Are leveraged ESOPs required to issue Form 1099-INTs to former shareholders?

[Guest AAKERISA]

So, the tax department where I work recently questioned whether a leveraged ESOP that we represent is required to issue a Form 1099-INT to the former shareholders who are carrying the financing for the ESOP's purchase of stock. This is the first time I have encountered this issue and cannot find any guidance out there. Has anyone dealt with this? Does anyone know of any guidance that would dictate whether the ESOP is responsible for issuing Form 1099-INTs?

IRC 6041 says that persons (including qualified retirement plans - Treasury Regulations) engaged in trade or business need to report payments that are greater than $600 to the IRS, but does not state what activities rise to the level of "engaged in a trade or buiness". Alternatively, IRC 6041 excludes interest governed by IRC 6049, which says that every person (including qualified retirement plans) who pays interest in excess of $10 needs to report this to the IRS. I cannot find an exception that applies to relieve the ESOP of this obligation, but I have never known of a leveraged ESOP that issues Form 1099-INTs.

Please help.

[ESOP Guy]

We have always had the ESOPs issue 1099-INTs. It strikes me as the safer position. They aren't hard to generate and file I would add. To me the cost is low and the risk of being wrong is high enough.

[Guest ESOP Guy Need Help]

Not sure if this will still get replied to. But if we are going to issue 1099-INTs, what boxes should be filled in for interest paid to selling shareholders from the trust on the 2018 1099-INT Form?

Thank you.