Rev. Rul. 68-628

The taxpayer, an individual, purchased and sold stock of a foreign issuer in his 1963 calendar year subsequent to July 18, 1963. On September 2, 1964, the Interest Equalization Tax Act was enacted and made effective, with certain exceptions not applicable here, to acquisitions of foreign securities made on or after July 19, 1963. In October 1964, the taxpayer paid the interest equalization tax retroactively imposed on his 1963 purchases and filed a claim for refund of income tax for 1963 adjusting the basis of the stock sold in that year.

Held, under section 263(a)(3) of the Internal Revenue Code of 1954, the taxpayer is required to capitalize any amount paid as interest equalization tax on the acquisition of stock and, therefore, may treat such tax as part of the amount paid for the stock. The taxpayer properly filed a claim for refund, Form 843, adjusting the basis of the stock sold in 1963 by the amount of the interest equalization tax paid in 1964 applicable to such stock.