Rev. Rul. 67-81

Advice has been requested as to the liability for interest equalization tax of an organization which is exempt from income tax under section 501(a) of the Internal Revenue Code of 1954, where such organization acquires by purchase or by gift stock of a foreign issuer or debt obligations of a foreign obligor.

Section 4911 of the Code imposes a tax on each acquisition by a United States person of stock of a foreign issuer or of a debt obligation of a foreign obligor (if such obligation has a period remaining to maturity of 1 year or more), unless an exemption or exclusion from the tax is provided.

In this case the stock of a foreign issuer or debt obligations of a foreign obligor are acquired under circumstances where there is available neither the statutory exemption for prior American ownership provided in section 4918 of the Code, nor any of the statutory exclusions provided under sections 4914, 4915, 4916, and 4917 of the Code.

Section 501(a) of the Code provides an exemption from income tax to certain organizations. However, an exemption from income tax under section 501 will not serve to avoid liability for interest equalization tax since an exemption under section 501 relates only to the taxes imposed under subtitle A (Income Taxes), whereas the interest equalization tax is imposed under subtitle D (Miscellaneous Excise Taxes).

Section 4914(a)(3) of the Code provides an exclusion from interest equalization tax for acquisitions `by gift to a United States person who is an individual.' The exclusion for acquisitions by gift is therefore not available where the donee is other than an individual.

Accordingly, under the circumstances stated, the purchase, or acquisition by gift, of stock of a foreign issuer or debt obligations of a foreign obligor by the organization which is exempt from income tax under section 501 of the Code is subject to interest equalization tax.