Rev. Rul. 59-52

Advice has been requested concerning the applicability of the documentary stamp tax imposed by sections 4301 and 4321 of the Internal Revenue Code of 1954 to the issuance and transfer of stock of a limited dividend housing company organized under state law, as described below.

A state public housing law authorizes the formation of limited dividend housing companies for the purpose of providing housing for veterans. In furtherance of this purpose, the law provides that three or more persons may become a housing company by filing a certificate which states the name of the housing company, the purpose for which it is formed, the amount of capital stock, the number of shares, the duration of the company, and other pertinent information. It is required that such company must raise at least 20 percent of the actual cost of the lands and improvements through investment of private capital in the stocks or income debentures of the company. On dissolution of the company, stockholders in no event shall receive more than the par value of their stock plus accumulated, accrued, or unpaid dividends or interest. The provisions of the business corporation law, the general corporation law, and the stock corporation law of the state are applicable to such housing companies. The public housing law limits the amount of dividends that may be paid to a stockholder in any one year. The dividends paid on the stock are exempt from taxation by the state.

Section 4301 of the Code provides that a documentary stamp tax shall be imposed on each original issue of shares or certificates of stock issued by a corporation, whether on organization or reorganization. Section 4321 of the Code provides that a documentary stamp tax shall be 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.

There is no provision in the law or regulations which exempts stock issued by limited dividend corporations from the stamp tax on the issuance and/or the sale or transfer of shares of stock. Accordingly, it is held that the issuance and the sale or transfer of shares of stock of the limited dividend corporation described above are subject to the documentary stamp tax imposed by sections 4301 and 4321, respectively, of the Code. In view of the foregoing, in determining whether shares of stock issued by the limited dividend corporation are subject to the documentary stamp tax, it is not necessary to determine whether such corporation is an instrumentality or agency of a State or a municipal or other corporation exercising the taxing power.