Rev. Rul. 63-279
Rev. Rul. 63-279; 1963-2 C.B. 578
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
Obsoleted by Rev. Rul. 69-227
Advice has been requested concerning the application of the documentary stamp tax, imposed under section 4321 of the Internal Revenue Code of 1954, to the sale or transfer of rights to subscribe for or to receive less than a full share of stock, where no stock will be issued unless rights aggregating enough to receive a full share are presented.
Section 4321 of the Code, as amended by Public Law 86-344, C.B. 1959-2, 700, provides as follows:
There is hereby imposed on each sale or transfer of shares or certificates of stock, or of rights to subscribe for or to receive such shares or certificates, issued by a corporation, a tax at the rate of 4 cents on each $100 (or major fraction thereof) of the actual value of the certificates, of the shares where no certificates are sold or transferred, or of the rights, as the case may be. In no case shall the tax so imposed on any such sale or transfer be-
(1) More than 8 cents on each share, or
(2) Less than 4 cents on the sale or transfer.
Under the foregoing provisions of the statute, the basis of the tax on the sale or transfer of the `rights' is the actual value of the rights sold or transferred, without regard to the number of shares or fractional shares which the rights represent or which might be obtained upon the exercise of the rights, subject only to the minimum and maximum limitations imposed by the statute.
In view of the foregoing, it is held that the sale or transfer of rights to subscribe for or to receive less than a full share of stock is subject to the documentary stamp tax imposed by section 4321 of the Code at the rate of 4 cents on each $100 (or major fraction thereof) of the actual value of the rights sold or transferred. However, in no case shall the tax imposed on the sale or transfer of the rights be more than 8 cents on each share represented by the rights. On the other hand, in no case shall the tax be less than 4 cents on each sale or transfer.
The examples set forth below illustrate how the statutory limitations will be applied in specific transactions. Assume in each case that (1) one right has been issued with respect to each share of outstanding stock, and (2) one new share of stock is issuable upon the exercise of 25 rights plus a specified amount of cash.
Number of Actual value of rights
Example rights sold or _______________________ Transfer
transferred Per right _ Total value tax
_
A_______________ 1 $ 1.00 _ $ 1.00 $ .04
B_______________10 1.00 _ 10.00 .04
C_______________ 9 10.00 _ 90.00 .04
D_______________16 10.00 _ 160.00 .08
E_______________22 10.00 _ 220.00 .08
F_______________15 25.00 _ 375.00 .08
In examples A and B , the amount of tax is four cents because of the minimum statutory limitation with respect to each sale or transfer, although the actual value of the rights transferred in each case is less than a major fraction of $100. In example C , the tax of four cents, computed on the actual value of the rights transferred, comes within the minimum and the maximum limitations, as does the tax of eight cents in examples D and E . However, the tax in example F , which otherwise would be 16 cents, is limited to eight cents because the rights transferred do not represent more than one share.
Where a transaction involves transfers from two or more transferors, a separate computation of the tax (which is payable by stamp) is required with respect to each transferor.
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
