Rev. Rul. 65-218

M , a Japanese corporation, has arranged for a public offering in the United States through underwriters of a substantial number of shares of its common stock. As a part of the arrangement, M has entered into an agreement with a United States bank under which M will deposit the number of shares of its stock sold to United States investors in a Japanese bank which has been appointed the agent of the United States bank. These so-called `American Depositary Shares' will be recorded on the books of the corporation in the name of either the United States bank or its agent.

Upon notification of the deposit of shares of M's common stock in the Japanese bank, the United States bank will execute and deliver to the United States investors specified by M so-called `American Depositary Receipts.' These receipts state that the United States bank certifies that the designated holder is the owner of a specified number of `American Depositary Shares' representing the number of shares of M corporation's common stock purchased by the holder which are on deposit in the Japanese bank as agent of the United States bank. The receipts will be transferable on books to be kept by the United States bank which will execute new receipts and issue them to the person entitled thereto after transfer.

American Depositary Receipt holders will have full voting rights with respect to the M corporation stock represented by the receipts and will be entitled to receive any dividends paid on the stock. A receipt holder may surrender it at any time to the United States bank and have the stock represented thereby delivered to him.

The primary purpose of the stock deposit arrangement is to overcome the mechanical and other problems involved in the purchase, holding, or sale by nonresidents of Japan of the underlying foreign securities by making available to United States investors readily transferable American-style certificates evidencing the rights to the underlying shares. The arrangement also provides for the discharge by the United States bank of a number of administrative services on behalf of a receipt holder, including the collection, conversion into dollars, and distribution to the holder of any dividends paid on the underlying shares.

Held , a holder of an American Depositary Receipt will be treated, for purposes of the foreign tax credit allowed by section 901 of the Internal Revenue Code of 1954 and for purposes of the benefits provided by the United States-Japan Income Tax Convention, C.B. 1955-1, 658, as if he held the underlying shares of M stock directly.