Rev. Rul. 57-349

Advice has been requested whether the documentary stamp tax applies to the sales or transfers of corporate securities to or by a State or a political subdivision thereof.

Section 4321 of the Internal Revenue Code of 1954 imposes a tax 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. Section 4331 of the Code imposes a tax on each sale or transfer of any certificates of indebtedness, issued by a corporation. Section 4383 of the Code provides, in part, that the documentary stamp tax shall be paid by any person who makes, signs, issues, or sells any of the documents and instruments subject to the tax, or for whose use or benefit the same are made, signed, issued, or sold. Thus, the tax shall be paid by any of the parties to a taxable transaction, or by any person for whose use or benefit the transaction is made.

M.T. 39, C.B. 1950-1, 141, holds that the conveyance of real property to or by a State, or a political subdivision or corporate instrumentality thereof, is not exempt from the documentary stamp tax merely by reason of the governmental character of one of the parties to the transaction. Revenue Ruling 56-259, C.B. 1956-1, 530, holds that the principle relating to the liability for documentary stamp tax on conveyances of real property, as set forth in M.T. 39, is also applicable to the liability for the documentary stamp tax on the issuance of foreign insurance policies. Likewise, the principles stated therein have equal application to the documentary stamp tax imposed on the sales or transfers of corporate securities.

It is considered, therefore, that the documentary stamp tax applies to the sales or transfers of corporate securities to or by a State or a political subdivision thereof. However, if a State or political subdivision thereof acquires or disposes of corporate securities while acting in its truly governmental capacity, it is considered immune from the tax. Accordingly, in such cases, it is held that the State or political subdivision thereof is not liable for the transfer taxes imposed under section 4321 and 4331 of the Code, but the other or non-exempt party to the transaction is liable for the tax under the dual liability provisions of section 4383 of the Code.