Rev. Rul. 69-137

A foreign shipping corporation seeking to establish that it is a "less developed country corporation" has asked whether it must establish that the stock ownership requirement of section 4916(c)(1)(B)(ii) of the Internal Revenue Code of 1954 was met on each day of the applicable period.

The stock of a foreign shipping corporation is publicly owned and actively traded. The foreign corporation qualifies as a "less developed country corporation" as defined in section 4916(c)(1)(B) of the Code, except that there is a question of whether it qualifies with respect to the ownership requirements of section 4916(c)(1)(B)(ii) of the Code.

Section 4916(c)(1)(B)(ii) of the Code provides in general that a foreign corporation's stock must be owned on each day of the applicable periods specified in section 4916(c)(3) of the Code to the extent of at least 80 percent by United States persons or residents of less developed countries or by a combination of both.

Because the foreign corporation's stock in the instant case is widely owned and actively traded it is represented that it would be extremely burdensome and expensive to establish that it met the ownership test of section 4916(c)(1)(B)(ii) of the Code on each day of the applicable period.

In an analogous situation with respect to the requirements in section 4916(c)(1)(A) of the Code that the foreign corporation has on each day of a year 80 percent or more of its assets in specified categories section 147.3-1(b)(1)(i) of the Temporary Regulations, by reference to section 1.955-5 of the Income Tax Regulations, states that in the absence of affirmative evidence showing that such 80 percent requirement has not been satisfied on each day of the periods, information on such assets as of the end of each quarter of such corporation's annual accounting period preceding that with respect to which a ruling is requested will be accepted. Such information helps to establish whether or not the foreign corporation can qualify. However, such information is not conclusive, since actual information that on a particular day a foreign corporation's asset holdings did not meet the statutory requirements of section 4916(c)(1)(A) of the Code would require revocation of a favorable ruling to such a corporation. See section 147.3-1(e)(4) of the Temporary Regulations.

Similarly, the foreign corporation can, in the absence of affirmative evidence that the 80 percent ownership requirement of section 4916(c)(1)(B)(ii) of the Code has not been satisfied on each day of the applicable period described in section 4916(c)(3)(A) of the Code, satisfy such ownership requirement by establishing that the requirement has been satisfied on the last day of each quarter of the applicable period.