Rev. Rul. 68-588

A foreign corporation received a ruling from the Internal Revenue Service, issued in accordance with section 147.7-2 of the Temporary Regulations under the Interest Equalization Tax Act under procedures set forth in Revenue Procedure 64-50, C.B. 1964-2, 999, that its only class of common stock of 5x dollars par value satisfied the requirements of section 4920(b)(1) of the Internal Revenue Code of 1954 and was, therefore, not subject to the interest equalization tax imposed by section 4911 of the Code. In accordance with a resolution of the board of directors of the corporation the common stock was split in the ratio of 2 to 1 in 1967. Subsequently, in an unrelated transaction, a stock dividend with respect to the common stock (after the stock split) was declared and distributed in 1968. Prior to the issuance of the stock as a result of the stock split and the stock dividend, the corporation informed the Commissioner of Internal Revenue of such issuances in accordance with the provisions of section 3(b)(5) of Revenue Procedure 64-50.

Held, under the above circumstances, the shares of common stock issued as a result of the stock split in 1967 and those shares issued as a stock dividend in 1968 represent additional shares as defined in section 4920(b)(2)(C) of the Code of the class of stock which was held to meet the requirements of section 4920(b)(1) of the Code. Therefore, such additional shares will not be subject to the interest equalization tax imposed by section 4911 of the Code since the foreign corporation is not considered a foreign issuer with respect to such shares.