Rev. Rul. 60-64

Advice has been requested concerning the determination of the `actual value' of shares of stock, for purposes of computing the documentary stamp tax imposed by section 4301 of the Internal Revenue Code of 1954, where an underwriter, acting as principal, purchases stock from an issuing company and also where an underwriter acts merely as an agent for an issuing company in effecting sales to dealers.

Section 4301 of the Code, as amended by the Excise Tax Technical Changes Act of 1958, Public Law 85-859, C.B. 1958-3, 92 imposes on each original issue of shares or certificates of stock issued by a corporation a tax at the rate of ten cents on each $100 or major fraction thereof of the actual value of the certificates, or of the shares where no certificates are issued. The tax imposed by this section is computed on the basis of all certificates or shares so issued by the corporation on each day.

The amount received by the issuing corporation from the first purchaser for value is accepted as the `actual value' of the stock where the stock is issued by the corporation in an arm's length transaction and without being subject to special conditions that fix a price not reflecting the ordinary market price.

Accordingly, it is held that where an underwriter, acting as principal, purchases stock from the issuing company, the amount paid by him for the stock as the first purchaser for value is the `actual value' for purposes of computing the original issue tax imposed by section 4301 of the Code. However, where the underwriter is merely an agent of the issuing corporation in effecting sales to dealers, the amount paid by the dealer, without reduction for the commission payable to the underwriter, is recognized as the `actual value.' The tax, however, should be computed on the total of all shares issued on a particular day rather than on each share separately.