Rev. Rul. 69-167

A participating firm, as defined in section 4918(c) of the Internal Revenue Code of 1954 for purposes of the interest equalization tax imposed on certain acquisitions of foreign stock and debt obligations, regularly effects security transactions with other participating firms on the "Z market" of the Toronto Stock Exchange which was established to facilitate the trading of Canadian securities between United States persons.

With regard to transactions on the "Z market" between participating firms, the buyer's broker receives from the seller's broker a floor ticket that is stamped: "Z-Selling Firm & Buying Firm are Participating Firms--No IET--Sec. 4918(e) Satisfied." A copy of each stamped floor ticket and of the daily clearing house sheets are kept in the records of the buyer's broker in the United States in compliance with interest equalization tax record keeping requirements. The stamp also has the name of the seller's broker on it.

Prior to the adoption of the above procedure, a letter was sent by each seller's broker to each buyer's broker indicating prior American ownership and compliance under section 4918(e) with respect to transactions between the participating firms. The letter showed the date of the transaction, the name of the stock or security, number of shares or face value, and sales price.

Section 4918(d) of the Code provides that under certain circumstances a participating firm may issue a written confirmation (IET clean confirmation) to its customer that the exemption from the interest equalization tax for prior American ownership and compliance provided by section 4918(a) of the Code applies to the acquisition, and, as provided in section 4918(b) of the Code, such confirmation is conclusive proof that the exemption applies if the customer relies in good faith on the validity of such confirmation.

Held, an IET clean confirmation may be issued pursuant to sections 4918(d)(1)(A) and 4918(d)(2) of the Code with respect to transactions effected between participating firms outside the United States if a written comparison or broker-dealer confirmation issued under section 4918(e) of the Code states that the transaction is not subject to the interest equalization tax because of the exemption provided by section 4918(a) of the Code.

Held further, the above-described stamped floor ticket and letter satisfy the requirements of section 4918(d)(1)(A) and upon receipt of such a ticket or letter from a participating firm, a buyer's broker, who is a participating firm, may issue an IET clean confirmation to its customer with respect to transactions described in such ticket or letter.