)

1099 -q tax correct ioN request





Fax the completed form to Pershing’s Retirement Products Department .

Toll-Free Fax Number: (866) 355-5572 Direct Fax Number: (201) 333-8842 (for calls originating outside of the United States)

IRA1099Q

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Form 5498 sa

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1. The 5498 Tax Correction Request Form is used for all Form 5498 correction requests (refer to page 52) .

Note: For contribution adjustments to qualified retirement plans, send a Service Center request to the Customer Service Technical Advisor Group (TAG) . Requests should be directed to Retirements Processing, Contributions, Check Contributions Adjustments .

2. The 5498-ESA Tax Correction Request Form is used for all Form 5498-ESA correction requests (refer to page 52) .

3. Correction requests should include a copy of your client’s brokerage account statement or a NetExchange Pro screen printout with the error(s) clearly highlighted . If the correction involves an account name or TIN, enclose a copy of the executed Adoption Agreement after the account has been updated .

4. We may need to speak with you about these corrections, so please provide a contact name, telephone number, and signature with the appropriate paperwork .

5. Duplicate copies of Forms 5498 and 5498-ESA can be found in NetExchange Pro . For original 2008 forms mailed by May 31, 2009, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statement type . Pershing provides for the correction of tax forms for the immediately preceding three tax years . Corrected forms for tax year 2008 will be generated in the format of the Pershing substitute form . These forms will be available in e-Document Suite, as noted, for the original forms . Corrections to forms for 2007 and 2006 tax years generated in 2009 will be produced using the standard IRS form . To obtain copies of these forms, go to Online Documents and enter the account number to locate the imaged form .

If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563 and select the option for retirement accounts .


Requests for corrections are reviewed upon receipt and are approved once we have received the necessary documentation . Correction requests for Forms 5498 and 5498-ESA should be submitted on the appropriate tax correction form, accompanied by supporting documentation . A reject Service Center notification will be sent within 48 hours of a correction request being received if the request is not in proper order . A corrected Form 5498 or 5498-ESA will be mailed to your client within five business days after an adjustment is made to an account, as appropriate . Corrected forms will be available in e-Document Suite on the day the form is mailed to the account holder or in Online Documents, as previously noted .

If you need help or have questions about Forms 5498 or 5498-ESA tax corrections, please call the Customer Service Group .

CorreCTInG Tax InFormaTIon For Form 5498 and Form 5498-esa

Pershing LLC Attention: Retirement Products Department One Pershing Plaza, 11th Floor Jersey City, New Jersey 07399 Toll-Free: (866) 355-5572 Direct Fax Number: (201) 333-8842 (for calls originating outside the United States)

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Please issue a corrected irs form 5498 for the followiNg category:




sigNature:Note: Duplicate copies of Form 5498 can be found in NetExchange Pro . For original forms mailed by May 31 each year, and for the corrections related to that tax year, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statement type . For corrected or new original forms done for a year other than the immediately preceding year, go to Online Documents and enter the account number to locate the imaged form . If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563 and select the option for retirement accounts .


coNtributioNs form 5498 iNformatioN requested correctioN

ira (box 1)

rollover (box 2)

roth conversion (box 3)

recharacterization (box 4)

seP (box 8)

simPle (box 9)

roth ira (box 10)

blank box

fair market value as of 12/31 (for tax year: ________)

Participant’s social security Number

clieNt iNformatioN

clieNt Name: taxPayer ideNtificatioN Number:

5498 tax correct ioN request







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Please issue a corrected irs form 5498-esa for the followiNg category:




sigNature:Note: Duplicate copies of Form 5498-ESA can be found in NetExchange Pro . For original forms mailed by May 31 each year, and for the corrections related to that tax year, go to Tax Year-End Documents in e-Document Suite and enter the account number and tax year and select the tax statement type . For corrected or new original forms done for a year other than the immediately preceding year, go to Online Documents and enter the account number to locate the imaged form . If you are unable to locate or print a form, please contact Pershing’s Credit Services Customer Service Team at (888) 367-2563 and select the option for retirement accounts .


coNtributioNs form 5498-esa iNformatioN requested correctioN

coverdell education savings account (esa) (box 1)

rollover (box 2, includes transfers)

beneficiary’s social security Number

clieNt iNformatioN

clieNt Name: taxPayer ideNtificatioN Number:

5498–esa tax correct ioN request





IRA5498E



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Form 1099-r name/TIn mIsmaTCH noTICes

> irs NotificatioNThe IRS notifies Pershing when a name/TIN combination on our 1099-Rs does not match the records of the Social Security Administration or the Internal Revenue Service . This notification is typically received in August or September each year and pertains to forms filed for the tax year two years prior to the year of notification . For example, the notification received in 2008 was related to 1099-R forms for tax year 2006 .

> w-9 mailiNgPershing is required to solicit W-9 forms directly from the appropriate end-clients for the accounts identified in the notification . Solicitations include a letter explaining the mismatch, what actions the account owner should take, a pre-printed substitute Form W-9 (W9BN), and a return envelope . The 1st B-Notice Notification date field in Account Services is populated with the W9BN mailing date . The substitute W9BN form must be used to avoid mandatory withholding (NOT IRS Form W-9) . If a blank W9BN form is needed, it can be found in the Material Catalog in The Source in NetExchange Pro, Keyword: IRS B Notice .

The following report is made available in Report Center in NetExchange Pro prior to the client mailing: 1099-R Name/TIN Mismatches for Tax Year 20XX (Report ID: IRA110R0), and an Operations Update is distributed around the same time to provide information regarding the process .

> maNdatory withholdiNg requiremeNtIf the end client does not respond to the TIN solicitation within the prescribed time frame (45 calendar days from the mailing date), Pershing is required to withhold a minimum of 10% federal taxes (and applicable state taxes) from distributions . Per IRS requirements in Publication 1586, a new withholding election is required at any

point after the mailing date if the client furnishes a different name/TIN combination . If a different name/TIN combination is provided on the W9BN form, then there will be a mandatory 10% withholding on previously established standing distribution instructions until a new withholding election is received by Pershing . Pershing’s withholding election is part of the Distribution Form, so the account holder simply needs to complete and provide a new distribution form to Pershing .

On the first business day after the deadline for receipt of the W9BN, a 1st B-Notice enforced date is placed on all accounts involved in the mailing for which a W9BN is not returned . The B-Notice fields are used in Pershing’s system . Pershing follows IRS Reasonable Cause procedures as outlined in IRS Publication 1586 . The process is very similar to that required for B-Notices . While distributions from retirement plans are not subject to backup withholding, the B-Notice field is utilized to signify and trigger the mandatory federal (and appropriate state) tax withholding requirement for the account . Pershing Automatic Cash Exchange (PACE) System holds are placed on the accounts as is the following notebook message, for example: IRS B NOTICE DATE 2008-11-17 INCORRECT NAME/TIN MINIMUM 10% FED TAX W/H REQD . If an account has a standing periodic distribution instruction, Pershing will update the withholding election to at least 10%, as required . Once updated, per IRS regulations, a new instruction must be supplied to change the withholding election .

If an account holder returns the W9BN after the B-Notice has been added to the account, then the B-Notice satisfied field will be populated and the mandatory withholding requirement will be lifted from the account . The PACE hold on the account will be removed and the following notebook message will be added: W9BN RECEIVED MIN W/H REQUIREMENT REMOVED .

ForeIGn dIsTrIBuTIon Tax TreaTmenT

> foreigN distributioNs: defiNitioN aNd basic coNditioNsA foreign distribution, for these purposes, is defined as taxable amounts distributed from a retirement account that are disbursed either outside of the United States or within the U .S . to a nonresident alien . There are specific requirements regarding tax treatment for foreign distributions .

There are three basic conditions:

1 . If funds are distributed outside of the U .S . or its possessions to a U .S . person, then a minimum of 10% federal tax must be withheld from the gross distribution amount .

2 . If funds are distributed to a nonresident alien or foreign estate and the account is NOT documented with a W-8BEN, then 30% NRA tax must be withheld from the gross distribution amount .

3 . If funds are distributed to a nonresident alien or foreign estate and the account IS documented with a W-8BEN, then 30% NRA tax, or a reduced rate based upon validly claimed treaty benefits, must be withheld from the gross distribution amount .

> foreigN distributioN tax treatmeNt gridsIn order to provide a more specific understanding of how Pershing will determine tax for foreign distributions, please refer to the two grids on the next page .

– Grid #1 details how Pershing handles Documented Accounts, accounts with a valid form W-8BEN or W-9 on file .

– Grid #2 details how Pershing handles Undocumented Accounts . Absent a form, IRS presumption rules (as provided in IRS Reg . Sec . 1 .1441-1(b)(3)(iii)(C)) are followed to determine tax treatment .

Each grid has three lines, one for each possible scenario . Below each grid is a written description of each scenario in that grid .

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ForeIGn dIsTrIBuTIon Tax TreaTmenT GrIds

grid #1: documented account: valid form w-8beN or w-9 on file

W-8BEN on File

Treaty Benefits Claimed W-9 on File

Social Security Number

Zero Treaty Country Tax Type

Req’d Min . W/H Tax Form

#1 Yes No No N/A N/A NRA 30% 1042-S

#2 Yes Yes No N/A N/A NRA Treaty Rate 1042-S

#3 No N/A Yes N/A N/A FED 10% 1099-R

grid #2: undocumented account: irs Presumption rules

W-8BEN on File

Treaty Benefits Claimed W-9 on File

Social Security Number

Zero Treaty Country Tax Type

Req’d Min . W/H Tax Form

#1 No N/A No Yes Yes FED 10% 1099-R

#2 No N/A No Yes No NRA 30% 1042-S

#3 No N/A No No N/A NRA 30% 1042-S

> Documented Account – Scenario #1 (Nonresident Alien or Foreign Estate): A foreign distribution is taken and a valid W-8BEN form IS on file . Treaty benefits ARE NOT claimed on the form and a W-9 form IS NOT on file . Whether there is a Social Security number on record for the account or if the foreign address is in a “zero treaty country” (as defined on page 56) is not applicable to the determination of tax treatment . NRA tax will be withheld from the distribution at a rate of 30% of the gross distribution amount . IRS form 1042-S will be mailed to recipients (as noted on page 56) and transmitted to the IRS to report the activity for the year .

> Documented Account – Scenario #2 (Nonresident Alien or Foreign Estate): A foreign distribution is taken and a valid W-8BEN form IS on file . Treaty benefits ARE claimed on the form and a W-9 form IS NOT on file . Whether there is a Social Security number on record for the account or if the foreign address is in a “zero treaty country” (as defined on page 56) is not applicable to the determination of tax treatment . NRA tax will be withheld from the distribution at the treaty rate of the gross distribution amount (see the country lists on page 56) . IRS Form 1042-S will be mailed to recipients (as noted on page 56) and transmitted to the IRS to report the activity for the year .

> Documented Account – Scenario #3 (U.S. Person): A foreign distribution is taken and a valid W-8BEN form IS NOT on file . Since there is no W-8BEN form on file, the claim of treaty benefits is not applicable to the determination of tax treatment . A W-9 form IS on file for the account . Whether there is a Social Security number on record for the account or if the foreign address is in a “zero treaty country” (as defined on page 56) is not applicable to the determination of tax treatment . Federal tax will be withheld from the distribution at a minimum rate of 10% of the gross distribution amount . Form 1099-R will be mailed to recipients and transmitted to the IRS to report the activity for the year .

Note: If both documents are on file, then the most recently received valid document will dictate tax treatment . Form W-9 is valid indefinitely . W-8BEN forms generally expire on December 31 of the third year following the year the form is signed and dated .

> Undocumented Account – Scenario #1 (U.S. Person): A foreign distribution is taken and EITHER a valid W-8BEN OR W-9 form is NOT on file with Pershing . There IS a Social Security Number on record for the account AND the foreign address is in a “zero treaty country” (as defined on page 56) . Federal tax will be withheld from the distribution at a minimum rate of 10% of the gross distribution amount . Form 1099-R will be mailed to recipients and transmitted to the IRS to report the activity for the year .

> Undocumented Account – Scenario #2 (Nonresident Alien or Foreign Estate): A foreign distribution is taken and EITHER a valid W-8BEN OR W-9 form is NOT on file with Pershing . There IS a Social Security number on record for the account BUT the foreign address is NOT in a “zero treaty country” (as defined on

page 56) . NRA tax will be withheld from the distribution at a rate of 30% of the gross distribution amount . IRS Form 1042-S will be mailed to recipients (as noted on page 56) and transmitted to the IRS to report the activity for the year .

> Undocumented Account – Scenario #3 (Nonresident Alien or Foreign Estate): A foreign distribution is taken and EITHER a valid W-8BEN OR W-9 form is NOT on file with Pershing . There is NOT a Social Security number on record for the account . Whether the foreign address is in a “zero treaty country” or not is immaterial to tax treatment determination . NRA tax will be withheld from the distribution at a rate of 30% of the gross distribution amount . IRS Form 1042-S will be mailed to recipients (as noted on page 56) and transmitted to the IRS to report the activity for the year .

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> irs PublicatioN 515: withholdiNg of tax oN NoNresideNt alieNs aNd foreigN eNtities IRS Publication 515 contains a table with treaty rates for withholding from pension and annuity distributions to nonresident aliens and foreign intities (NRAs) . If a country is not noted below, then the NRA rate is 30% of the gross distribution amount . To receive the reduced rate, an account holder must have a certified Form W-8BEN, in which treaty benefits are claimed, on file with Pershing and coded in Pershing’s system .

Zero Treaty Countries (0% NRA tax)*: Ashmore and Cartier Islands, Australia, Austria, Bangladesh, Barbados, Belgium, China, Christmas Island, Cocos (Keeling) Islands, Coral Sea Island Territory, Cyprus, Czech Republic, Egypt, Estonia, Finland, Germany, Greece, Hungary, Iceland, India, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea, Latvia, Lithuania, Luxembourg, Mexico, Morocco, Netherlands, New Zealand, Norfolk Island, Northern Ireland, Norway, Pakistan, Portugal, Romania, Russia, Slovak Republic, Slovenia, Spain, Sri Lan ka, Sweden, Switzerland, Thailand, Trinidad & Tobago, Tunisia, Turkey, Ukraine, United Kingdom, and Venezuela .

Reduced Treaty Countries (15% NRA tax)*: Canada, Indonesia, and South Africa .

> u.s. tax treatmeNtFor purposes of the tax treatment, the United States includes U .S . military bases and U .S . possessions .

> u.s. PossessioNs*American Samoa, Baker Island, Guam, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Marshall Islands, Micronesia, Midway Islands, Navassa Island, Northern Mariana Island, Palmyra Atoll, Puerto Rico, Trust Territory of the Pacific Island, U .S . Virgin Islands, and Wake Island .

> form 1042-sIRS Form 1042-S (NOT Form 1099-R) is sent to retirement account holders to report nonresident alien distributions . These forms will be mailed to recipients by the March 16, 2009 IRS deadline, and copies will be available on or around that date in the e-Document Suite of NetExchange Pro . Of note, the Box 1 Income Code is 14, the gross amount of the distributions will be reported in Box 2, the applicable tax rate will be in Box 5, and the amount of NRA withholding (if any) will be reported in Box 7 . (Please refer to page 31 for a sample of Form 1042-S .)

* At the date of publication of this handbook .

Irs puBlICaTIon 515 and Form 1042-s

57


As custodian or servicing agent, Pershing is required to file with the Internal Revenue Service (IRS) Form 990-T–Exempt Organization Business Income Tax Return, which may include Form 8886–Reportable Transaction Disclosure Statement, and applicable State Tax Returns to report UBTI for tax deferred accounts, including, Individual Retirement Accounts (IRAs), Simplified Employee Pension Plans (SEPs), Savings Incentive Match Plans for Employees (SIMPLEs), Roth IRAs, and Coverdell Educational Savings Accounts (ESAs) that have $1,000 or more of UBTI annually .

These accounts are usually tax-deferred taxpayers and earnings generally are not taxed until the funds are withdrawn . However, if a tax-deferred account invests in a limited partnership that produces UBTI, the account may be taxed on its share of the partnership’s income . If UBTI is earned and taxes are due, we will remit the appropriate federal income tax payment to the IRS and/or the state income tax payment to the applicable state taxing authority from the tax-deferred account . If the account is closed after December 31, 2008 or if sufficient cash is not available to pay the tax, we will file the tax return(s) and refer the IRS or state taxing authority to the account holder for collection of tax, interest, and penalties . Please ensure that cash is in these accounts in order to satisfy the tax, penalties, and interest due . Payments made with funds from outside the tax-deferred account are considered contributions to the tax-deferred accounts and that may cause the account to have an impermissible excess contribution . We will not file returns or pay amounts due for accounts that were closed as of December 31, 2008 .

Pershing has been tracking net operating losses (NOLs) from the account’s partnership investments since 2003 . Tax returns will be prepared using the NOL information we have on file . In the event that your client’s tax deferred account incurred losses prior to 2003 that can be used to offset current year income, evidence must be submitted to substantiate the losses . Appropriate evidence of prior year losses can be found on prior year’s Schedule K-1 forms . Schedule K-1 forms can be obtained from the limited partnership(s) in which the tax-deferred account is currently or previously invested . Pershing does not guarantee the use of any prior year’s losses .

When we receive the 2008 tax information (Schedule K-1) from the limited partnership(s) by March 20, 2009, Pershing will have tax returns prepared by PricewaterhouseCoopers, filed, and tax paid by April 15, 2009 . Please note that estimated tax payment penalties and interest may be assessed by the IRS in the event that quarterly estimated tax payments were not made in sufficient amounts from the tax-deferred account during 2008 . This type of penalty applies to your customers if their 2008 tax due is in excess of $500 .00 . In these cases, PricewaterhouseCoopers will calculate the estimated tax payment penalty and interest and add it to the tax due on your client’s return .

If we receive the 2008 Schedule K-1 from the limited partnership(s) after March 20, 2009, Pershing will have the tax returns prepared by PWC, filed, and tax paid in approximately three weeks following the receipt of the Schedule K-1 form(s) . In this case, the 2008 tax return will not be filed with the IRS and for any applicable state by April 15, 2009 . However, Pershing will file an extension on Form 8868 with the IRS by April 15, 2009 to request additional time to file the return . The request(s) to extend the time to file does not extend the time to pay tax . The IRS (and states) will impose penalties and interest for late payment of tax, and/or failure to pay estimated tax . PWC will calculate the applicable penalties and interest and add it to the tax due on your client’s return .

The client communication mailed to account holders will include a letter explaining the UBTI process, a copy of their tax return(s), a schedule reflecting the name of the limited partnership(s), and the UBTI earned .

Requests for the correction of the tax return(s) can be submitted to Pershing via the UBTI Correction Request Form . Correction requests may include, but are not limited to:

> Submission for additional NOLs for years prior to 2003

> Submission for NOLs for accounts opened during 2008 Note: Please provide prior year Schedule K-1s to substantiate the information on the correction .

> Amended Schedule K-1 from limited partnership reflecting additional or different information

Pershing’s Tax Reporting Department may need to speak with you about these correction requests, so please be sure you provide a contact name, telephone number, and a signature of the representative of the financial organization accompanied by the appropriate paperwork .

Please fax or mail correction requests to:

Pershing LLC Attention: Tax Reporting Department One Pershing Plaza, 12th Floor Jersey City, New Jersey 07399Direct Fax Number: (866) 355-5572

Requests for corrections are reviewed upon receipt, and are approved once we have received the necessary documentation . If the request is not in proper order, you will be contacted within 48 hours of the receipt of the correction . If applicable, corrected tax return(s) will be mailed to your client . The corrected tax return will be filed with the IRS and state, if applicable, with the appropriate tax payment .

Irs Form 990-T—exempT orGanIzaTIon BusIness InCome Tax reTurn

58


> 2009 imProvemeNtsSignificant improvements have been made to our process in order to file the tax returns by the IRS deadline of April 15, 2009:

– Tracking of NOLs beginning with tax year 2003

– Timely reviews of Schedule K-1s

– Addition of introducing broker-dealer and investment professional name and telephone number to the client communication

Due to these improvements, the need for the 30-day account holder review has been removed .

> rePorts aNd oNliNe documeNtatioNThe UBTI Status Report (IRA984R0) will be available in Report Center via NetExchange Pro® in March . This report is updated on a weekly basis . Accounts will be added to this report as Pershing receives, reviews, and updates Schedule K-1 information and determines taxes due . We strongly recommend that you review this report, as it reflects

your clients who are subject to this filing . In addition, it will help you determine if cash is available to satisfy any outstanding liability .

To access this report, click on the Office tab in NetExchange Pro and select Report Center . Click on Report Search and enter the name of the report or the report identification number .

Client communications regarding UBTI will be imaged in Online Documents in NetExchange Pro for processing purposes .

> feesFor each tax return prepared and filed, Pershing applies a filing fee to the applicable tax-deferred account .

> additioNal iNformatioNShould you require additional information regarding these tax returns, please refer to the instructions for IRS Form 990-T, IRS Forms 8886, or the applicable State Tax Form instructions .

Irs Form 990-T—exempT orGanIzaTIon BusIness InCome Tax reTurnsa

mPle

tax

form

OMB No. 1545-0687 Exempt Organization Business Income Tax Return 990-T

Form

� See separate instructions.

Department of the TreasuryInternal Revenue Service Employer identification number

D

(Employees’ trust, see instructions for Block Don page 9.) Print

orType

Number, street, and room or suite no. If a P.O. box, see page 9 of instructions.

Unrelated business activity codes

E (See instructions for Block E on page 9.) City or town, state, and ZIP code

B Exempt under section

Check box ifaddress changed

A

Check organization type �

G 501(c) corporation

Group exemption number (See instructions for Block F on page 9.) �

F

Form 990-T (2008)

501(c) trust

401(a) trust

501( ) ( )

408(e)

Cat. No. 11291J

H I

Describe the organization’s primary unrelated business activity. �

During the tax year, was the corporation a subsidiary in an affiliated group or a parent-subsidiary controlled group? �

If “Yes,” enter the name and identifying number of the parent corporation. � No Yes

Unrelated Trade or Business Income

1c 1a

c Balance �

Less returns and allowances

Gross receipts or sales

2 Cost of goods sold (Schedule A, line 7)

2 3 Gross profit. Subtract line 2 from line 1c

3

4a Capital gain net income (attach Schedule D)

4a 4b Net gain (loss) (Form 4797, Part II, line 17) (attach Form 4797)

b

4c Capital loss deduction for trusts

c 5 Income (loss) from partnerships and S corporations (attach statement)

5

6 Rent income (Schedule C)

6 7 Unrelated debt-financed income (Schedule E)

7

8

Investment income of a section 501(c)(7), (9), or (17)organization (Schedule G)

8

9

Interest, annuities, royalties, and rents from controlledorganizations (Schedule F)

9

10 Exploited exempt activity income (Schedule I)

10 11 Advertising income (Schedule J)

11

12 Other income (See page 11 of the instructions; attach schedule.)

12 13 13 Total. Combine lines 3 through 12

Deductions Not Taken Elsewhere (See page 12 of the instructions for limitations on deductions.)(Except for contributions, deductions must be directly connected with the unrelated business income.) 14 14 Compensation of officers, directors, and trustees (Schedule K)

15 15 Salaries and wages 16 16 Repairs and maintenance

17 17 Bad debts 18 18 Interest (attach schedule)

19 19 Taxes and licenses 20 20 Charitable contributions (See page 14 of the instructions for limitation rules.)

21 21 Depreciation (attach Form 4562) 22b 22a 22 Less depreciation claimed on Schedule A and elsewhere on return

23 23 Depletion 24 24 Contributions to deferred compensation plans

Employee benefit programs

25

28 Other deductions (attach schedule)

26

29 Total deductions. Add lines 14 through 28

27 28 29

30 Unrelated business taxable income before net operating loss deduction. Subtract line 29 from line 13

30 31 Net operating loss deduction (limited to the amount on line 30)

31

32 Unrelated business taxable income before specific deduction. Subtract line 31 from line 30

32 33 Specific deduction (Generally $1,000, but see line 33 instructions for exceptions.)

34 Unrelated business taxable income. Subtract line 33 from line 32. If line 33 is greater than line32, enter the smaller of zero or line 32

Part I

Part II

Excess readership costs (Schedule J)

Excess exempt expenses (Schedule I)

25 26 27

33

34

b

(A) Income

(B) Expenses

(C) Net

For Privacy Act and Paperwork Reduction Act Notice, see instructions.

C Book value of all assetsat end of year

(and proxy tax under section 6033(e))

J The books are in care of �

Telephone number � ( )

220(e)

408A

530(a)

Other trust

529(a)

For calendar year 2008 or other tax year beginning

Name of organization ( Check box if name changed and see instructions.)

, 2008, and , 20 .

087 Open to Public Inspection for 501(c)(3) Organizations Only

ending

8

59


Irs Form 990-T—exempT orGanIzaTIon BusIness InCome Tax reTurnsa

mPle

tax

form

Page 2 Form 990-T (2008)

Statements Regarding Certain Activities and Other Information (see instructions on page 18) No Yes 1 At any time during the 2008 calendar year, did the organization have an interest in or a signature or other authority

over a financial account (bank, securities, or other) in a foreign country? If YES, the organization may have to file Form TD F 90-22.1. If YES, enter the name of the foreign country here �

2 During the tax year, did the organization receive a distribution from, or was it the grantor of, or transferor to, a foreign trust? If YES, see page 5 of the instructions for other forms the organization may have to file.

Enter the amount of tax-exempt interest received or accrued during the tax year � $

3 Schedule A—Cost of Goods Sold. Enter method of inventory valuation �

6 1 Inventory at beginning of year

1 Inventory at end of year

6 Purchases

2 2 Cost of goods sold. Subtract line

6 from line 5. Enter here and in Part I, line 2

7 3 Cost of labor

3

7 Additional section 263A costs (attach schedule)

4a No Yes 4a Do the rules of section 263A (with respect to

property produced or acquired for resale) apply to the organization?

8 Other costs (attach schedule)

b 4b

5 Total. Add lines 1 through 4b

5

Part V

Organizations Taxable as Corporations. See instructions for tax computation on page 15.Controlled group members (sections 1561 and 1563) check here � See instructions and:

35

Enter your share of the $50,000, $25,000, and $9,925,000 taxable income brackets (in that order):

a $ $ (2)

(1)

$ b

36

Income tax on the amount on line 34 �

35c

Trusts Taxable at Trust Rates. See instructions for tax computation on page 16. Income tax onthe amount on line 34 from: Tax rate schedule or Schedule D (Form 1041) �

36

40a Foreign tax credit (corporations attach Form 1118; trusts attach Form 1116)

40a 40b Other credits (see page 17 of the instructions)

b

General business credit. Check here and indicate which forms are attached:Form 3800 Form(s) (specify) �

c 40c 40d Credit for prior year minimum tax (attach Form 8801 or 8827)

d

40e Total credits. Add lines 40a through 40d 41 Subtract line 40e from line 39

41

42 Other taxes. Check if from: Form 4255 Form 8611 Form 8697 Form 8866 Other (attach schedule)

42

38 Alternative minimum tax

38

43 Total tax. Add lines 41 and 42

43 44a Payments: A 2006 overpayment credited to 2008

44a

44b 2008 estimated tax payments

b 44c Tax deposited with Form 8868

c d 44d Foreign organizations: Tax paid or withheld at source (see instructions)

45 Total payments. Add lines 44a through 44f

45 46 Estimated tax penalty (see page 4 of the instructions). Check if Form 2220 is attached �

46 47 Tax due. If line 45 is less than the total of lines 43 and 46, enter amount owed �

47 48 Overpayment. If line 45 is larger than the total of lines 43 and 46, enter amount overpaid �

48 49 Enter the amount of line 48 you want: Credited to 2009 estimated tax �

49 Refunded �

c

Part III

Part IV

Tax Computation

37 Proxy tax. See page 16 of the instructions �

Tax and Payments

37

$ (3) Enter organization’s share of: (1) Additional 5% tax (not more than $11,750)

$

(2) Additional 3% tax (not more than $100,000)

e

39 Total. Add lines 37 and 38 to line 35c or 36, whichever applies

39

e 44e Backup withholding (see instructions)

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true,correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Sign

Here Title

Date

Signature of officer Date

Preparer’s SSN or PTIN

Preparer’ssignature

Check ifself-employed

PaidPreparer’s Use Only

Firm’s name (oryours if self-employed),address, and ZIP code

EIN Phone no. ( )

Form 990-T (2008)

May the IRS discuss this return withthe preparer shown below (seeinstructions)?

Yes No

�

�

�

�

Form 4136

Other

Total �

Other credits and payments:

Form 2439

f 44f

60


1. The UBTI Correction Request Form must be used for all IRS Form 990-T correction requests (refer to page 61) .

2. Correction requests should include all relevant documentation . If the current year income is misstated, a copy of the corrected current year Schedule K-1 should be attached to the correction request . If the correction involves carrying forward losses from prior years, Schedule K-1s for all prior years beginning with the year in which the account acquired the partnership should be attached . The partnership’s General Partner furnishes K-1 forms .

3. We may need to speak with you about these corrections, so please provide the contact name, telephone number, and signature of a representative of the financial organization accompanied by the appropriate paperwork .


Requests for corrections are reviewed upon receipt, and are approved once we have received the necessary documentation . UBTI correction requests should be submitted on a UBTI Correction Request Form, accompanied by supporting documentation . If the request is not in proper order, a reject notification will be sent within 48 hours of the correction request . If applicable, a corrected IRS Form 990-T will be mailed to your client . The newly calculated IRS Form 990-T will be filed with the IRS with the appropriate tax payment .

CorreCTInG Tax InFormaTIon For Irs Form 990-T

Pershing LLC Attention: Tax Reporting Department One Pershing Plaza, 12th Floor Jersey City, New Jersey 07399 Fax Number: (866) 355-5572

61


Please uPdate irs form 990-t as follows:

Note: This request must be returned to Pershing within 30 days from the date of the client notification or the original IRS Form 990-T will be filed with the IRS .


o k-1 issued by PartNershiP showiNg Prior year losseso tax iNformatioN statemeNt (form 990-t)

o other:

sigNature:


ubt i correct ioN requestFax to Pershing’s Tax Reporting Department at (866) 355-5572 .





62


FreQuenTly asked QuesTIons

Q. Are there any changes to IRS Form 1099-R reporting for the tax year 2008?

A . There are no changes to IRS Form 1099-R reporting for tax year 2008 . Please refer to the PPA on Point link in The Retirement Products section of The Source in NetExchange Pro . The link provides information regarding the Pension Protection Act of 2006 . Certain provisions of the act became effective in 2008 .

Q. Is my client required to attach a copy of IRS Form 1099-R to her tax return?

A . It depends . Copy B of Form 1099-R must be attached to the individual’s income tax return only if federal taxes were withheld from distributions during the year . The federal tax amount is reflected in Box 4 of the form .

Q. My client received a distribution of $10,000 from his/her Pershing IRA in 2008. The funds were used to purchase a first-time home, which exempts the amount from the early distribution penalty. Box 7 of Form 1099-R reflects Code 1. When I contacted Pershing for a correction, I was informed that Pershing reported the transaction properly and the client should claim the exemption on his income tax return. Is this true?

A . Yes . The IRS requires Pershing to use an exception code, such as Code 2, only in instances when we know that an exception to the 10% penalty applies . For distributions such as medical expenses, first-time home purchases, or qualified higher education expenses, Pershing uses Code 1 if the account owner is under the age of 591/2 when the distribution occurs . Your client may claim the exception by filing IRS Form 5329 along with his tax return .

Q. My client took a distribution from his IRA and made a rollover contribution of the amount to his IRA within 60 days. Will he receive an IRS Form 1099-R for the distribution?

A . Yes . The IRS requires that Pershing issue IRS Form 1099-R for all distributions that occur from the retirement account, including those that are rolled over in a timely manner . Your client will receive IRS Form 5498 for the rollover to offset IRS Form 1099-R .

Q. My client made an excess IRA contribution in July 2007 and removed the excess amount in January 2008 before the tax filing deadline. Will my client receive IRS Form 1099-R or Form 5498 for the distribution/contribution?

A . The IRS requires all IRA distributions to be reported on IRS Form 1099-R, including return of excess contributions . IRS Form 1099-R will be issued for 2008, the year in which the distribution occurs . Pershing will indicate Code P in Box 7 of Form 1099-R to let the IRS know that the distribution is attributable to an excess contribution made for 2007 . If the excess contribution was attributable to 2008 and distributed in 2008, then IRS Form 1099-R would have been issued for 2008 and the code in Box 7 would be Code 8 . The IRS also requires all IRA contributions to be reported on IRS Form 5498, even if the contribution is later removed .

Q. My client established and funded a Traditional IRA in January of 2008 and revoked the IRA seven days after signing the adoption agreement. My client still received an IRS Form 1099-R for the amount returned. Is this correct?

A . According to the IRS instructions for filing IRS Form 1099-R and Form 5498, IRA custodians must report revoked contributions on IRS Form 1099-R . The distributed amount is reported as a return of excess contribution . Your client will also receive IRS Form 5498 for the contribution amount .

Q. Why did Pershing check Box 2b “Taxable amount not determined” on Form 1099-R for my Traditional IRA when an amount is reported in Box 2a as a taxable amount?

A . Generally, the IRS requires that we report distribution amounts from your Traditional IRA as taxable . However, because we are unable to determine whether a portion of your distribution is tax free, we also check Box 2b . This allows you to make the IRS aware if any portion of your distribution is nontaxable . Speak with your tax professional about the forms that you must file with the IRS when your distribution includes nontaxable amounts .

Q. Is my client required to attach a copy of IRS Form 5498 or Form 5498-ESA to her tax return?

A . No . The IRS does not require your client to attach these forms to her tax return . Your client should retain the forms .

Q. Why does Pershing send IRS Form 5498 and Form 5498-ESA after the tax filing date?

A . The IRS deadline for contributing to an IRA is April 15 of the following tax year . Since the filing requirements allow contributions to be made until April 15, including those that are mailed by April 15, the forms are prepared and mailed after the tax filing date .

Q. My client did not receive an IRS Form 5498. My client was informed that even though a contribution for 2008 was not made, he should receive IRS Form 5498. Is this correct?

A . No . For IRAs that have no other reporting activity for 2008, such as a contribution, conversion, or recharacterization, Pershing is not required to issue IRS Form 5498 . We must report, however, the fair market value of these IRAs . This information appears on the January 2009 brokerage account statement .

frequently asked questions: required minimum distributions (rmds) and irs forms 1099-r, 1099-q, 5498, and 5498-esa

63


FreQuenTly asked QuesTIons

Q. My client deposited a 2007 SEP contribution to a SEP IRA in January 2008. This amount, however, was not included on her 2007 IRS Form 5498. Is this correct?

A . Yes . The IRS requires Pershing to report SEP IRA and SIMPLE IRA contributions, including salary reduction/deferral contributions, for the calendar year that we receive the contribution, regardless of the tax year for which the employer might be contributing . Your client should report contributions based on the tax year, not the calendar year . For contributions that are clearly marked “previous year,” Pershing will add the trailer “contribution received current year for previous year” to the transaction .

Q. If my client revokes his 2008 IRA contribution on a timely basis, will he still receive IRS Form 5498?

A . Yes . Any reportable contributions made for 2008, even if the contribution is revoked before December 31, 2008, must be reported on IRS Form 5498 .

Q. What is a RMD?

A . Under federal regulations, owner’s of Traditional IRAs, SEP IRAs, SIMPLE IRAs, qualified plans, and 403(b) accounts are required to distribute a certain amount from the retirement account each year beginning the year the participant reached age 70 1/2 .1 This amount is referred to as a Required Minimum Distribution (RMD) . Generally, the RMD for a year is determined by dividing the previous year-end fair market value (FMV) by the retirement account owner’s life expectancy factor, which may be obtained by using the life expectancy tables in IRS Publication 590 . The RMD amount must be distributed by December 31 of each year . An exception applies the year the participant reaches age 70 1/2, where he/she is allowed to defer the RMD for that year until April 1 of the following year .

Q. What happens if the participant fails to withdraw the RMD amount?

A . If the participant fails to withdraw the RMD amount by the applicable deadline, he/she will owe the IRS an excise tax of 50% of the shortfall . This is referred to as an excess accumulation tax .

Q. Will Pershing be able to process and report the withdrawal as a 2008 transaction if the participant submitted the withdrawal request to the introducing broker-dealer in 2008, but the request was not forwarded to Pershing until 2009?

A . No . In order to be in compliance with IRS reporting requirements, distribution requests processed after December 31, 2008 cannot be reported for 2008 . Requests to report transactions processed after December 31, 2008 for tax year 2008 will not be honored .

Q. Is there any provision for waiving the penalty?

A . Yes . If the participant feels that there is a reasonable excuse for failing to satisfy the RMD in a timely manner, he/she may ask the IRS to waive the excess accumulation tax . According to the instructions provided by the IRS in Publication 590, the participant must take the following steps when the waiver is being requested:

- Withdraw the RMD amount

- File IRS Form 5329 with his/her Form 1040 (tax return)

- Pay any tax owed on the excess accumulation

- Attach a letter of explanation

If the IRS approves the request, it will refund the excess accumulation taxes paid by the participant .

NOTES:

- Pershing will report the distribution for the year it is processed .

- The participant is responsible for paying the excise tax to the IRS when he/she files IRS Form 5329 .

- If the participant elects to pay the excise tax from his/her retirement account, it will be considered a distribution and will be reported in the year it is processed .

Q. If the participant already filed his/her IRS Form 1040 for the year, can he/she still file IRS Form 5329?

A . The participant should contact his/her tax advisor for assistance if he/she already filed his/her IRS Form 1040 for the year and did not include IRS Form 5329 .

Q. Where can the participant obtain IRS Form 5329?

A . IRS Form 5329 and the instructions are available online at www .irs .gov, at most local libraries, or by contacting the IRS at (800) 829-3676 .

Q. Who should the participant contact for assistance with completing IRS Form 5329?

A . The participant should contact his/her tax professional for assistance with completing IRS Form 5329 . The participant may also refer to IRS Publication 910, Guide to Free Tax Services, for information on free tax services offered by the IRS .

Q. Can Pershing assist the participant with requesting the waiver?

A . No . Such assistance must be provided by a party qualified to offer tax advice . Pershing does not provide tax advice .

frequently asked questions: required minimum distributions (rmds) and irs forms 1099-r, 1099-q, 5498, and 5498-esa

1For qualified plans and 403(b) accounts, the participant may be able to defer beginning the RMD until April 1 of the year after the year the individual retires from service with the employer

that sponsored the plan . Participants should refer to their plan administrator or the plan document for the rules that apply to the plan .

Pershing LLC, a subsidiary of The Bank of New York Mellon Corporation . Member FINRA, NYSE, SIPC . Trademark(s) belong to their respective owners .

ref-taxhbk-1-09