What is the primary purpose of Form 1099-S?

Form 1099-S is utilized to report the sale or exchange of real estate, specifically to inform the federal government about the proceeds from the transaction. The primary purpose of this form is to ensure that sellers properly report any capital gains realized from the sale of their property. When a property is sold, the IRS requires reporting of the gross proceeds to monitor tax compliance, particularly as this can affect the seller's tax liabilities based on capital gains. The requirement for sellers to report this income through Form 1099-S helps maintain transparency and accountability in real estate transactions, particularly regarding taxation.

Each of the incorrect options does not align with the primary purpose of Form 1099-S. While reporting rental income, providing statements for closing costs, and documenting property tax information are important aspects of real estate and taxation, they do not pertain to the specific function of Form 1099-S, which focuses solely on the reporting of proceeds from real estate sales.